The Border is a Long Row to Hoe – Editorial

(Globe & Mail)

Canada will have to be constantly lobbying to limit the protectionist damage from the ambiguous U.S. stimulus bill that President Barack Obama is signing today in Denver. His meeting with Prime Minister Stephen Harper in Ottawa on Thursday needs to at least get this process off to a good start.

As it emerged from the House of Representatives, the bill favoured U.S.-made iron and steel; the Senate version favoured, more sweepingly, U.S. manufactured goods. The final Buy American clause combines the specific and the general, to protect “iron, steel and manufactured goods.”

Worse, this applies to any “public building or public work,” a phrase which is broader than earlier drafts – and undefined.

Mercifully, consistency with the international treaty obligations of the U.S. – including NAFTA and the WTO – has now been built into the American Recovery and Reinvestment Act (the bill’s formal name), but doubts remain about whether those obligations apply to the procurement policies of states and municipalities, when state and local infrastructure projects get federal stimulus money. Such questions cannot wait for judgments in trade litigation.

Similarly, inconsistency with the public interest can be invoked to overcome the preference for U.S. products, but that presumably means the public interest of the U.S.

Another uncertainty is what rules of origin apply. This is no merely technical question; different parts of many products come from different places, and intricately entwined supply chains could be seriously disturbed if they have to be disentangled, to the detriment of both the U.S. and Canada.

Mr. Obama already has the authority under a pre-existing law to waive such preferences if they violate treaties. Moreover, the final version of the ARRA allows head of U.S. agencies to exempt types of products. One U.S. Senate staffer has offered the example of screws as a whole class, as opposed to this or that particular model of screw.This point graphically shows how persevering Canadians will need to be in persuading a host of different U.S. authorities.

Though the Ottawa meeting this week of the President and the Prime Minister may open the way for a broad exemption for Canada, Canadian governments and businesses also have to be ready for a long series of many minor battles. Wars of attrition are wearisome, but they can be won in the end.