Tensions over Buy American rules appear destined to live on after this year — even if Donald Trump’s presidency doesn’t.
It’s one takeaway from trade policies laid out by U.S. election frontrunner Joe Biden, who in a speech Thursday promised to turn the page on numerous Trump-era practices.
With at least one glaring exception.
One notable area where he’s emulating the president’s rhetoric is the idea that contracts for large-scale public projects should go to U.S. firms.
Biden has promised to spend $400 billion US on clean energy and infrastructure with American products, materials, services and shipping companies favoured; he then reiterated the pledge in a Pennsylvania speech.
“Products made by American workers,” Biden said.
“When we spend taxpayers’ money — when the federal government spends taxpayers’ money — we should use it to buy American products and support American jobs. I plan to tighten the rules to make this a reality.”
Buy American: what the rules say
Existing free-trade rules guarantee Canadians some access to U.S. publicly funded construction work, within limits.
The rules are more porous for work funded at the state and local level. Also, the old NAFTA procurement rules have been eliminated in the new agreement, leaving Canadian companies relying on similar rules agreed to at the World Trade Organization.
When we spend taxpayer money, we should use it to buy American products & support American jobs.<br><br>But under Trump, the rate of federal contractors offshoring jobs more than doubled. It’s unacceptable.<br><br>I’ll invest $400 billion in American-made products & keep jobs here at home. <a href=”https://t.co/iNpPuMzFqC”>pic.twitter.com/iNpPuMzFqC</a>
But Biden suggests he wants to tighten the global rules too.
His new plan says he’d work with allies to modernize international agreements so that countries’ procurement tax dollars are spent at home.
The big-picture political context looming over Biden’s speech involves his need to address one lingering political weakness.
It involves economic policy, and working-class voters.
The political context
While the presumptive Democratic nominee has been leading President Trump in numerous national and swing-state polls, surveys also show that the current president is more trusted on economics.
A notoriously critical plank of Trump’s economic policy is trade protectionism — especially when it comes to public works projects, with his series of executive orders and other moves, like at the NAFTA negotiating table, to erode free trade in procurement.
One Washington trade-watcher said he still assumes Biden would be a more favourable interlocutor for Canada when it comes to trade.
While free-trade purists hate Buy American rules, and warn they drive up the cost of products, they remain generally popular.
Eric Miller said it’s normal for campaigning politicians to promise Buy American rules.
Biden or Trump?
What’s less normal, Miller said, is the current administration’s habit of constantly threatening tariffs against allies.
“In many ways [this speech from Biden] is expected. No politician in the United States will run against ‘Buy American.’ The name itself sounds good,” said Miller, a former Canadian official who now runs the Washington-based Rideau Potomac consulting firm.
“I am skeptical that Joe Biden would be a big user of Section 232 [national security tariffs on allies like Trump]. … Biden’s instinct is not to go after allies. It is to work with allies. “
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Some aspects of Biden’s trade policies will, indeed, be more welcome in foreign capitals.
Biden’s just-announced plan promises a more cooperative approach on steel and aluminum. He said he would build alliances to press China to reduce its excess production and alleged dumping of products at below-market prices.
“Rather than picking fights with our allies and undermining respect for America, Biden will work with our closest allies,” says his plan.
“[We’ll] focus on the key contributor to the problem – China’s government.”
A wakeup call on China
Miller said that section should also serve as a wakeup call to Ottawa: U.S.-China tensions will continue and Canada must prepare to live in a world with that growing rivalry.
“I think there is some hope in some quarters that somehow this [tension] is all going to go away and that the U.S.-China disagreements will somehow moderate,” Miller said.
“Even if we have a Biden presidency we are not going to be magically pulled back to 2016. … Deep structural changes in the functioning of global affairs and realignments in balances of power do not reverse easily.”
One pact relevant to that international alliance-building is the multi-country trade deal formerly known as the Trans-Pacific Partnership, which now exists without the U.S.
The Wall Street Journal reported that Biden doesn’t envision quickly rejoining the pact now rebranded as the CPTPP — but he’s leaving open the possibility of re-entering eventually.
Miller said Canada should take the initiative quickly to work with other CPTPP countries, and start talking about what conditions a U.S. re-entry might look like.
Biden’s trade policy includes one other element with potentially major international significance: he’s calling for a “carbon adjustment fee,” essentially a tariff, for countries failing to meet their Paris climate goals.
While that could mean, in theory, a tax on Canadian exports, Miller said he suspects Canada’s domestic carbon pricing and cooperation with a Biden administration on regional climate projects, like Arctic oil-drilling bans, might allow it to avoid such a tax.
Published at Fri, 10 Jul 2020 08:00:00 +0000