U.S. President Joe Biden lifted the veil Wednesday on a broad and ambitious $2 trillion in infrastructure spending but Canadian businesses, contractors and suppliers were left still wondering if they will be able to share in the largesse.
Stakeholders north of the border, well familiar with Biden’s campaign-trail promises to impose more rigid “Buy American” rules for government contracts, are still waiting to find out just how stringently those restrictions will be enforced.
“I don’t think anybody really knows just how strident the Biden administration is going to be,” said Jesse Goldman, an international trade lawyer and partner at Toronto-based BLG.
“There’s a lot of uncertainty here — the numbers are very large, the concerns are pretty profound and the track record of Democrats over the last several decades has not been one of openness to trade.”
And Biden’s only getting started.
Wednesday’s tranche is just the first piece of a 10-year, $4-trillion process to rebuild the U.S. economy by restoring the lustre of American manufacturing, overhauling home care, renewing roads and bridges and lacing the country with electric-vehicle charging stations, to name but a few of the goals — all while combating climate change, to boot.
“We’re going to make sure ? that we buy American. That means investing in American-based companies and American workers,” Biden said Wednesday as he promoted the plan at a training facility for carpenters in Pittsburgh.
“Not a contract will go out, that I control, that will not go to a company that is an American company with American products all the way down the line, and American workers.”
Given the price tag, to say nothing of the U.S. political climate and the challenge of getting his plans through a deeply divided Congress with a paper-thin majority in the Senate, it’s hardly surprising the president is attaching protectionist riders.
In truth, the measures broadly known as Buy American have been on the U.S. books for decades, and actually comprise two tracks: one covers projects funded directly by the federal government, while the other — often referred to as “Buy America” — kicks in when federal infrastructure money gets transferred to the state, regional or municipal level.
Canada’s already largely exempt to the former, including the executive order Biden signed in the earliest days of his presidency, thanks to commitments the U.S. has already made to the World Trade Organization.
But given the multiple levels of government involved in the latter, that “cascade” of Buy America provisions poses a more insidious threat, said Dan Ujczo, a Canada-U.S. trade expert at Thompson Hine LLP in Columbus, Ohio.
“That’s where things get tricky, and when you’re talking about whatever number this is going to be — $3 trillion, $4 trillion — there’s a lot of potential, across multiple sectors, for missteps on government contracting,” Ujczo said.
“There’s no silver bullet here. There’s no one Canada-wide exemption that’s going to cover everything.”
There is, however, a fundamental truth that both countries learned in 2009, the last time the U.S. imposed restrictions on foreign contractors and suppliers: doing so ultimately does more harm than good on both sides of the border, given the closely knit nature of the two economies.
“There’s clearly a desire in the U.S. to use government procurement money to support U.S. workers and jobs, and we get that,” Kirsten Hillman, Canada’s ambassador in Washington, said in an interview.
“We know from past experience that applying them to the Canada-U.S. economic relationship has the opposite effect from the policy goals that they’re trying to advance. It tends to harm U.S. companies; it tends to harm U.S. workers.”
Canadian officials and elected leaders make that point at every opportunity when liaising with their American counterparts, Hillman said — a task made easier by the fact that many of those counterparts, including the president himself, were members of Barack Obama’s administration when it resurrected Buy American rules 12 years ago.
That decision, which accompanied a stimulus package aimed at pulling the U.S. out of the recession wrought by the 2008 economic crisis, prompted arduous yearlong talks that eventually resulted in a Canadian exemption to the restrictions.
“There is institutional knowledge — and that was under Obama, so we have some of the same individuals who are working on these files who were working on them then,” Hillman said.
“That’s definitely an asset in our discussions.”
So too is the ideological alignment between Biden and Prime Minister Justin Trudeau, particularly when it comes to climate change, said Ken Neumann, the national director of the Canadian branch of the United Steelworkers union.
Neumann said Canada’s steel producers have a built-in advantage when it comes to limiting emissions, thanks to largely carbon-free electricity, more modern facilities and their proximity to U.S. markets.
“We truly believe that common sense will prevail,” he said.
“If you look at the trading relationship, you can’t ask for a better neighbour, and (Canada has) a lot of the goods that are going to be required, be it aluminum, be it steel, be it cement or be it wood.”