International Trade Committee on Sept. 27th, 2011

[Kevin Thompson]

My apologies, but I will answer your question in English.

A variety of business groups that represent both U.S. as well as Canadian interests in Washington were quite active during the 2009 recovery act in expressing their concerns about the introduction of the Buy American provision. There are associations at the national level that represent national business groups, but there are also specific associations in specific sectors--for instance, the water and waste water equipment association, the cement association, the pipe association--that have sizable Canadian memberships. For instance, the Association of Steel Distributors has a number of Canadian members. They're concerned because their distribution networks or distribution centres are very much integrated with Canadian suppliers. It's very difficult for them from an inventory perspective to be able to separate out what's made in America and what's made in Canada.

So there's a range of different associations at the national level as well as the sectoral level that we've historically been engaged with and have been engaging this time around.

[The Chair, Conservative, Rob Merrifield]

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

I thought I was sharing my time with Mr. Shipley, but I'm happy to go first.

[The Chair, Conservative, Rob Merrifield]

You can, if you like.

[Mathieu Ravignat, NDP, Pontiac, QC]

Is my time up? I was going to share my time with Mr. Chisholm.

[The Chair, Conservative, Rob Merrifield]

It's right down to the seven minutes. We can try to come back to you, if you want.

Go ahead, Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

In your opening remarks you made the comment that the Buy American requirement must be applied consistently with the U.S.'s international obligations. I was speaking with Ambassador Jacobson yesterday, and that was his response to any concerns that people had about the Buy American provisions in this proposed Jobs Act. Basically he's saying don't worry, we have NAFTA, this isn't going to affect anything.

I'm wondering, were not the same comments made when the 2009 recovery act was introduced? Did they not also say the same thing at that time--don't worry, we have NAFTA, everything's fine--and then subsequent to that did we not proceed with the Canada-United States government procurement agreement just to clarify that everything was open to free trade?

Are we going down the same path here as we did just a few years ago?

[Jon Allen]

Yes, to some extent we are going down the same path. It's quite a different context. One does not have to make excuses for the Americans, but the President is facing an incredibly high unemployment rate. He's facing no growth. He's facing an election, and rather than thinking of the big picture and trying to keep a jobs act—which is extremely important, as everybody acknowledges—as open as possible and taking the lessons from the last set of events, I guess one could argue there was a certain appeal to local needs without an understanding that such an appeal may in fact hurt Americans and hurt jobs there.

So to some extent, yes, we are going down the same path and are making the same arguments. I'd say the difference perhaps is that the U.S. is probably in worse shape now they were then. From their perspective, they might—and we consider this to be incorrect—consider themselves in greater need of such legislation.

[Laurent Cardinal]

There's also a difference in obligations this time from the previous time. Before CUSPA, there were no commitments on the part of the U.S. states towards Canada. Procurement was covered only by NAFTA at the federal level. Now, with the commitment at the WTO, 37 states are covered, as are provinces and territories. So that's an expanded obligation compared to the first stimulus package that was put in place.

As for the way it's going to be implemented, there are always grey zones. In the proposed legislation, there will be funds transferred to private schools and private universities. The question will be whether it is still public procurement if the money is transferred to a private school. On those sorts of questions, we will need to see clarification from the U.S.

[The Chair, Conservative, Rob Merrifield]

You have more time left.

It is one o'clock, and in respect to the committee's time, I will only go past one o'clock if I have unanimous consent to do so. Having ten more minutes would get us through our list. Is anyone opposed to that?

Okay. Mr. Shipley.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

I have a quick question. Clearly, I think one of the things that has been talked about is that nothing in this process that's political is ever certain. So we've seen that as the comeback.

What will the ground effect be of this legislation if it potentially goes through? Our companies caught in the middle of this do not know or are trying to define, as you mentioned, whether their inventories are made in the U.S. or made in Canada. What does this say to Canadian companies that have already been in a procurement process?

Let's say this thing goes through. Now they can't use the products that would normally have been in their contracts. It's pretty self-serving for the United States, because those companies that are looking to do procurement for contracts are now going to say “Whoa, I'm not going to spend my money in a time of constraint. How can I afford to spend money on going through the process of putting a contract or a procurement proposal forward?”

So what will the ground effect be for Canadian companies, from what you've heard when talking to them?

[Kevin Thompson]

Certainly a big issue the last time around for Canadian companies that were already suppliers, for instance, to municipal waterworks was that the latter municipalities would find their supply chains or supplier relationships with those companies disrupted. For the projects funded under the recovery act, they would not be able to rely on their traditional Canadian supply chain.

I think you raised a very good point in asking about the possible effect these types of provisions will have, if they repeat, on decisions by public entities to source from foreign suppliers, even if there are no explicit restrictions. It's an extraordinary inconvenience if you're a water utility to have to shift the different types of equipment midway through your process, or to purchase equipment that's made in the U.S. but not compatible with your existing equipment.

But in terms of getting any kind of specific read on that, it's very difficult to do.

[The Chair, Conservative, Rob Merrifield]

Our time has gone on this one, Mr. Shipley.

We'll go with five minutes for Mr. Chisholm, then five for Mr. Holder, and then we'll call it.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Thank you.

I understand that the government was taken by surprise, and maybe you folks were as well, but the reason we're so upset about this is not just because of the passage of the bill in 2009, the impact that had on us, and the fact that it's come back again. This may not go through, I know, but it's the fact that it's there: it will affect the buying intentions, the purchasing intentions of those suppliers and so on, and it will have a ripple effect.

