Canadian Manufacturers Face New Buy American Rules

President Joe Biden makes an announcement Friday, March 4, 2022 in Washington. Canadian manufacturers are once again faced with the risk of being hurt by US protectionism and the need to fight for crucial exemptions. THE CANADIAN PRESS/AP/Patrick Semansky

Canadian manufacturers once again run the risk of being hit by US protectionism and the need to fight for crucial exemptions.

The challenge comes after the Biden administration announced new procurement guidelines on Monday that require building materials purchased for federally funded infrastructure projects to be produced in the United States.

Dennis Darby, head of Canadian Manufacturers & Exporters, says Canada will have to work hard to secure exclusions and waivers to protect access to the US market, as it has done in previous challenges.

Key to these efforts will be to emphasize the integrated nature of economies, where materials already flow freely across the border, and how Canada is rarely able to undercut U.S. prices.

“Canada and the United States don’t compete in manufacturing; we actually make things together. And that’s a truism, it’s not even a cliché,” Darby said during a telephone interview.

Across the continent, some grades of steel are made almost exclusively in Canada while others are produced in the United States, he noted.

“We’d like to say, ‘Buy North American’.”

The U.S. provisions are likely intended to target countries like China, where there are concerns about subsidized production and dumping of products for export at problematically low prices, Darby added.

The Buy American rules, part of the US$1 trillion infrastructure package that was signed into law last November, state that all “iron, steel, manufactured goods and building materials” used in the projects — from bridges to broadband Internet — that draw on those federal funds are done domestically.

However, the legislation allows for several scenarios in which the requirements could be waived, including if they are inconsistent with the public interest or if the materials are not produced in sufficient quantities or of satisfactory quality domestically.

Federal agencies will be responsible for approving all waivers, which the White House says should target specific products and projects “where possible,” rather than entire sectors or product types. This emphasis marks an effort by President Joe Biden to bolster the broad exemptions that some states have relied on to circumvent procurement rules.

In response to the Buy American push, Global Affairs Canada and the Department of Finance are in full consultation on reciprocal procurement policies. The two departments said last month that the new US requirements “are expected to negatively affect Canadian suppliers’ access” to US markets.

The federal hearings follow a commitment from last year’s Liberal budget to “ensure that goods and services are only purchased from countries that provide Canadian businesses with a similar level of access to their markets. ‘supply “.

In Budget 2022, released earlier this month, Ottawa said it would set new targets for “green procurement” across government, adding a green tint to the more than $20 billion that it spends each year on purchased goods and services.

This could have the effect of favoring local producers, said Stuart Trew, a trade researcher at the Canadian Center for Policy Alternatives.

“We have low carbon cement, we produce low carbon aluminum and low carbon steel in Canada. And if you demand those conditions on federal spending and federal transfers, you’re going to prioritize domestic jobs,” he said in an interview.

This path may be all the more attractive as trade agreements could prevent Canada from engaging in explicit domestic patronage.

“Canada has many commitments and trade agreements outside of the WTO (World Trade Organization). So with the European Union, for example, it prohibits just about any kind of domestic preferences on spending up to ‘at the school board level,’” he said, noting exceptions in some provinces for large transit or hydro projects.

This report from The Canadian Press was first published on April 19, 2022.