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There’s a reason Canadian officials have been cautious in their response to the big Buy American boosterism in Joe Biden’s union address.
He was still trying to figure out, days later, what he was doing in Canada – if anything.
That speaks to a truism among trade wonks when it comes to Buy American policy: don’t think of the headline, read the fine print.
The president attracted a rare bipartisan standing ovation, and headlines, by pledging in a speech to tougher Buy America rules for future public projects.
That’s rhetoric. Next comes the harder part: math. Specifically, how many dollars are actually at stake.
Canadian officials said they were awaiting an assessment of the industries Biden listed as Buy American priorities: Glass, wood, drywall, fiber optic cables and certain metals.
There are a lot of unknowns to go through including technical details that have yet to be released, the promise of exemptions, and some of the free trade agreements involved federal and country government that will have a softening effect.
Ottawa is not yet sure how many of these products are even sold to the US for public projects subject to the new Buy American policy.
Canadian industry is affected
For starters, between top 25 products exported by Canada to the US in December, only two were included in the Biden policy: wood and aluminum.
Canadian lumber companies have some protections: already buy up factories in the U.S., in part to avoid U.S. duties.
Aluminum companies, meanwhile, will be gunning for Liberation: the rule allow exceptions when buying American costs 25 percent more or hurt the public interest.
Amidst this, the Canadian government plans to submit public comments as the US asks for input over the next month for future policies.
It’s clear Canadian officials aren’t as concerned as they were last year when the U.S. proposed discriminatory tax credits against non-U.S.-made cars.
Canada and Mexico fear serious long-term damage. In the end, he won the exemption he wanted from the auto policy.
Canadian officials said they believe this will also be resolved.
“I’m not worried,” Canada’s industry minister, François-Philippe Champagne, told reporters Friday during a trip to Washington.
Canada’s Ambassador to Washington, Kirsten Hillman, described the Buy American law as a constant struggle and never actively met the US, although she also believed in it.
“We’ve been pretty successful over the years getting exemptions,” he told CBC News this week. “That’s what they’re busy trying right now.”
A Canadian-US trade expert put it bluntly: this, in his opinion, is a relatively minor irritation.
“The impact on Canada is probably negligible,” said Laura Dawson, executive director of the Future Borders Coalition. “Canadian suppliers are very used to this routine.”
Is it a lumber company or pipe companyhe said, companies concerned about this have set up offices in the US
Background: The law was passed in 2021
It’s no secret that protectionism is in fashion, and not only in the US Canada, in fact, maintains the level of tariffs equal or higher than the US
What is undeniable is the new political enthusiasm for reviving manufacturing in the US: between both parties, it is an article of faith that communities, individuals, and the country, in general, are experiencing a decades-long decline in hard work.
That was on display in the House of Representatives when Biden spoke.
In one of the evening’s famous bipartisan lines of applause, friends and foes stood enthusiastically during the state of the union as Biden said: “Made in America! I mean it. Wood, glass, drywall.”
What the audience at home will not notice is that Biden concluded this line in the speech, which was not in the prepared text: “It is completely consistent with the rules of international trade.”
Let’s talk about those international rules.
They include free trade for Canada, England and Australia in the purchase by the US military. They also include large purchase by 85 US federal entities and agencies in 37 states participating in the World Trade Organization procurement agreement.
You can see how calculating the effect can take some time.
In fact, this whole process took some time: Biden talked about the legislation Congress passed more than a year ago, the $1.2 trillion infrastructure act adopted in November 2021.
What the law says, in Title IX, is that construction materials are not sufficiently covered by existing Buy American rules and that federally funded construction must use U.S. parts, such as drywall and lumber.
The implementation of the law is not immediate.
In his state of the union address Tuesday, US President Joe Biden announced new standards that would require all construction materials used in federal infrastructure projects to be made in America.
Any
Biden later set a task force who issued the opening landmark last year: count as an American product, 55 percent must come from the US
The rules are stricter for the construction materials mentioned above: all must be from the U.S. What is not yet clear is the amount of materials that will be exempted.
Also, the definition of US construction materials remains unclear.
That is why the US issued a draft regulations on February 9, soliciting public comments through March 13, which Ottawa plans to participate in.
This is what Biden called the state of the union: the ongoing regulatory process to implement legislation passed 15 months ago.
One trade lawyer said the US administration was still sorting out a lack of clarity on how the process would work.
“[They’re] asked for comments on some key questions ‘in the grass’,” said Dan Ujczo, a Canada-US trade expert at the firm Thompson Hine LLP.
“What are the construction materials? For example, should I make sure the gravel container is made in the USA or not?
Lawyers in the US: This can help Canada
One Canadian-born trade lawyer living in the US likes the strict Buy American policy.
Charles Benoit works for the pro-honoring group Coalition for a Prosperous America and says this law can actually do Canada a favor.
It is because it is designed to follow WTO rules, leaving Canada in between only 47 countries which would withhold access to certain US public contracts.
Competitors in the rest of the world will be cut off, including China and most of Asia, because they are not part of the international procurement agreement.
Benoit’s main complaint is that infrastructure laws are not strict enough.
“It’s a giant gaslight called Buy American,” he said, complaining that the door was open to too many imports from too many countries.
“[It] should be renamed the ‘Geographic Resource Limitation Act’.”
Here’s another wrinkle: The same 2021 US infrastructure law also includes hundreds of millions of dollars in improvements rail and highway connections to Canada.
So what is the net effect in Canada? We will get back to you. We still don’t have good prints.
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