International Trade Committee on March 16th, 2010

[The Chair, Conservative, Lee Richardson]

Order, please.

Thank you for your patience and indulgence.

We still have a few members who appear otherwise occupied, but we're going to have to begin.

I'm sorry for keeping our witnesses waiting. I appreciate their punctuality.

We are going to continue today with our general review of Canada-United States trade relations, with specific reference in this meeting to procurement policies and the recent procurement agreement.

To help us through these discussions, we have a witness from Canadian Manufacturers and Exporters. Jean-Michel Laurin has been with us before. I appreciate his return on a new subject today. From the Canadian Centre for Policy Alternatives, we have Scott Sinclair, who is a senior research fellow. We again welcome back Teresa Healy, who is a senior researcher for the social and economic policy department at the Canadian Labour Congress.

With those brief introductions, I'm going to ask each of our witnesses to give brief opening remarks for up to 10 minutes, if that's agreeable to all of you. We will hear from all three of our witnesses in terms of opening remarks and we'll then go to questions.

Let me ask you to begin. I'll start with Scott Sinclair from the Canadian Centre for Policy Alternatives.

[Scott Sinclair, Senior Research Fellow, Canadian Centre for Policy Alternatives]

Thank you very much, Mr. Chair and honourable members.

Thank you for the invitation to appear today and for the opportunity to discuss the February 2010 Canada-U.S. government procurement agreement.

The Canada-U.S. government procurement agreement, which I'll refer to from now on in my remarks as “the agreement”, in my view fails to provide a meaningful exemption for Canadian suppliers from the Buy American provisions employed in the February 2009 U.S. stimulus package, the recovery act.

As you're aware, the agreement has three main elements: an exchange of permanent commitments under the WTO agreement on government procurement; a temporary agreement, lasting until September 2011, providing mutual access to certain state, provincial, and municipal infrastructure projects; and a pledge to explore the scope for further negotiations and agreement to expedited consultations regarding future procurement-related matters.

In the time allotted, I will briefly discuss each of these elements.

First, on the permanent commitments, under the agreement Canada will bind, for the first time, certain provincial government procurement under the WTO GPA, while in exchange the U.S. will extend its 1994 GPA commitments at the sub-federal level to Canada.

Thirty-seven U.S. states have varying levels of commitments under the GPA. Until now, Canadian suppliers have not had the right to challenge decisions to exclude them from bidding on contracts covered by these 37 U.S. states. It is difficult to estimate the quantity of state-level procurement covered by the U.S. under the GPA. Despite obligations to do so, the U.S. government does not report detailed statistics on covered procurement at the state level to the WTO committee on government procurement.

The quality of the U.S. GPA commitments at the sub-federal level, however, is poor. As I think you're aware from previous testimony, the U.S. has various exceptions, most notably for the Buy American restrictions attached to federally funded mass transit and highway projects, as well as for small business and minority set-asides. Public utility contracts are carved out, and of course there are the 13 states that have no commitments. Even in many of the 37 states that have signed on, Canadian suppliers will not be permitted to supply construction-grade steel, vehicles, or printing services, and there are other exclusions.

Importantly, Canadian suppliers are currently denied access to the 23% of U.S. federal procurement dollars set aside for small business and minority-owned businesses. Comparable set-aside programs at the state level are also fully exempted. In some states, these range from 25% to 40% off the top, as set aside for local small or minority-owned businesses. Municipal governments, as you're aware, are also not covered by the U.S. GPA commitments.

Now, in 1995, the Canadian representative to the WTO committee on government procurement, looking at this identical offer, summed up Canada's response by saying:

It was Canada's position that, in providing increased and secure market access to its trading partners, it was not unreasonable to expect the same degree of reciprocal market access in return. In the context of the present offers, this circumstance simply did not exist.

I believe that assessment is still valid today.

