U.S. President Joe Biden imposed stringent new made-in-America rules for U.S. government spending Monday, adding a caveat likely troubling to Canada: exceptions to those rules will be allowed only under “very limited circumstances.”
Monday’s Buy American executive order was the result of a cornerstone Biden campaign promise, one designed to corral swing-state support among the protectionist, blue-collar voters who elevated Donald Trump to the White House in 2016.
The aim of the policy is not a new one in U.S. politics: ensuring that American manufacturers, workers and suppliers are the primary beneficiaries of U.S. government largesse, including an estimated $600 billion a year in procurement contracts.
The Trump administration liked to talk about Buy American, Biden said, but ultimately did little to toughen or even enforce the rules.
“That is going to change on our watch,” he said, signing an executive order to raise standards for U.S. content, increase oversight and provide for more stringent enforcement.
The measures include a “Made in America” office attached to the White House to police the use of waivers — the exceptions that allow Canadian contractors, manufacturers and suppliers access to a lucrative and often essential source of business.
That office will “review waivers to make sure they are only used in very limited circumstances — for example, when there’s an overwhelming national security, humanitarian or emergency need here in America,” Biden said.
“This hasn’t happened before. It will happen now.”
Waiver details will also be posted on a U.S. government website to provide more public transparency about who is getting around the rules and why.
The plan would also increase the amount of U.S.-produced materials or components a project or product would need to qualify as American-made, and make it easier for small and medium-sized businesses to access procurement opportunities.
It also requires government agencies to provide twice-yearly progress reports on their efforts to follow the new rules.
“I don’t buy for one second that the vitality of American manufacturing is a thing of the past,” Biden said. “American manufacturing was the arsenal of democracy in World War Two, and it must be part of the engine of American prosperity now.”
In a statement Monday, Canada’s Trade Minister Mary Ng said that Prime Minister Justin Trudeau during his call with Biden Friday emphasized that workers in both countries “benefit from our integrated, secure and resilient supply chains.”
“The Prime Minister and President agreed to consult closely, and discussions between our two countries are already underway,” the statement read.
Ng said Canada is the “largest export market for the U.S., buying more goods from the U.S., than China, Japan and the U.K. combined.”
“Canada is the number one customer for 32 U.S. states,” she said.
Ng said the Canadian government will “continue to work closely together to support sustainable economic recovery, create jobs, and grow the middle class in Canada and the United States.”
Mark Agnew, the director of international policy for the Canadian Chamber of Commerce, said Canada will find little of comfort in Monday’s news.
“Buy American restrictions remain a perennial problem for Canadian businesses seeking to access government contracts with our largest trading partner,” Agnew said in a statement.
“Although the rules have progressively tightened over the years, (Monday’s) announcement represents another unhelpful step to make it more difficult for Canadian businesses to secure contracts in the U.S.”
In the midst of a deadly pandemic and resultant economic free fall, Canada and the U.S. should be looking for ways to join forces and leverage their strengths to fortify existing cross-border supply chains, Agnew said.
“Although the full impact of (Monday’s) announcement will take time to cascade to different parts of the U.S. government, its chilling effect on business will be acutely felt north of the border.”
As if to certify the echo of Trump’s “America First” mantra, Century Aluminum — a U.S.-based producer that led last year’s charge in favour of tariffs on Canadian aluminum imports — cheered Biden’s measures.
“Manufacturing is the backbone of our great nation,” Century CEO Michael Bless said in a statement.
“We applaud President Biden for his leadership on this critically important issue that will empower domestic manufacturing while creating more good paying jobs for American workers.”
A more stringent and orderly system of approving and enforcing waivers might eventually prove to be a “silver lining” for Canada, said Dan Ujczo, a Canada-U.S. trade lawyer based in Columbus, Ohio.
The enforcement of procurement rules can sometimes be haphazard, particularly when they are confusing and poorly understood, said Ujczo, senior counsel with the U.S. firm Thompson Hine LLP.
“Canada has a network of agreements with the U.S. to address Buy American programs, but the nuance often is lost on procurement officers that do not want to risk using non-U.S. products,” he said.
“If Canadian companies can use this new Made in America office at OMB to emphasize Canada’s ‘exemptionalism,’ it could prove worthwhile.”
Dennis Darby, the CEO of Canadian Manufacturers and Exporters, said the job now is to remind Biden that the U.S. and Canada “build things together,” and that the rules risk sideswiping Canada in the same way they did 10 years ago.
“Anyone who thought it was suddenly going to be easy, clear sailing now that Mr. Trump is gone, I think, was probably not thinking realistically,” Darby said.
It may help that Biden was vice-president in 2010, when Canada secured a waiver under the Buy American provisions imposed by then-president Barack Obama the previous year, Darby added.
“America is never a pushover; America is always going to be ‘America First,”’ he said. “We just have to make sure that our interests are protected and that we aren’t threatening American jobs in any significant way.”
The U.S.-Mexico-Canada Agreement, the replacement trade deal for NAFTA negotiated under Trump, does not include specific government procurement provisions between the U.S. and Canada.
The deal envisioned relying instead on the terms of the World Trade Organization’s general procurement agreement, to which both Canada and the U.S. are signatories.
Biden said he “remains committed to working with partners and allies to modernize international trade rules — including those related to government procurement.”
Even so, Canadian suppliers and contractors will need to remain on guard, Ujczo said.
“Make no mistake: Canadian companies, supported by federal and provincial governments, will need to remain vigilant and aggressive on this file. There is a risk that Canada gets lumped in with everybody else. ”
–With files from Global News