I have a steel fabricator in my riding that's the largest bridge-builder in Atlantic Canada, one of the five in Canada. They used to do a lot of business in New York, you know, on the Triborough Bridge and the John F. Kennedy airport, the major terminal. They've done a number of things there.

Can you talk a little about the actual impact you've seen on Canadian businesses from the original Buy American bill and the potential impact from the introduction of this bill?

[Kevin Thompson]

Well, certainly the impact I think has been more pronounced in areas where you've had longstanding Buy American restrictions. For a lot of transportation infrastructure spending, you've had these Buy American restrictions since 1982. There has been a narrowing and there have been waivers that have been granted, but there is still a fairly pronounced impact from the introduction of those provisions 30 years ago. Prior to that, Canadian steel fabricators, for instance, would have been able to participate in federally funded highway projects, but over the years they've not been able to. They've essentially been excluded from that market.

I think one of the concerns we have is that the rules will be applied more strictly. You now have an environment in the United States where there is a significant preoccupation with unemployment. Over the years, the Buy American provisions have been implemented with more flexibility in certain areas; there have been waivers that have been granted. The concern is that this flexibility is going to be reduced over time. I'll leave it at that.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

I know, for example, that this company that was shut out has in effect been shut out since 2009. My question is, have you evaluated the dollar impact that the original Buy American restrictions had on Canadian companies? Have you done that evaluation? Do you have any sense of what further impact this introduction of part two of Buy American will have?

[Jon Allen]

First of all, I think we should note and just remind ourselves that we have made progress. You're talking about a specific case, which is very relevant and important: somebody who was dealing with New York City, which is local.

[Robert Chisholm, NDP, Dartmouth—Cole Harbour, NS]

Yes.

[Jon Allen]

We've dealt with federal and state, so we've made some progress, which does send a bit of a signal the other way.

Secondly, I think in respect of this legislation--and you acknowledged it--we do have to remember, frankly, that the chances of it going through as is are not particularly high. Therefore, in terms of the businessmen you're talking to and dealing with, I wouldn't send them a signal that they should pull back or cut back. They should continue at full speed ahead until there is much more clarity that the legislation is going to go through and clarity on what the terms are.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Holder, very quickly.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I actually meant to bring this up when my friend Mr. Easter was speaking. I say “my friend” thoughtfully, because when he was asking some questions of our officials, I thought that the tone and the attack was very inappropriate. Maybe you spank your cattle in P.E.I. to get their attention, but I have to tell you that in terms of dealing with our officials, I think there's a more thoughtful way to do it.

I think we're now at the point where what we're trying to say is.... We can lay blame, but I think the issue here is where do we go from here. That's the intent of this question.

You've indicated, Mr. Allen, some of the rationale. I think we know that as well. President Obama has.... They have a pretty tough economy, and we want the U.S. to have a good economy. We know he's facing re-election; you've already articulated all of that, I think, relatively well.

I'd like to leave us with a sense of some comfort here, if you could provide this to us in terms of what I would like to call a “Team Canada“ approach to this very serious issue. It's one thing to reach out to members of the House and the Senate, as you indicated. I think one of our colleagues here—perhaps it was Mr. Ravignat--was making the comment about our approach in terms of utilizing every resource we have. What do we have? Obviously we have our officials talking to officials. We have our embassy staff in the United States presumably doing what they do. We have our provinces and territories, which have no small impact. We've talked about the number of states in the United States where we're the leading trade market for them. We have our own members of Parliament. We have senators with influence. We have associations and industries.

I guess what I would like to be left with is a sense of whether there is a comprehensive Team Canada response to this. I believe it's that serious. Can I ask who's coordinating that, and how does it look, if you were to put that on paper and say “Here's who we have here and there and in different places tackling all these folks and we're coming together and reporting with each other on some organized basis”? Can you give us some confidence that something like that is in place? Can you just give us a sense of what that looks like a little more formally?

[Jon Allen]

You were actually pretty comprehensive in your description of what is happening.

We have two focuses. We have the embassy in Washington, which is coordinating with all of our missions—22 missions in the U.S.—to ensure that we are getting to members of Congress in their districts, in terms of our consulates-general, and in Washington, when they're in Washington, getting to their staffers, so officials from the embassy and the consulates are meeting regularly with the staffers. What we're doing here is picking those influential members of Congress.

We're also targeting influencers of those members of Congress: people, companies, and industry associations in the U.S. who recognize the importance of what we're talking about—the global supply chains and the integrated nature. We're targeting them and asking them to go speak to members of Congress to ensure that that word is put through to Washington. That's happening in the States.

Here, we've met and discussed the issue with the provinces to make sure they're on board, that they have the information they need, and that when they're dealing with their counterparts in the U.S. they make the case as cogently as possible. We're dealing with industry associations here in Canada, providing them with all the ammunition so that when they're talking to their counterparts in the U.S., they make the case.

I think we have a fairly comprehensive package. We have an advocacy package we're using that's been agreed on government-wide, which ministers have seen and approved. We have people from the Prime Minister on down speaking out about this.

You know, you can always do more, undoubtedly, but I think you were asking if it is coordinated and if we are acting in concert as Team Canada. I think I can say that we are, and that we will continue to do so until we find out where the bill is going and what its impact may be.

[Ed Holder, Conservative, London West, ON]

Could I just ask for clarification?

[The Chair, Conservative, Rob Merrifield]

Go ahead.

[Ed Holder, Conservative, London West, ON]

Not so much from the political level, because we presume that's the international trade minister, DFAIT, and the Prime Minister, but at the non-political level--this is all politics--who would be the internal person leading that coordinated effort?