For their part, Canadian provinces have agreed to cover a range of goods, services, and procurement, mainly by provincial government ministries. This is the first time that Canadian sub-national government procurement has been committed under an international agreement.

Canadian provincial governments have excluded a range of procurement programs--entities such as crown corporations and sectors such as renewable energy and mass transit--from Canada's GPA commitments. Canadian municipal government is not covered under the permanent commitments; it is under the temporary commitments, which I'll come to in a minute.

I just want to emphasize that the GPA rules prohibit governments from negotiating or considering any form of local content or “any condition or undertaking that encourages local development”, even if the procurement contract is open on a non-discriminatory basis to foreign bidders.

So you can't even look at which proposal, from whatever bidder, provides the greatest benefit to my community, region, or province or to the country.

To sum up, the GPA commitments will curtail Canadian provincial governments' ability to prefer Canadian goods or suppliers or to use government purchasing as an economic development tool, while leaving existing Buy American preference policies almost fully intact.

I'll turn now to the temporary commitments.

The second main element of the agreement is an arrangement that lasts until September 30, 2011. It provides mutual access to certain infrastructure and construction projects not otherwise covered by the GPA. It is difficult to obtain precise numbers on the value of the temporary commitments, but the best available estimates show that this part of the agreement greatly favours the U.S. The agreement gives Canadian suppliers an opportunity to bid on the remaining contracts under seven specific federally funded programs. While the overall budget for the seven programs totals $18 billion U.S., by December 31, two-thirds of the grants, loans, and transfers under the recovery act had already been allocated. Canadian suppliers will therefore have an opportunity to compete for no more than an estimated $6 billion U.S. of federally funded stimulus projects, representing just 2% of the procurement funded under the recovery act. The rest falls outside the scope of this agreement. The amount actually open, as a practical matter, to Canadian suppliers will be considerably less than this.

Further funds were allocated between December 31 and the date of entry into force of the agreement. Canadian suppliers' access will be restricted to contracts above the threshold. To give an example, for one of the seven programs--I think the largest--the U.S. Environmental Protection Agency reports that by February 15, 2010, over $3.5 billion U.S. of the total of $4 billion U.S. allocated under the recovery act to the clean water state revolving fund was already under contract. Similarly, by February 15, 2010, over $1.8 billion U.S. of the total of $2 billion U.S. allocated to the drinking water state revolving fund was already under contract.

In a February 16 briefing on the agreement for Quebec labour groups, a senior Quebec Department of Economic Development official stated that the ministry estimated the value of the unallocated funds of the seven U.S. programs to be $1.3 billion U.S. Given how long the negotiations have taken, the fact that only a sliver of total recovery act funded projects are covered, and that most of these moneys have already been allocated, Canadian suppliers can expect to see very little practical benefit from the temporary commitments.

In return, Canada has guaranteed U.S. suppliers access to a range of municipal and crown procurement construction projects until September 2011. The value of these contracts can be roughly estimated to be more than $25 billion Canadian. During questions I can explain how I arrived at that figure. U.S. suppliers will have the opportunity to bid on the full amount of these contracts, right up until the deadline. In sum, the temporary commitments are remarkably lopsided, with the bulk of the benefits going to the United States.

I'll comment briefly on the third element. A key demand of Canadian governments when they first entered the negotiations was that any deal should protect Canada against Buy American rules in future U.S. legislation. The agreement did not achieve this objective. Instead, it provides for expedited consultations at the request of either party on any matter related to government procurement. Such consultations must begin quickly--within 10 days--but the agreement provides no legal safeguards or guarantees to protect Canada from Buy American preferences in future U.S. legislation. In addition, the agreement provides for Canada and the U.S., as you know, to enter, within one year, discussions to explore an agreement that would expand, on a reciprocal basis, commitments with respect to market access for procurement.

It is difficult to say what the outcome of such talks might be, but the unbalanced nature of the current agreement and the fact that despite paying a fairly steep price Canada was unable to gain any lasting or meaningful relief from the Buy American preferences in the recovery act are not good omens for future negotiations.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Sinclair.

