Posthaste: Canada may be locked out of a $2.6 trillion bonanza if Biden enforces a stringent ‘Buy American’ policy

It could be an area of friction between Canada and the U.S.

U.S. President-elect Joe Biden delivers remarks about the U.S. economy during a press briefing at the Queen Theater on November 16, 2020 in Wilmington, Delaware. PHOTO BY JOE RAEDLE/GETTY IMAGES

Good morning,

In his first major speech on the economy since winning the election, U.S. President-elect Joe Biden sounded a bit like Donald Trump — not in tone, thankfully, but in his intentions.

“From autos to our stockpiles, we’re going to buy American,” Biden said in a speech Monday as he outlined his plans to jump-start the economy. “No government contract will be given to companies that don’t make their products here in America.”

That should alarm bells ringing in Canadian business circles who are hoping for a Canada-friendly president in Washington and the prospect of $600-billion in federal contracts, apart from $2 trillion in green infrastructure spending that the president-elect has promised — a $2.6 trillion bonanza.

While president U.S. Donald Trump has long touted the ‘Buy American’ policy, the current, scatter-brained occupant of theWhite House has been largely distracted over the past four years to coherently put an effective policy together.

But the Biden would-be administration appears to be a well-oiled machine and will methodically pore over every clause and article to boost its Buy American policy without running afoul of various treaties and trade agreements. It is also a politically savvy move by Biden to show Rust Belt voters that brought him to an impressive victory that they will not be forgotten.

During the campaign, Biden had pledged that, if elected, his administration will target government procurement contracts worth US$600 billion to ensure that it benefits American businesses the most from a much-needed fiscal stimulus.

“Going to use the buy American products, support American jobs, we’ll invest to build more resilient infrastructure roads, bridges, ports,” he said during a speech in October in Toledo, Oh.

Lawrence Herman, a former Canadian diplomat who practices international trade law at Herman & Associates, believes the new U.S. administration could push through its Buy American policy while remaining within the rules of the World Trade Organization. It could also remain onside of the U.S.-Canada bilateral Government Procurement Agreement (GPA), which was first signed in 2010, but has gone through a few iterations since then.

“Going forward under the new order in Washington, Canadian suppliers need to be prepared,” Herman said in note for C.D. Howe Institute where he is a senior fellow. “The revised GPA has wide doors through which the Biden administration could drive additional Buy American preferences and, arguably, not be offside WTO obligations. This point remains to be tested, however. When those preferences cross over the line into projects not clearly excluded, there could be WTO problems.”

The new U.S. president would also face a conundrum that will test his views on multilateralism and could have far-reaching impact on global trade.

While Trump had rendered the WTO toothless by blocking appointments to the its appellate body, a dispute-resolution mechanism, Biden is expected to restore its operational status. But that could open the door to Canada – or any other GPA party — launching a WTO complaint over Buy American measures that breach US treaty obligations, Herman said.

“Whether any of this comes to pass will depend on how aggressively the Biden administration pursues enlarged Buy American preferences. From what has been said, however, it looks like this could be an area of friction between the two countries, notwithstanding the Canadian cheers for the election result.”

Source: Financial Post