Thursday, August 20, 2009

Talking truce in trade tussle

Hauling Ontario-made sewage pumps out of the ground in Indiana, and removing Canadian pipe fittings in California, as mandated by the "buy American" provisions of the $787 billion U.S. stimulus package, is the kind of thing that sets teeth on edge in the true north strong and free.

There were enough of these incidents back in the spring to whip up some tit-for-tat fervour. A gaggle of Ontario towns retaliated by barring U.S. companies from their municipal contracts.

Looked at from the perspective of a town in Alabama or New Brunswick, these backatcha policies make eminent sense. In tough times, why wouldn't you act in ways that support local industry and employment?

Trouble is that things are way more complex than that, and doing the "obvious" right thing may come back to haunt you in ways you didn't expect. Supply chains are global. A plant shutdown in Windsor, Ontario can idle an assembly plant in Ohio, and vice versa. If a foreign owned plant in Pittsburgh is shut out of bidding on stimulus projects, they may have to lay off their American workers. What do you buy when there are no Canadian-made alternatives for a foreign-made product if, for example, your municipal water supply will shut down without it?

The Americans shouldn't have started this fight, but behaving spitefully isn't the solution. I'm no great fan of either Ontario Premier McGuinty or International Trade Minister Stockwell Day, but on this file they both have it right.

"We're kidding ourselves if we think we can be safe by building a lifeboat just for the people in our own communities," McGuinty said in a speech to the annual conference of the Association of Ontario Municipalities this week.

Day is working with the provincial premiers to present a united front to Washington. There is also a fair amount of dialogue going on with governors of border states who have much to lose if a trade war breaks out.

So far, Canada is not feeling the love of the Obama administration, what with protectionism, stricter entry requirements, increased border surveillance, and so on. But escalating an already dangerous situation makes no sense.

My prediction: Obama, who actually seems to "get" the risks of protectionism, is spending his political capital elsewhere (e.g. healthcare), and has none left to take on Congress and the K Street bullies on this issue. Canadian tantrums will change nothing.

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