I think we'll just continue down the line.

We have Jean-Michel Laurin, from the Canadian Manufacturers and Exporters.

Again, you have 10 minutes or less, please. Thank you.

[Jean-Michel Laurin, Vice-President, Global Business Policy, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen.

Thank you again for inviting me to appear before the committee today on behalf of Canadian Manufacturers and Exporters to discuss Canada-U.S. trade relations and, more specifically, the procurement agreement that was recently concluded between the two countries.

It's always a pleasure to be here. In fact, I remember that we had the chance to meet with this committee almost a year ago to talk about Canada-U.S. trade relations. I know the committee produced a report, and we were quite pleased to see that a recommendation that Canada should increase its lobbying and advocacy efforts in Washington was included in that report.

This afternoon I'd like to comment on the agreement that was concluded in February, share some of our ongoing concerns with Buy American restrictions in the U.S., and share some thoughts as to what we need to do going forward.

Before I start, I'd like to say a few words about the association and the members I have the privilege to represent. Canadian Manufacturers and Exporters is Canada's leading trade and industry association and the voice of manufacturing and global business in Canada. Our mission is to improve the business environment and help Canadian manufacturers and exporters compete and win in domestic and global markets by leveraging our leadership and expertise, our connections, and the strengths of our membership network. Our membership extends across Canada, includes businesses in every sector of manufacturing, and is primarily made up of small and medium-sized companies.

Last year alone, Canadian manufacturers directly exported 47% of their production, with 77% of those exports going to the United States. The U.S. is our main export market. When taking indirect exports into account, the argument can be made that we sell more to the U.S. than we sell here in Canada.

Canadian manufacturers' U.S. sales went down 23% last year, so our members have suffered greatly as a result of the U.S. recession. Despite exporters' efforts to diversify sales in other markets, for geographical and economic reasons we expect the U.S. to remain a key market for us in the foreseeable future, and also in the long term.

This is why the Buy American restrictions inserted in the American Recovery and Reinvestment Act, the U.S. version of the economic action plan, have been such an important issue for us. It explains why our association took the lead in orchestrating the fight against those restrictions in the Canadian business sector.

Our work in fighting Buy American restrictions in the recovery act started in January 2009, when Congress first proposed these restrictions. We alerted the government at the time and were glad to see the Prime Minister raise the issue directly with President Obama on a number of occasions. Despite the president's reassurances that the U.S. would respect its trade obligations, we knew this would impact our members, because NAFTA doesn't cover federal transfers to states and local governments.

Shortly thereafter, we started receiving calls from members who were saying they couldn't bid on projects unless they signed affidavits stating that their goods were made in the U.S. Businesses in various sectors, including water and waste water equipment companies, steel and fabricated metal companies, and electrical products, building products, and medical equipment sectors, were all reporting problems.

Some of our members' stories made headlines. You might have read about some of them.

Moreover, companies that should have been protected by our trade agreements, or that were not directly selling to U.S. governments, were reporting problems and losing business as well as a result of the Buy American sentiment that was spreading across the U.S.

The federal government and the provinces quickly understood the issue and began to take measures. In just a few weeks, all the provinces rallied around the strategy put forward by Minister Day of the federal government. This strategy sought to bring us back to February 16, 2009, which is the day before the American Recovery and Reinvestment Act was adopted, in the United States.

The short-term objective sought to exempt Canadian companies from the Buy American measures and to negotiate an agreement that would have a longer-term impact by opening up public markets on both sides of the border.

The agreement that came into force on February 16 of this year is, in our opinion, a positive step forward. It delivers gains to Canadian exporters by improving access to U.S. procurement markets. While the new procurement agreement does not deliver the blanket exclusion for Canadian manufactured products that we would have liked to see, it's a positive step forward and strengthens Canada's hand in fighting Buy American restrictions in the future.

