Canadians overwhelmingly hope Joe Biden will win the November presidential election. If he does, as seems increasingly likely, he plans on introducing a slate of new “Buy American” policies as part of a pandemic recovery program. Though some Canadians may cringe at that thought, it is not such a bad thing.
Biden’s “Made in All of America” stimulus plan is surprisingly ambitious. It includes $400 billion in new spending on clean energy and infrastructure and another $300 billion in support for research and development tied to technological innovation and “high-quality job creation” within the U.S.
That $400 billion earmarked for federal, state and local government projects is bigger than the $292 billion in procurement under Barack Obama’s 2009 American Recovery and Reinvestment Act. That stimulus package also included $212 billion in tax cuts, while Biden proposes modest hikes on upper-income earners and corporations.
In absolute terms, Biden’s plan would be the largest fiscal stimulus package in U.S. history—and Canadians should welcome it. As the U.S.’s largest trading partner and neighbour, Canada generally benefits when the U.S. economy thrives.
Fiscal stimulus is clearly needed. U.S. employment has not rebounded from COVID-induced lows. And most Canadians will welcome Washington’s focus on a green recovery and its desire to step up the global fight against climate change.
In contrast to the Trump administration’s scatter-gun approach, Biden’s plans are serious and detailed. The former vice-president’s platform rejects the racist, anti-migrant overtones of Trump’s “Hire American” pledges and instead stresses the importance of investing in frontline communities and supporting “women and communities of colour”.
Biden’s procurement policies are also accompanied by a $2 trillion pledge to rebuild new clean energy infrastructure while tackling climate change. This commitment stands a far better chance of bearing fruit than Trump’s hollow promises, especially if the Democrats gain control of the Senate.
It will frustrate some Canadians that the Biden plan includes tougher Buy American and Buy America provisions. The first are domestic preferences on direct federal government procurement while the latter are requirements for federal agencies, state and local governments to use American-made steel and other domestic products in federally financed projects.
Biden intends to increase the domestic content levels needed for goods to qualify as made-in-America under federal Buy American procurement policies and in Buy America requirements in transfers to the states. His administration will also make waivers to these rules harder to get, and support U.S. firms to produce goods and components that are currently only available from offshore.
Canadians should understand that this is discretionary spending by U.S. public entities. It is entirely reasonable, as the Democratic platform prescribes, that “when we spend taxpayer money, we should buy American products and support American jobs.”
Successive U.S. administrations have carefully excluded most Buy American and Buy America provisions, as well as set-asides for U.S. small and minority-owned businesses, from trade deals. A Biden White House will be no different.
If they respect the United States’ limited commitments under the WTO Agreement on Government Procurement, the Biden administration’s initiatives will be shielded from any successful trade treaty challenge.
How then should Canada react? Hopefully not by moralizing about the virtues of open procurement markets, which has gotten us nowhere in the past. Canada’s standard response—to seek an exemption for Canadian suppliers—has fallen short before and the prospects of success are worse today.
The Harper government failed to gain any meaningful exemptions from Buy American provisions in the 2009 Recovery Act. Subsequently, the U.S. also refused to budge on its Buy American rules during the Trans-Pacific Partnership negotiations (from which the Trump administration speedily withdrew on taking office). Finally, Canada again came up empty-handed in the CUSMA (or “new NAFTA”), despite its willingness to guarantee U.S. suppliers access to almost all Canadian procurement at every level of government—more than even the Europeans got in the Canada-EU Comprehensive Economic and Trade Agreement (CETA).
The U.S. is simply not interested in signing a traditional, reciprocal procurement liberalization agreement, whichever party holds power in Washington. Canada needs to take a different approach, one that accepts that Buy American procurement policies are here to stay.
The Biden plan extends an olive branch to key trading partners, stating the administration will “work with allies to modernize international trade rules and associated domestic regulations regarding government procurement to make sure that the U.S. and allies can use their own taxpayer dollars to spur investment in their own countries.”
Unfortunately, Canada has foreclosed its own options in this regard. CETA covers almost all federal, provincial and local government procurement. The agreement precludes Buy Canadian policies outside of a few sectors such as shipbuilding and defence. CETA’s procurement chapter even disallows set-asides for small and minority-owned businesses, except for Indigenous-owned enterprises.
With the scope for buy-local policies greatly reduced, “buy sustainable” procurement may provide the best remaining avenue for Canadian federal, provincial, and municipal governments to achieve more social and environmental benefits from government purchasing.
Examples of buy sustainable policies include requiring suppliers to provide fair wages and working conditions, respect gender equality and human rights, and empower disadvantaged groups. Procurement decisions would favour products and production methods that have a low carbon footprint, avoid adverse impacts on biodiversity, reduce pollution and waste, and respect animal welfare. If such policies do not involve nationality-based discrimination, they should pass muster under international trade rules, including CETA.
In fact, such policies are widespread in Europe. In their October 2016 joint interpretive instrument, Canada and the EU affirmed that “CETA maintains the ability of procuring entities within the European Union and its Member States and Canada, in accordance with their respective legislation, to use environmental, social and labour-related criteria…in procurement tenders.”
An added advantage of buy sustainable policies is that they can add value and benefits to all procurement, whether foreign or domestically sourced. They can also be combined, as in the Biden plan, with assistance to domestic firms to ensure that Canadian suppliers can meet the higher standards and are ready to bid successfully on public tenders. The remarkable response of Canadian firms and the public sector in producing urgently needed personal protective equipment and medical supplies during the pandemic demonstrates the potential.
In the bigger picture, Canadians should acknowledge that our government’s current hands-off, laissez-faire approach to government procurement has been spurned by our largest trading partner and is barely adhered to by EU member states. We would be foolish not to also consider the benefits of sustainable purchasing with domestic benefits.
As our country “builds back better,” Canadians can no longer afford to disregard or neglect considerable potential of government purchasing for job creation, improved working conditions and environmentally sustainable development.
Given our current trade treaty constraints, ambitious “Buy Sustainable” purchasing policies offer the best way forward for Canadian workers and the environment.
Scott Sinclair directs the CCPA’s Trade and Investment Research Project. A shorter version of this article first appeared in the National Observer on October 21.