President Joe Biden’s tighter rules for US purchasing, potential protectionism in his US $ 550 billion infrastructure program, and the promise to move medical and military supply chains out of foreign countries raise concerns that Canadian companies are forced out of the US government procurement market.
Mr Biden unveiled his long-promised tightening of the Buy American Act on Wednesday. Under its new rules, goods purchased by the U.S. federal government – from vehicles to building materials – will have to contain 75 percent U.S.-made content by 2029, up from 55 percent today.
Entrepreneurs will also need to provide more documentation to the government to prove that they comply with these content requirements.
“They have a new sheriff in town,” the president said at a Mack truck assembly plant in Macungie, Pa. “We want to be the ones who make the innovative parts for every product.”
Biden to Boast Stricter “Buy American” Rules During Visit to Mack Trucks Pennsylvania Plant
Mr Biden also pledged to use the infrastructure deal, which enjoys the backing of Democrats and Republicans, to direct public money to American companies that build roads, railways and broadband networks. . And he announced a plan to encourage companies to make certain essential products in the United States, rather than importing them.
The exact value of US government procurement to Canadian businesses is unclear. A 2015 estimate from the United States Government Accountability Office put the figure at $ 15 billion per year for all levels of government, including $ 674 million from the federal government in particular.
A senior Canadian government official said Ottawa was not particularly worried about Mr Biden’s Buy American rules, as they will be mostly neutralized by the World Trade Organization’s Government Procurement Agreement. Under this agreement, Canadian companies are exempt from Buy American requirements on most US federal government contracts. The source said Mr Biden’s goal appears to be primarily to punish non-allied countries, such as China, which is not a party to the deal.
The official said the Canadian government is far more concerned that Mr. Biden or members of Congress will include US content requirements in the infrastructure package. Most of this spending will be channeled through local and state governments, which are not subject to WTO rules. The official said Canada was lobbying the White House for exemptions to ensure Canadian companies were not harmed.
The Globe and Mail does not identify the official so he can better understand the Canadian government’s thinking on Mr. Biden’s actions.
Daniel Ujczo, an Ohio-based commercial lawyer with clients on both sides of the border, said Buy American could still cause pain in Canada. U.S. companies with contracts with the government might be discouraged from sourcing goods in Canada due to the hassle of paperwork to meet Mr Biden’s higher compliance requirements, he said. The rhetoric around Buy American could also have a chilling effect, in which American companies decide not to deal with Canada for fear of breaking the law in some way.
âThe problem will be perception. Businesses might say “we don’t want to go through all of these requirements to deal with Canadians” and only use American suppliers, “he said.
The Canadian companies that could be affected are largely those that supply construction components used in US federal government buildings, he said: metal fabrication, wire, transformers and hydraulics.
Mark Agnew, vice president of policy at the Canadian Chamber of Commerce, said Canada could also be swept away by a White House plan to move supply chains for essential goods to the United States.
The Biden administration has listed many products, from computer components to drugs, that it wants to manufacture domestically to prevent other countries from cutting off supplies to the United States. potash.
On Wednesday, the president said he would create new incentives for the US government to source from US factories to encourage companies to find domestic suppliers. Such a move is largely aimed at Beijing, which Washington says could hamper the U.S. military or healthcare facilities by cutting off vital supplies.
But Mr. Agnew warned that such a policy could harm even allied countries like Canada.
âOur government must be aggressive on essential minerals, on promoting the common base of defense and industry,â he said. âThis is not aimed at Canada, but there is nothing I saw today that indicates that Canada is going to receive special treatment. “
Canadian companies have been beaten in previous rounds of US procurement protectionism. But they’ve also gotten significant exemptions in the past: Former President Barack Obama gave Canada a Buy America rules pass in his 2009 stimulus package, for example.
So far, Prime Minister Justin Trudeau has not been able to get anything similar this time around. Earlier this year, Biden privately told Trudeau that US purchasing policies would not hurt existing trade relations. But the president has not made any firm commitments publicly.
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