In fact, I want to use the opportunity again to recognize and thank Prime Minister Harper, Minister Day, his colleagues in cabinet, and his staff, as well as Canada's premiers, our chief negotiator Don Stephenson, his negotiating team, Ambassador Doer in Washington, as well as all of his staff, for their leadership, their perseverance, and their hard work in concluding this, which is the first trade agreement signed by the Obama administration.

For our members this agreement basically changes five things going forward. First, the agreement exempts Canadian companies from the Buy American restrictions of the recovery act. That exemption is limited to seven programs, which Mr. Sinclair described earlier.

Second, by getting our provinces to sign on to the WTO's government procurement agreement, Canadian companies now have guaranteed access to procurement opportunities in 37 states. In other words, Canadian companies now get the same level of coverage in the U.S. that European businesses have had for years. Once the stimulus money runs out, that part of the agreement is what is going to remain in place.

Third, the agreement sets a precedent for Canada that recognizes the integrated nature of our two economies. During the negotiations and throughout the negotiations, the U.S. administration kept saying it couldn't provide Canada with an exemption because it would create a precedent. In the end we were able to get that precedent and that recognition of the special nature of our relationship, which should prove useful in the future.

Fourth, the agreement means that U.S. companies now have guaranteed access to some of our procurement markets here in Canada. We've guaranteed them access to projects funded under our own recovery act. In addition, by signing on to the WTO agreement, our provinces are providing U.S. firms with access to a range of procurement opportunities.

It should be said that those markets were by and large already open to American companies. Canadian companies were used to facing competition from the U.S. and other parts of the world in our own procurement markets here in Canada.

Finally, the agreement also sets a process for undertaking more ambitious negotiations. It provides a fast track mechanism for dealing with future Buy American restrictions and commits both governments to launching more ambitious negotiations over the next year.

The agreement doesn't solve all the problems Canadian companies are experiencing with Buy American, so it must not signal the end of our efforts to fight restrictions in our main export market.

We continue to be concerned with future legislation emanating from Congress, which would negatively impact Canada's access to the U.S. market. In fact, as long as economic security tops Americans' list of priorities, there will be strong pressures for Buy American policies in the U.S.

Through our own office in Washington, D.C., we're currently following Congress very closely, especially the U.S. appropriations process that started in February and work on any other bills that could further U.S. efforts to stimulate its economy, especially if they contain Buy American provisions.

We're also working very closely with a number of allied associations in Washington. In fact, our president is in Washington right now to meet with some of them. One thing we realize is that the key to fighting Buy American restrictions is to find those allies in the U.S. and to get them to explain that Canadians and Americans make things together, and that our economic partnership creates jobs, creates lasting wealth, and creates business opportunities in both the U.S. and Canada.

I know some of the members of this committee and some of your colleagues in Parliament have been personally involved through the Canada-United States Inter-Parliamentary Group and other avenues. I want to tell you that this makes a difference as well. Our embassy, our provinces, and our municipal leaders also need to cultivate relationships with allies and counterparts in the United States. Those also go a long way to crafting a local message and telling Americans at a local level about the impact of our trading relationship.

Finally, our work should not end with this agreement. I think this agreement is a positive step forward, but if there's a lesson we learned from this experience it's that the key to success is in building alliances across the border and in working together with these allies.

Thank you.

I'll be happy to answer any questions you may have.

[The Chair, Conservative, Lee Richardson]

Thank you, Monsieur Laurin.

Now, from the Canadian Labour Congress again, we have Teresa Healy.

[Dr. Teresa Healy, Senior Researcher, Social and Economic Policy Department, Canadian Labour Congress]

Thank you, members of the committee, for the opportunity to appear before you today to present our views on the Canada-U.S. agreement on government procurement.

