Fears of US Protectionism Rise as "Buy American" Provisions Spark Alarm in Ottawa

Strategic Insights -

Fears of rising US protectionism dominated the agenda for President Barack Obama's visit to Canada, as Ottawa sounded the alarm on "buy American" provisions in a Washington bill. The US House of Representatives passed legislation that bars virtually all foreign iron and steel from the $820-billion stimulus package's infrastructure projects, prompting warnings from Canadian business leaders and politicians that this could be a spark for broader, and deeply damaging, trade wars.

Key Takeaways:

  • The US House of Representatives passed legislation with "buy American" provisions that bar virtually all foreign iron and steel from the $820-billion stimulus package's infrastructure projects.
  • Canadian Prime Minister Stephen Harper expressed worry and called for discussions with the US, with Trade Minister Stockwell Day hinting that diplomatic pressures could persuade US lawmakers to kill the provisions.
  • Canadian business groups, including the Canadian Chamber of Commerce, warned that US protectionism could spark a broader trend of trade wars and damage the global economy.
  • The Canadian government fears that US policy makers might extract domestic job guarantees that cause Canadian plants to shut down, with auto industry analyst Dennis Desrosiers estimating that up to $100-billion might be required to save the Big Three auto makers alone.
  • Liberal Leader Michael Ignatieff blamed the Conservative government for US protectionism, questioning why they couldn't prevent "protectionism language" from creeping into the package.

Statistics:

  • The $820-billion US stimulus package includes a $17-billion bailout for the Big Three auto makers.
  • The Conservative government fears that US policy makers might extract domestic job guarantees that cause Canadian plants to shut down.
  • Approximately $100-billion might be required to save the Big Three auto makers alone.
  • The US House of Representatives passed legislation with "buy American" provisions, with the Senate version of the bill extending the requirement to all goods and equipment paid for with government stimulus cash.

Sources:

  • February 19, story by Campbell Clark and Barrie McKenna, Ottawa, Washington, published in The Globe and Mail.
  • World Economic Forum in Davos, Switzerland, where World Trade Organization director-general Pascal Lamy warned that trade barriers will make the global economy worse.