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Canada Defends “Open” Government Procurement Against Calls for Protectionist “Buy American” Measures

Posted March 20, 2017

A recent call by Democratic senators urging President Trump to make good on his “Buy American, Hire American” campaign pledge by suspending government procurement provisions in existing trade deals, including the North American Free Trade Agreement (NAFTA), has prompted a strong response from David McNaughton, Canada’s ambassador to the United States.

In a March 16 letter, the Trudeau government’s envoy defended Canada’s “open” procurement system against charges that foreign countries’ procurement requirements “make it difficult for American-made products to compete” and warned that mandating domestic content purchasing requirements on private companies would violate terms of both the NAFTA and the World Trade Organization (WTO).

“Imposing local content requirements on the purchasing decisions of private companies is unprecedented and would have potentially severe and wide-ranging consequences, including vis-à-vis international trade obligations,” McNaughton wrote in the letter addressed to progressive Democratic senators Tammy Baldwin (WI), Jeff Merkley (OR), Chris Murphy (CT) and Jon Tester (MT). “These are crucial principles that Canada and the United States have together championed for decades.”

The appeal by Baldwin and Merkley to the Trump administration followed the release of a report from the Government Accountability Office (GAO) that found the U.S. has opened a “greater percentage of its government procurement to foreign competitors” than other trading partners.

Despite the GAO casting doubt on reliability of the available data, Baldwin and Merkley said its report “makes clear” that U.S. manufacturers are “losing out” in current trade deals and argued that temporarily suspending the “Buy American” waivers for foreign companies until government procurement chapters in trade agreements are renegotiated would help cut U.S. trade deficits and could lead to an increase in demand for domestically manufactured goods.

“Providing U.S. firms with opportunities to bid on a smaller amount of government contracting in other countries is not a sound trade-off for providing preferential access for foreign goods and firms to our larger pool of government contracts,” the senators stated.

In response, MacNaughton said “Canada has an open procurement system, whether for private sector or publicly funded projects,” adding that Canada's $2 billion government procurement market is “open to U.S. suppliers.”

The letter notes that just 3% of U.S. federal contracts are awarded to foreign suppliers, whereas this figure is 11% in Canada. Moreover, while Canadian suppliers win just 0.15% of U.S. government contracts, American suppliers account for more than 9% of federal contracts in Canada.