On behalf of the 3.2 million members of the Canadian Labour Congress, we want to thank you for this opportunity. The CLC brings together Canada's national and international unions, along with provincial and territorial federations of labour and 130 district labour councils, whose members work in virtually all sectors of the Canadian economy, in all occupations, and in all parts of the country.

For the Canadian Labour Congress, there are two important points to make about the context within which Canada has concluded this procurement agreement with the United States.

First of all, Canadian workers continue to feel the full impact of the economic crisis. The latest release from Statistics Canada indicates that Canada has lost over 250,000 full-time jobs since October 2008. The unemployment rate stands at 8.2% and is not expected to decline for the foreseeable future. The real unemployment rate--that is, the rate including discouraged workers and involuntary part-time workers--stands at over 12%. Over one and a half million men and women are without work and 20% of them have been without work for more than six months.

Secondly, the so-called recovery has been extremely fragile and partial. Throughout the world economy, countries continue to depend upon public moneys directed towards stimulus, economic development, and job creation.

These two elements, high unemployment and a fragile economy, frame our analysis of the agreement on government procurement that is before us.

I should say at the outset that the labour movement continues to believe that public money should be used to support a range of social goals. Since the economic crisis hit us with its full force, we have been calling for significant public investments in physical and social infrastructure to ensure that public funds are used to support economic recovery across the country.

We are aware that there have been concerns that the use of public money in the United States under the American Recovery and Reinvestment Act has disrupted integrated North American supply chains and has limited the access of Canadian suppliers to U.S. stimulus funds. However real that concern, over the past year the public outcry grew beyond all proportions, as stories and images of Canadian pipes being ripped out of the ground flooded the media. In response, Canadian officials committed themselves to lead the global fight against American protectionism.

The government chose not to recognize integrated industries by negotiating sectoral arrangements. Unfortunately, and as a result, we are presented now with an agreement for which we will pay dearly, we believe, long into the future. There are many problems, in our view.

The first is that Canada, for the first time, has bound provinces and two territories to permanent commitments under the WTO agreement on government procurement. In the midst of an economic crisis, provinces and territories have given up important policy space that could be better used to support the production of Canadian goods and services in both the public and the private sectors.

Secondly, in committing themselves to this agreement, governments have signalled their willingness to cede even more control over Canada's economic development in future negotiations with the United States and in ongoing negotiations with the European Union.

Thirdly, by locating this new agreement in the fight against rising protectionism, the legitimacy of Buy Canadian policies has been undermined. The agreement will have a chilling effect on governments' commitments to use public purchasing power to support economic development in the future.

Fourth, we are astonished that the government has given us no indication of the extent of the harm suffered by Canadian suppliers that has given rise to this unprecedented agreement. Information on the damages caused to Canadian suppliers because of the Buy American preferences, which have been around since the 1930s, is purely anecdotal. Because of business confidentiality concerns, information is only available to us through the press. As we have no public knowledge of the extent of damages, we cannot simply accept the view that it was U.S. preferences rather than the economic recession itself that is to blame for declining exports.

Fifthly, it is indeed true that there are lots of exceptions and reservations to the agreement on both sides. However, the government is unable to provide us with an accounting of costs and benefits. There have been no public studies of the potential damages to the Canadian economy as a result of the presence of larger U.S. suppliers of goods and services in the public sector, for example.

Sixth, in the agreement, procurement is considered as “contractual transactions to acquire property or services for the direct benefit or use of the government”. In this definition, procurement may include the selection of a public-private partnership. It entrenches contracting out and privatization in covered entities despite the high costs and low-wage strategy that this entails.

The problem with this agreement goes beyond the question of reciprocal market access and approaches the question of what kind of state are we fashioning for the future. How are we to ensure democratic control over our economy and our society when governments willingly give up policy instruments that can strengthen social inclusion and social justice?

