The Biden administration has made a goal of working with allies on issues of a global nature, be it climate change and corporate taxation for multinationals, to the elephant in the G7 living room: China. To his credit, Biden has taken a go-it-alone approach if necessary, only to have European allies follow along. In this case, the hesitancy in Europe on going after China for its human rights violations of Uyghur Muslims in Xinjiang province is one example where Biden made a stand, and others in the G7 followed. National Security Advisor Jake Sullivan said last week that more restrictions were coming on China because of their treatment of the Uyghurs. The G7 was on board with this, he said, adding that each would tackle it their own way. Indeed, Europe has been tackling it their own way, calling China a “systemic rival”. China is angry.
But the work with allies approach will not always work. Although many global corporations and political leaders often liken the planet to being just one big nation-state, the reality is that nations exist and they have their own goals, their own socio-economic issues to grapple with. What’s good for Ford in Detroit is not necessarily going to be good for Ford in Mexico City, and vice versa.
The latest example of this comes from Canadian lawmakers who are pushing for Prime Minister Justin Trudeau to speak out against Biden’s Buy America policies – a trade act that requires government procurement contracts to go to components majority made in the U.S. And while this provision is laden with holes that allow for nearly all of Europe to participate in such contracts, our allies to the north are wary of the rhetoric from Biden; rhetoric that, to them, sounds too much like Trump.
A Canadian House of Commons committee set up to examine economic relations with the U.S. released a report this week, outlining six recommendations for how the Trudeau government should deal with President Biden’s new “Buy America” initiatives, World Trade Online reported for subscribers on Monday.
In one of his first moves as President that signaled a continuation of the previous government’s concern over the continued outsourcing of American manufacturing, Biden signed an Executive Order titled “Strengthening Buy American Provisions, Ensuring Future of America is Made in America by All of America’s Workers.”
Canada’s concerns over Buy America provisions are almost meaningless. When it comes to government procurement contracts, Canada is a member of the World Trade Organization’s group of 48 nations that are allowed to bid on each other’s government contract work. Trump wanted to exclude those members of the WTO’s Government Procurement Agreement from bidding for government pharmaceutical orders, but Biden actually reversed that order in April.
“Canadian economic nationalists want the U.S. to keep being their importer of last resort,” said Michael Stumo, CEO of CPA.
Canada’s House of Commons said in its report that the Trudeau government should advise Washington on how Buy America policies have “negative effects on both countries.” They advocated for a full exemption from any Buy America policies, an exemption that, thanks to the WTO’s GPA, already exists for Canada. They will try to convince like minds in Washington, most of them lobbying for multinationals or die-hard free marketeers in the Senate, that if the American taxpayer is forced to source from domestic supply, it will cost them too much money. The alternative: give the jobs to Canadians and other allies. In this case, “work with allies” becomes “work for allies.”
Canada’s assistant deputy minister for trade policy and negotiations Steve Verheul in March said Canada planned to negotiate sector-specific carveouts to Biden’s Buy America policies in areas where the countries can “very easily align.” He was speaking primarily in regard to green energy spending.
Unless Biden rejects the GPA in the future, those 48 nations are basically considered a domestic enterprise for the same government contracts as American firms.
There are many areas where Canada and the U.S. can work together to strengthen domestic supply chains. If Biden is to go along with the Canadian view on joining forces on supply chain resilience, especially under the auspices of Buy America policy, trade negotiators should also consider country of origin labeling for beef as leverage. This has been an issue American ranchers and political leaders from ranch states have brought up to USTR Katherine Tai a number of times this year. Canada and Mexico are opposed to it.