American Jobs Act and Buy American Provisions
International Trade Issues And How They Affect Industry
Brisette Lucas, Vice-President, Government Relations & Policy, Electro-Federation Canada
After what was considered huge progress on Canadian exemptions for previous Buy American provisions, on September 12, 2011 US President Barack Obama proposed the American Jobs Act (the “Act). This gave a recession-weary America something to hold onto, but reinvigorated tensions with its biggest trading partner.
Ultimately the Act did not get through the Republican-led Congress, but at the time of its announcement it caused much debate north of the border. The Act included a provision that no funds may be used on public works projects unless all of the manufactured goods were produced within the United States.
There were some exemptions noted in the Act. For example, if using all-American products increases the cost of the project by more than 25% or if the goods needed for the project are not manufactured or available in the United States, then hypothetically an opening for Canadian companies existed.
But how would a Canadian company qualify for that exemption? According to the Act, if the head of a federal department or agency determines that it is necessary to waive the application, the head of that department or agency had to publish in the Federal Register a detailed written justification as to why the provision is being waived. What troubled Canadian manufacturers was that Canada was not outrightly exempted, and that the path to exemption appeared to be mired in red tape and operated as a deterrent to even trying.
EFC, along with other associations, advocated for a permanent Canadian exemption to any Buy American provisions in recogniation that Canada is the U.S.’s biggest trading partner.
‘Buy American’ in the Context of the North American Free Trade Agreement
Under NAFTA, Canadian goods and suppliers are exempt from Buy American requirements. This occurs if procurement is being done directly by a listed U.S. federal department or agency and if the value of procurement exceeds NAFTA thresholds, currently US$25,000 for goods, US$77,494 for general services and US$10,074,262 for construction services. Buy American can still apply in many cases because the American stimulus bills were drafted so that money was allocated to state and municipal projects.
As NAFTA, and other internationsl trade obligations, are federal in scope, when states and municipalities are the procuring entities, they do not apply. This is the paradox of NAFTA and ‘Buy American’. Buy American policies run counter to an important aspect of a well-functioning trade zone between the United States and Canada — a shared commitment between both governments to reduce unintended barriers to the free flow of goods and services — and does not support the overall objectives of NAFTA.
Despite these ‘Buy American’ provisions, in some cases, Canadian goods and supplies are treated the same as American domestic product. Canada is a signatory to the World Trade Organization (WTO) GPA at the sub-federal level. In the U.S., 37 states are also party to this agreement. Canadian goods and supplies are put on same level with as American for procurement opportunities at the state level in those 37 signatory states.
The WTO GPA state exemptions are in keeping with existing free access at the federal level under NAFTA; however, if stimulus dollars are directed towards municipal projects then Canadian companies would not be exempted from the provisions and not be eligible to bid. If, on the other hand, the projects are done by a listed U.S. federal department or agency, or with any of the 37 states that are signatory to the WTO GPA then Canadian companies would be treated the same as American companies in the bidding process.
Regulatory Cooperation Council
On November 7, 2011, Prime Minister Stephen Harper and US President Barack Obama announced their intention to negotiate a perimeter agreement consisting of two action plans that will promote regulatory cooperation and alignment between both countries. Details of the Plans can be found at www.borderactionplan.gc.ca.
The Action Plan on Perimeter Security and Economic Competiveness focuses on cross-border law enforcement, infrastructure, and border security. The Action Plan on Regulatory Cooperation is aimed at reducing regulatory barriers to trade, lowering costs to businesses and consumers, and spurring economic growth.
This announcement was only the beginning of a process that will take some to formalize and implement. The Canadian government has started its consultation with key stakeholders to give these initiatives some substance. EFC is currently working with Standards Council of Canada to build a business case to include our industry in the plans going forward.
The Government of Canada, through the Department of Foreign Affairs and International Trade (DFAIT), is seeking the views of Canadians on the scope of possible free trade negotiations between Canada and Trans-Pacific Partnership (TPP) members.
The Trans-Pacific Partnership (TPP) is a free trade agreement under negotiation to liberalize trade in the Asia-Pacific region. Nine countries are currently participating in the negotiations: Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States. Japan and Mexico have recently announced their intentions to begin consultations to join the TPP.
With the participation of Canada, Mexico and Japan, the TPP would comprise a market of more than 775 million people and a combined GDP of $25.7 trillion (or US$24.9 trillion) — a market larger than the European Union. Additional information on the TPP can be found at www.ustr.gov/tpp.
Although the official comment period has closed, EFC is seeking member comment for further lobbying efforts with DFAIT.
Importance of Getting Involved
Trade issues continue to dominate discussions among member companies. In this rapidly changing regulatory landscape it is imperative that members are aware of the changes that affect their companies. One good way to achieve this is to join EFC’s Government Relations Committee. If a member of your organization is interested in participating in the Committee, please contact Brisette Lucas.
Brisette Lucas is responsible for government relations and policy, ensuring that EFC members can effectively address regulatory issues. Brisette can be reached at email@example.com or 905-602-6214.
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