In “Labour's Plan to Deal with the Economic Crisis”, we noted a study by Informetrica for the Federation of Canadian Municipalities that shows that $1 billion in additional spending in basic infrastructure creates 11,500 jobs, half in construction and half in other areas. As many as 18,000 jobs are created for every $1 billion of investment in energy conservation and renewable energy systems. Statistics Canada has shown that public infrastructure investment generates a return of 17% to the private sector by boosting productivity through lower operating and production costs.

Investments can also support new manufacturing jobs if they contain Buy Canada procurement requirements, as called for by the CLC and the Canadian Manufacturers and Exporters in their February 2008 position paper.

We could create 2,000 new jobs by replacing $694 million worth of public transit vehicle imports with Canadian-made products. There is broad public support for the development of a wind and solar industry, and these new industries should include Canadian content. As well, the terms of government contracts should promote a strong public sector by maintaining public sector delivery in public services. The public sector should not be undercut by government insistence on contracting out, privatization, or costly P3s. Our public sector is a means of delivering high-quality services, as well as promoting unionization, good jobs, and the inclusion of women, immigrants, and workers of colour in new hiring and associated training.

In conclusion, over the past year, the Canadian Labour Congress has been going out to communities across the country to ask people how they are experiencing the economic crisis. I will close with a quote from Brian Clark, a miner in Campbell River, British Columbia: “We've lost our fishing. We've lost our logging. We've lost our mill. We've lost our mine. What more can one town lose?”

I submit to the committee that the answer to Mr. Clark's question is before us in the current and future implications of this agreement. Without debate and without evidence, a significant policy tool has been restricted, delegitimized, and made subject to the prospect of further liberalization in new negotiations. In doing so, the public sector has been undermined. This is a development that causes us great concern indeed.

Thank you.

[The Chair, Conservative, Lee Richardson]

Thank you.

We'll now proceed with questions.

One more member has joined us. It's nice to have the Hon. Lawrence MacAulay join us today and the Hon. Gerry Byrne. I take it we're going to have Mr. Silva start as the regular member.

We'll try to start with seven-minute rounds to let everybody have a chance to speak. So I'll keep it to seven minutes for questions and answers. If we could keep both brief, that would facilitate us better in getting through the whole thing.

Mr. Silva.

[Mario Silva, Liberal, Davenport, ON]

Thank you, Mr. Chairman.

Let me first begin by thanking the witnesses for their testimony.

Obviously, all of us were quite concerned about the terrible bind Canada faced when the Buy American provisions and what they entailed came in. The protectionism that was happening in the U.S. was quite alarming to all of us. Given the fact that a lot of our businesses and manufacturers are in fact intertwined with their operations in the U.S., it made it extremely difficult for them to carry on their businesses.

So I realize the predicament the government was in. There was a lot of pressure to come up with an agreement. I think all of us felt that some type of agreement was necessary.

Since the agreement, there have been many of us who have had concerns about how the agreement came about, particularly on the issue of the blanket exemptions and what that means. Is that setting a type of precedent, a future precedent, for the country and our negotiations?

I'd like to hear a comment from any one of you, basically, on the blanket exemptions and the precedent-setting.

The issue of whether this also ties the hands of governments throughout the country when it comes to using public procurement to develop certain projects, to start developing economic development, and so forth is something that I think maybe some of you could help us shed some light on. Some of us are still asking questions here, and we're hoping to come to a conclusion. The concerns are out there that all of us have. Needless to say, we needed an agreement. The question we're asking is whether this is the right agreement.

It's open for anybody.

[Jean-Michel Laurin]

I think it's a very good question.

To rephrase what you're asking, it is: what is the deal that has been done for Canadian exporters, has it helped to improve the situation, and what are the ramifications of having such an agreement in place?

When you look at the impacts, the direct impact of the Buy American restrictions was that you had Canadian companies that couldn't bid on procurement contracts or stimulus projects in the United States. That was a direct impact, and we lost some business as a result of it. That's what we want to get fixed in the short term, but the impacts went much beyond that direct loss of sales or business contracts. You had Canadian suppliers who were no longer able to sell to their U.S. customers because their clients were not sure they could use Canadian-made inputs.

