With the serious toll the recession continues to take on our economy and particularly given the reports that many American states and municipalities are denying Canadian companies a chance to bid on infrastructure projects, it’s not surprising to increasingly hear of calls for our provinces, territories and municipalities to discriminate against foreign suppliers. In particular, the Canadian Auto Workers Union is mounting a concerted campaign to have local councils adopt “Buy Canadian” policies that would limit the ability of foreign suppliers to compete for contracts.
Many chambers of commerce across the country have long encouraged both organizations and individuals to purchase locally-made products whenever it made sense to do so. After all, the companies that produce those products pay taxes locally and create jobs for local people.
The quality of the goods and services produced in Canada is recognized throughout the world, so making sure that local suppliers are fairly considered and chosen when their price and quality are competitive is only logical. The problem comes when we go beyond promoting these products and services to writing laws that discriminate against suppliers from other provinces, territories or countries.
When applied between regions, these policies balkanize Canada. An example was the costly and destructive “construction war” between Ontario and Quebec, but there are plenty of other examples that prevent out-of-province/territory companies from operating in other jurisdictions or make it hard for individuals to offer their services in other regions.
For some time now, resolutions passed at the Canadian Chamber’s Annual General Meeting have supported eliminating those internal barriers to trade and mobility. The CAW’s call to discriminate against foreign suppliers is in many ways a tougher challenge because it is much easier to argue for excluding companies from other countries, particularly when Canadian firms often have to deal with discrimination like U.S. “Buy American” laws. Each chamber has to decide for itself how it wants to approach this issue. However, here are some factors you may want to consider:
- When Canada objected to the “Buy American” provisions in the U.S. stimulus package, Congress amended the legislation to say that the United States would respect its trade obligations under international law. That amendment meant that Canadian companies would not be shut out of contracts at the federal level.
However, Canadian companies can only get the protection offered under the law at the state and municipal level if we do not discriminate against U.S. companies operating here. We need to decide whether we’re prepared to “walk the walk” and not just “talk the talk.”
- Canada is one of the most trade-dependent countries in the G8. Canadian companies need access to global markets to compete, grow, and create jobs – in communities across the country. Blocking foreign companies from bidding on Canadian procurement projects will result in other countries retaliating against Canada, in exactly the same way as many Canadians now argue that we should retaliate against American businesses.
- Canada and the European Union are about to launch free trade negotiations, which are forecast to generate $40 billion in annual trade and investment gains. Shutting foreign companies out of our procurement market will jeopardize these negotiations, as well as undermine potential economic partnerships with other major economies like China, India, and Japan.
- ‘Buy Local’ policies are designed to discriminate against companies that would otherwise win competitions because either their products or their prices are better – there is no need to shut out companies that cannot compete. The net effect is that taxpayers get less for their money.
- According to the OECD, protectionist policies such as ‘Buy Local’ don’t pay. A recent OECD report stated that “retaliation will spread these risks like a virus and, as a result, governments wishing to protect the weakest firms will end up punishing the strongest”. Keeping markets open benefits the entire economy with a 10 percent increase in trade associated with a 4 percent rise in per capita income.
- The Canadian Chamber network has looked into ‘Buy Local’ policies before. In fact, at two recent AGMs, local chambers voted against ‘Buy Local’ policies for Canada because of the importance of trade and global market access to our country.
There is no question that we are in difficult economic times and the status of jobs within our own towns and cities is uncertain. The reaction to “protect our own” is only natural, but it can also be self-defeating in the long run. Canadian companies in all communities – large and small – rely on both domestic and global markets to create and grow jobs for Canadians. By seeking to shut our markets, we put at risk the very businesses and jobs in our communities that depend upon global access. Our country’s future prosperity will depend on staying open to the world and keeping the world open to us.
President, Canadian Chamber of Commerce