Thanks very much to the chair and to the committee for this chance to speak to you about the Biden administration's plan to tighten up the buy American and buy America rules.
First, I'll tell you a bit about me. I currently direct the trade and investment research project at the CCPA, which has been doing public interest research into Canadian trade and investment policy since the late 1990s.
I've split this presentation today into three parts. The first gives some context on the buy American policies themselves; the second is on the way in which I think we shouldn't respond, and the third is on the way in which I think we should respond to this moment.
The first point is that buy America is here to stay. As committee members know and have heard from other witnesses, buy America, buy American and other domestic preferences on U.S. procurement have existed for some time, and they enjoy broad bipartisan support. Buy American policies require federal agencies to favour domestic end products or domestic construction materials when procuring goods, except in situations where it would be impractical or overly expensive to do so. For example, if buying locally would be more than 25% more expensive than the lowest qualifying foreign bid, or where there is no domestic supplier, the agency can waive the buy American requirement at the federal level.
The buy America policy at the state level refers to a slate of domestic content statutes and regulations in which federal funding for state and local governments, mainly for transit and highway projects but also for water infrastructure, comes with domestic content quotas. These quotas generally relate to the use of American iron and steel and certain other manufactured goods, or they could apply again to the value of components in things like buses and railcars for public transit projects.
As the committee has heard, while many buy American measures at the federal level in the U.S. are generally waived—by regulation, not by statute—for Canada and other member countries to the WTO agreement on government procurement, buy America transfers to the lower levels of government are completely excluded from the U.S. GPA coverage even for the 37 states that have made other procurement commitments in that agreement.
The long-standing measures are standard operating procedure in the U.S. no matter who's in office, and the U.S. is well within its legal rights to continue them. We have very little leverage, in other words, to change these policies. I think the main unknowns, as this committee has already heard, are what exactly the buy America conditions that will apply in this specific new stimulus plan are and how he plans on changing or tightening up this waiver application process in response to criticism that the buy America contracts have been going to foreign firms. I think we have to put in there that the main focus seems to be on China with respect to this specific aspect of the buy America contracts.
So how should we not respond? Looking back at the Obama administration days, when they passed their own recovery act a decade ago with strings attached—buy America strings—we tried to negotiate a bilateral procurement agreement that would be balanced, and it didn't go well. The end deal announced in 2010 was hugely lopsided in favour of the U.S. Canada largely opened up provincial and local government procurement to unconditional U.S. bids, in return for a tiny sliver of opportunity to bid on stimulus money in a handful of federal projects. This wasn't guaranteed access, obviously; it was an opportunity to bid on what was left of the money that hadn't already been spent. It amounted to about four or five billion dollars' worth of what was initially a $275-billion U.S. procurement fund, so not a great deal at the end of the day.
Canada has since made permanent commitments in the WTO GPA to restrict provincial procurement flexibility and bilateral commitments with the EU to permanently cover municipal procurement. U.S. firms with a presence in Canada benefit from both of these agreements already, and as a result we have very little to offer the Americans in a new procurement deal. You could offer them a CETA-plus arrangement with municipal coverage, but that's exactly what we did in the CUSMA negotiations and they weren't interested, and I suspect the Biden administration wouldn't be interested now.
So instead of making a new deal or fretting over what Canadian products or components may or may not be excluded from Biden's new buy America plans, I think we should recognize, as this committee has already heard from other witnesses, that these same products and components—steel pipes, concrete, railcars, buses, transit, renewable power, broadband access, infrastructure, and water in particular—are needed here in Canada as well for the same purposes. The AFB at the CCPA recommends that we spend $36 billion over the next eight years on new water infrastructure because we have a huge deficit in that area.
If we're going to spend the money, which I think we should, why not take a page out of the Biden playbook and find ways to channel some of that money to domestic manufacturing, local small and medium-sized enterprises, women-owned businesses, indigenous-owned businesses, etc., with all the spillover benefits that doing that would produce in Canada and the U.S.?
In summary, I would say that sustainability criteria on federal transfers to the provinces and territories that prioritize high–quality sustainable Canadian goods and services may even bring the Biden administration to the table to discuss, as we just heard from the previous witness, a potentially beneficial and mutually beneficial North American green jobs and procurement strategy.
I'm also happy to answer questions. Thanks very much for your time.