Some municipal governments were not tied by the Buy American restrictions. If they were using their own money, they could do whatever they wanted to do with it. Some of them decided they were just going to buy from American companies because they didn't want to carry two sets of inventories. So we have lost business as a result of that.

We have also lost business as a result of some Canadian companies that were supplying other companies doing business in the U.S. in procurement losing contracts and losing sales as well.

Finally, many companies were not directly impacted by Buy American restrictions, but we're saying they send the wrong signal. Many Canadian companies rely on foreign investment, and if the perception is that if you invest in Canada you might not be able to access the U.S. market, that sends the wrong signal. It makes a lot of investors afraid of putting their plants or their money in Canada.

The agreement partially solves some of those problems. The perception is that now Canada is exempted from the Buy American provisions. That's certainly a very good signal when it comes to attracting investment or even retaining our existing stock of investment in this country.

In terms of the short-term aspect of having access to procurement contracts funded by the recovery act in the U.S., we get a partial exemption. In other words, we're only exempted from seven programs, and most of the money in these programs has been spent already, so the benefits are limited. But are we better off with this agreement than with no agreement at all? We definitely are. In fact, we had discussions with the government throughout the negotiations, and I think they knew that if they had walked away from a bad deal, we would have supported them. The objective was not to get an agreement at all costs, but to get a deal that was going to improve things for Canadian companies. It's obviously not perfect, but I think we're better off with this than with no agreement at all.

Just to wrap up, you've asked whether this is tying our hands in the future or limiting what we can do in terms of using procurement in Canada. Provinces signed on to the WTO's agreement on government procurement, which provides American and only American companies with partial access to procurement contracts here in Canada. We have to say that these markets were by and large already quite open. But there is still a broad range of procurement that is not covered by this agreement. We hope both governments will be able to sit around the table and come to an agreement that would open up more markets.

As Mr. Sinclair indicated in his remarks, some markets remain closed to Canadian companies in the U.S. because of policies that have been there for quite some time. As was mentioned as well, municipalities in either the U.S. or Canada are not covered by the long-term portion of this agreement. So there is still a lot to negotiate. There is still a lot of room for improvement in terms of getting better access into markets in the U.S.

But our goal should always be to try to get better access into the U.S., rather than restricting our own markets here in Canada. There is so much more of a market in the United States for our goods and services. When you talk to Canadian companies, and I know you all do, their eyes are always first and foremost on the U.S. market. It should always be our goal to open as many opportunities and as many markets as possible for Canadian companies.

[The Chair, Conservative, Lee Richardson]

Does one of you want to make a comment?

[Dr. Teresa Healy]

I have just a quick response.

It's very important for us to have this discussion and again bring to the fore the fact that we're in the midst of an economic crisis the likes of which none of us has ever lived through in this country. When we're talking about recovery, when we're talking about trading relationships going forward, we're not talking about business as usual; what we're talking about is the proper use of public funds. I really think that's what we have to come down to. It's not just about export relations or trade relations in a vacuum. We're talking about an economic crisis wherein governments have the possibility of using public funds to develop our economies and promote a full recovery. That goes for the way in which the Americans are deciding to use their public funds as much as it goes for the way in which we need to use our public funds.

[The Chair, Conservative, Lee Richardson]

Sorry, we're trying to keep it to seven minutes for questions and answers. If you want to respond, maybe you can indicate at the beginning when the question is asked. Otherwise, as happened in this case, one respondent will take up all the time.

Monsieur Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Thank you, Mr. Chair.

I would like to welcome the witnesses.

We seldom hear of such contradictory positions. I am thinking about what Mr. Sinclair and Mr. Laurin said, more specifically, and I am also thinking about what Ms. Healy said as compared to what Mr. Laurin said.

