Buy American and the impact on North American competitiveness

Submission to the House of Commons Special Committee on the Economic Relationship between Canada and the United States.

Mr. Chairman, committee members, thank you for the invitation to take part in your meeting on Buy America and the economic relationship between Canada and the United States.

The Business Council of Canada is composed of 170 chief executives and entrepreneurs of Canada’s leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses.

Representing different industries and regions, these men and women are united in their commitment to improve the quality of life for all Canadians.

Canada is a trading nation. Our prosperity and living standards depend on it. 65 per cent of our GDP is tied directly to trade. The bulk of this trade is with the United States. As of 2020, it accounted for 73 per cent of Canada’s merchandise exports and 53 per cent of services exports. Two million Canadian jobs are related to exports to the United States.

This relationship is mutually beneficial. Nearly nine million jobs in the United States depend on cross border trade and investment with Canada, and we are the largest or among the largest export partners for most states.

Given the importance of this relationship for our shared prosperity, during CUSMA negotiations, the business community on both sides of the border advocated for a “do no harm” approach and to modernize certain elements of the 25-year-old NAFTA, the basis for most of our bilateral trade.

The Council and many of our American counterparts were pleased with the new agreement in both its substance and because it was able to bring a wider range of stakeholders on board. The level of bipartisan and key stakeholder support for this agreement in the U.S. is remarkable – especially given the current political climate south of the border.

While CUSMA’s government procurement chapter does not apply to Canada-U.S. trade, the overarching goal of the agreement was to enhance North American competitiveness in manufacturing, among other areas, while supporting well-paying jobs.

We believe the direction taken on Buy American by the new administration, which broadly supports CUSMA and its objectives, undermines the success of this critical agreement.

Bilateral challenges related to Buy American are certainly not new. However, the timing and approach of the latest proposed actions by executive order and in The American Jobs Plan goes against the spirit of CUSMA, as well as many shared objectives for bilateral cooperation, including in the Roadmap for a Renewed U.S.-Canada Partnership and priorities outlined for the U.S.- Canada High Level Ministerial Dialogue on Climate Ambition. It is critical that Canada secures an exemption or a clear carveout.

The tighter application of Buy American rules and restrictions in the American Jobs Plan will not only harm Canadian, but also American workers. CUSMA created strong, resilient, and competitive regional supply chains. Proposed changes could harm trade and investment in Canada and fragment American supply chains at a time when we need to work together to address economic resiliency and environmental challenges.

Canada faced a formidable challenge at the outset of CUSMA negotiations. But with a proactive and coordinated Team Canada approach that involved the business community and labour, among others, we were able to overcome and emerge with an outcome that benefitted people living on both sides of the border.

If we are to be successful this time around, we need to take a similar approach and do so with urgency. This effort should be directed at the White House, Congress, state and municipal officials, and most importantly, aligned with U.S. stakeholders in business and labour.

Canada should not challenge Buy American as a concept. Rather, we need to make the case that working with Canada, given the unique integrated nature of our economies, is key to achieving this procurement policy’s goal of ensuring strong and resilient supply chains as well as well-paying jobs.

The Business Council of Canada and its members stand ready to support a Team Canada approach.

Thank you for this opportunity. I look forward to answering your questions.