Buy America Laws to Drag Down Canadian Recovery Next Year: Report

(The Canadian Press – Julian Beltrame)

Buy America restrictions in the massive U.S. stimulus package could be sufficiently punitive to keep Canada’s economy from a more robust recovery next year, a new economic outlook says. The CIBC report argues that Canada will largely miss out on the benefits of the U.S. recovery next year because most of the activity is being generated by government stimulus.

“Much of the U.S. growth in 2010 will be generated from government stimulus on projects where Buy America provisions shut the door on Canadian suppliers, or in sectors like education that don’t benefit Canadian industry,” said chief economist Avery Shenfeld.

The CIBC has upgraded its forecast for the Canadian economy next year by half-a-point to two per cent growth, but that is still a full percentage point less than the Bank of Canada estimate.

The key difference in the forecasts, says Shenfeld, is that the central bank has built in a substantially bigger bounce for Canada’s export sector, a pop he maintains won’t happen because of Buy America and other provisions of the stimulus program. “In a normal year Buy America provisions might not bite that much because the U.S. economy would be growing on several channels, but in the case of 2010, with a lot of the growth coming out of that stimulus, that will be one reason why we may underperform,” he explained. Read more here.