Thank you very much, Mr. Chair, and bonjour, mesdames et messieurs. Thank you for the invitation to come to speak to you on a number of issues with respect to Canada-U.S. relations.
We certainly have a number of concerns right now, extending from the growing complexity of costs and time delays at the border, Canada's lack of enforcement of rules that would prevent counterfeit product going into the United States from Canada, the imposition of export controls, as well as a number of opportunities, I think, as previous speakers have said, for Canadian and American businesses to work together.
I'd like to focus my remarks on one particular issue, which is the challenge we see right now with the imposition of buy American provisions in U.S. legislation. I have circulated a brief to committee members on this issue. I won't go through it point by point but look at the highlights. This is the same brief that has been circulated to the Prime Minister's Office, the international trade minister's office, and the industry minister's office. It has been circulated throughout the Canadian government. It has been circulated to congressional representatives in the United States and to a number of business associations in the United States. We have the latest version of the brief.
In short, the concern has to do with the provisions that were first contained in the American Recovery and Reinvestment Act signed into law by the President in February. The restriction is that all iron and steel manufactured goods that are used in public works projects funded under this act are to be made in the United States. There's a question mark about what that actually means, but we think it means substantial transformation of goods taking place in the United States. Now, that act also contains three waivers. The rule would not apply if a waiver were granted because the impact of the provision would substantially increase the cost of the project or if particular products were not available in the United States or if it were against the public interest.
The recovery act also requires these provisions to be implemented consistent with U.S. trade obligations here. What we're also seeing is not only the appearance of these provisions in the recovery act itself, but in other pieces of legislation that are emerging from Congress. In fact, we know of seven other pieces of legislation right now, the Water Quality Investment Act being the one that is causing the most headaches. It is an act that would provide $13.5 billion over the next five years for clean drinking water and municipal waste water improvement projects, but we're also seeing this appear in other pieces of legislation, most recently on Tuesday in an act presented before the House of Representatives, the Green Schools Act, covering construction materials for schools in the United States.
Canada's concern here is that under the provisions of NAFTA, state and local procurement is not covered. There's no safeguard for Canadian exporters to the United States under NAFTA provisions. NAFTA, the WTO procurement agreement, covers only federal procurement as far as Canadian exporters go, although I would argue that what has changed here is that these provisions are contained in federal law. They are provisions that affect how federal funds are being spent at state and local levels, and I would say there is an argument that at least in terms of the spirit of NAFTA this should be covered under NAFTA. I think that's a good negotiating argument for the Canadian government to make, but in essence, right now there is no clear safeguard for Canadian exporters here. Buy American content provisions have existed for a long time at state and local levels. Usually those are threshold content provisions. What is contained in the federal legislation that is now coming out are out-and-out restrictions that will apply to exporters of certain products, particularly in the water and waste water sector, which is the area right now, although structural steel producers, foundry producers, are also being affected.
These markets were fairly open to Canadian exporters. As a result of the introduction of the Water Quality Investment Act, we are now seeing contractors in the United States requiring Canadian suppliers to sign affidavits saying that the product was made in the United States. If they're unable to sign those, they're losing contracts. A number of companies have been affected. They've lost business in the United States. One company in particular, IPEX, which is based in Don Mills, has had its pipes ripped out of the ground by a contractor. That's simply because the contractors themselves don't want to be put in the position of having to remove the equipment if these provisions are actually employed. This is a growing issue of great concern. It directly affects Canadian exporters and a number of Canadian communities.
As a result of this, we're also seeing quite a wide array of sentiment on the part of Canadian companies that are finding themselves restricted from the U.S. market even as provincial or local procurement markets remain wide open for American suppliers in Canada. A number of municipalities are passing resolutions that provide some form of reciprocal access. This began in Halton Hills, and it's going to be debated by the Federation of Canadian Municipalities. Under these resolutions, municipalities would provide open access to their markets for suppliers from other countries as long as those countries provide open market access for Canadian exporters. So there is some form of reciprocal market access resolution.
I can tell you that there is growing pressure for some form of retaliatory action here in Canada. I think it could be used as a negotiating lever. It's one of the most important levers that we have. One thing that American businesses and American officials take very seriously is the threat of retaliatory action on the part of their trading partners. If other countries also undertake retaliatory action, what we're left with is a world that goes back to the 1930s and the imposition of trade restrictions. In the midst of a global downturn, I don't think that you come into recovery by restricting business opportunities. It's much better to keep markets open so we can grow business opportunities together. But in other sectors, the of retaliation is very real.
Since the commitment of the G20 leaders in November not to restrict markets, the WTO has counted 137 cases around the world of increased tariffs, new non-tariff barriers, or new procurement restrictions. In spite of President Obama's commitment not to restrict market access, these buy American provisions provide quite substantive restrictions, particularly towards Canadian companies exporting into municipal and state procurement markets.
CME is trying to identify affected companies. We want to make sure the government knows what the impact is. We are the only business association in Canada with an office and representative in Washington. Our representative has been very active on this file and has found business allies in the United States. At the end of the day, it's important for U.S. businesses to make the case to legislators that these buy American policies are bad for the United States because they slow down infrastructure projects, complicate them, and increase costs. If Canadian businesses are losing opportunities in the United States, then U.S. suppliers to those businesses will also be losing jobs. I think it's very important that we bring U.S. allies on side.
As for our recommendations for what the Canadian government can do, there are four things.
First of all, the Prime Minister and the President need to discuss this issue and come to an agreement that conditions should not be imposed on how federal funding is spent at state and local levels, in the spirit of NAFTA.
Second, we have to make very clear presentations before the U.S. Congress. I know that the Minister of International Trade will be doing that, but I think it's even more important that we continue to build allies in the United States so that U.S. business interests express their concerns to their congressmen and senators.
Third, there is an opportunity here on the part of the United States to open negotiations to develop a new agreement on procurement. I think the U.S. authorities are waiting for a proposal from the Canadian government to do that, and I think they would treat that proposal very well.
And fourth, very frankly, the message that there may be some reciprocal restriction imposed on the part of Canadian municipalities is a very strong negotiating message that the Canadian government has to deliver to U.S. counterparts. The current motion that is going to go forward to the Federation of Canadian Municipalities may cut both ways. It is a motion that would provide for reciprocal restriction. But you could also see it as a motion that provides reciprocal market access: Canadian municipal markets will remain open to suppliers from countries whose markets remain open to Canadians.
Thank you.