Mr. Laurin, you said that the negotiation strategy adopted by the government and by Minister Day had tried to bring things back to February 16, 2009, when the Buy American Act was adopted after the recovery plan. I find it curious that you seem to agree with this.

How can we go back to February 16, 2009, when two-thirds of the money has already been spent? Canadian companies can no longer make any bids. We cannot bring things back to February 16, 2009. However, you seem to be saying that we can. This seems rather contradictory to me.

[Jean-Michel Laurin]

No, I mean that our objective at the outset was to make Canada practically exempt from the Buy American measures, and then to come to a broader agreement that would allow us to offer protection and guarantees to the provinces and to the American states. This would help prevent this kind of problem from recurring in the future.

All in all, your question is a good one. The Americans did not wait for negotiations to be over before spending their money. You are quite right in saying that a good part of the money has been spent. We do not have exact figures. As far as we can see, about 60% of the funds had been spent by the time the agreement was announced.

In any case, we are dealing with the United States and with a $787 billion recovery plan. Even if only a small slice remains, nevertheless, the opportunities are far greater than what is available in Canada.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

In your analysis, you said that it was nonetheless interesting and that despite everything, it was worthwhile.

[Jean-Michel Laurin]

Yes.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

As for Mr. Sinclair, he said that we are giving a great deal and getting relatively little back.

Mr. Laurin, you are even saying that the markets that we are opening up here were already open. I am not sure whether this is accurate. I would like to have Mr. Sinclair's opinion regarding this.

[Scott Sinclair]

Thank you for the question. I think there's one clear lesson from this experience and the steep price we paid in this deal for very little relief from the Buy American preferences that have been in place for a long time, although they were intensified under the recovery act. The lesson is that we should be looking at a fresh approach, as Teresa alluded to.

The Buy American policies are extremely popular in the United States. Attacking them and making it a high priority, as opposed to using quiet diplomacy, will not likely win friends in Washington and influence their future policies in a practical way.

We also have to ask ourselves how much policy flexibility we are willing to sacrifice, particularly when we can just look across the border and see our major trading partner using procurement in a very sophisticated and systematic way with a lot of popularity and support from the general population--which I think you would also find in Canada--to enhance local economic development.

In Canada we are using it to get in on the ground floor of new industries like renewable energy, Quebec Hydro's huge procurement for wind, or Ontario's Green Energy Act. Are we prepared to throw away that policy flexibility and other areas in this sort of vain hope of influencing American policy? We should be taking a hard look at what's possible.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Have I any time left? No?

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair. Good afternoon ladies and gentlemen.

Mr. Laurin, each time you appear, your vision of trade and of the free market surprises me, but you are entitled to your opinion.

Nevertheless, I listened carefully to your statement. With regard to the Buy American Act, you mentioned the Buy American feeling. That surprised me. Was last year's Buy American Act as bad as all that? Were these things not merely ghosts or scarecrows, as we say in Rimouski?

[Jean-Michel Laurin]

My answer will be brief. In fact, the Buy American measures were indeed very bad. It was the first time that the Americans enforced them. Measures similar to the Buy American measures were applied in the past, generally in some sectors or to very specific kinds of projects. It was the first time that the Americans were applying them to every kind of project funded by the recovery plan in the United States.

It was quite a serious problem for many companies in various fields of activity. So long as you are selling to the United States government, you are directly impacted. Thus, I would say yes.

I do not remember the first part of your question.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You spoke of a feeling.

[Jean-Michel Laurin]

In fact, our members told us that competitive American companies based in the United States use this with their clients and that they even told them that if they were not government clients, they could not buy anything from a Canadian company because the President said that Americans must buy in the United States. All this had an impact on companies in various sectors.

[Claude Guimond, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Concretely, have you seen any projects fail because of the Buy American Act?

[Jean-Michel Laurin]

Do you mean projects that have not been carried out?