Commons Committee Urges Government to Push for More Exemptions from ‘Buy American’ Initiatives

Trade Update • JUNE 30, 2021

A House of Commons committee established earlier this year to review the current and future state of the economic relationship between Canada and the United States, recently issued its second interim report; this one specifically addressing the potential impacts of President Joe Biden’s new “Buy America” initiatives.

The 12-member Special Committee held five meetings during the month of April, during which almost two dozen witnesses including government officials, businesses, trade associations, organized labour groups, think tanks, academics, and others spoke about current and proposed “Buy America” rules and similar U.S. domestic preference policies.

Economic Impact

Based on its findings, the report concludes that the application of “Buy America” policies “prevents integrated supply chains from functioning properly, can cause some firms to forego investments in Canada, and reduces Canada’s exports of certain products to the U.S., including some that are production inputs.”

The report warns that “these policies likely lead to job losses in both Canada and the U.S. by hindering continental competitiveness and the mutually beneficial integration of markets.” Additionally, it notes that “‘Buy America’ policies can make procurement projects more expensive for U.S. taxpayers, and limit the extent to which that country is able to attain its environmental and other goals.”

Recommendations

With the above in mind, the Special Committee made the following six recommendations:

• The Canadian government should continue engaging with the U.S. in discussions on how Buy America policies have “negative effects” on both countries, with the primary aim being on securing a full exemption.
• If a full exemption cannot be achieved, Canada should prioritize exempting integrated supply chains and differentiating them from imported or finished goods. Additionally, Canada should also pursue sector-specific exemptions following “timely consultations” with relevant stakeholders.
• The Government should facilitate talks between companies and organized labour groups on both sides of the border to raise awareness in the U.S. “about the increased costs to state and municipal projects that would result from Canada not receiving an exemption.” The government should also form a working group comprised of representative stakeholders from both countries to “provide Americans with information about – and emphasize – the importance of uninterrupted and resilient supply chains.”
• The governments of Canada and the U.S. should discuss the possibility of bilateral procurement strategies. If such strategies are developed, the initial focus should be on products and sectors where the two countries have “immediate shared priorities.”
• The two governments should also develop a procurement strategy that would prioritize the purchase of goods having low-carbon emissions, where it is felt that Canadian production – particularly in sectors such as aluminum, steel, and cement – enjoys a competitive advantage relative to other foreign suppliers.
• The Canadian government should closely monitor the progress and possible implementation of the American Jobs Plan, Biden’s proposal to spend more than $2 trillion on rebuilding the country’s infrastructure.

Canada’s Argument

According to the Special Committee, an exemption for Canada from “Buy America” policies would be beneficial for both Canada and the U.S. insofar as it would “recognize the integrated nature of the two countries’ economies and certain sectors, ensure that supply chains are able to function effectively, and contribute to business decisions that will enable firms and workers to maximize their economic contributions.”