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What are the “Buy Canada” promoters thinking?

Appeared in the Toronto Sun, Winnipeg Free Press and Halifax Chronicle Herald
Release Date: February 11, 2009

The US-protectionist tempest may yet be confined to its teacup. Yet a powerful group of Canadian leaders are striving to turn the protectionist tempest into a global tsunami.

That’s against the interests of Canadians in general but very specifically against the interests of Canadian workers, the people these leaders claim to represent. They appear to be playing off Canadians’ general ignorance of how our trade with the United States works and the grave threat to Canada of any trade disruption.

President Barak Obama has powerfully voiced his opposition to the “Buy-American” clause in the U.S. stimulus bill which launched all the fuss about protectionism. The clause required that steel products purchased under the stimulus bill be U.S.-produced. The Senate moved to expand that to manufactured products in general.

Canada, the European Union, and other U.S.-trading partners objected loudly. President Obama has weighed in on the side of free trade and the clause is likely to be dropped or rewritten. Dangers remain. Given political broiling in the Congress, the clause may not be dropped but rather rewritten in a way that will not fully eliminate the threat.

NDP leader Jack Layton, Ken Neumann, Canadian national director of United Steelworkers, and Ken Lewenza, President of the Canadian Auto Workers (CAW) union, among others are doing everything they can to exacerbate the threat. They continue to demand “Buy Canadian” policy.

In November, the CAW helpfully produced a legal ruling that Canada could unilaterally impose a “buy Canada” policy – something U.S. lawyers will quickly cite if protectionism gains steam in the United States.

The CAW’s home page has a blaring heading: “Made in Canada! Buy Canadian & Build Communities. CAW activists are demanding all levels of government adopt strong Buy Canadian rules for publicly funded purchases to protect Canadian jobs.”

The daydream seems to be that we can get the United States to exempt Canada from its clauses and merrily go forward with a buy-North American policy – though one wonders how long it would be before our protectionists want to cut Mexico out.

And that’s the way trade wars work. They escalate. That’s why world leaders reacted so strongly to what in the grand scheme of things is small potatoes, a buy-U.S. clause limited to one product group and one spending stream. Yet, sensible leaders know and fear that this would be enough to compel other nations – egged on by the sort of protectionists we face in Canada – to respond with their own protectionism.

That would spark further responses from the United States. And so on, a lesson that seems lost on Canadian protectionists. Erin Weir, an economist with the United Steelworkers Canada office, argues for a buy-North America policy because trade in steel products is well balanced between Canada and the United States.

Mr. Weir, how long do you think it’ll be before your U.S. protectionist friends notice that most Canada-U.S. trade is heavily unbalanced in Canada’s favour? Canada’s huge trade surplus could quickly become a bull’s-eye for “saving” U.S. jobs.

Many in Michigan already believe that Canada, more than Asian and European carmakers, is responsible for the deserted plants littered in desolate landscapes across Michigan and much of the rust belt.

In 2007, the most recent year for which full data are available, Canadian exports of automobiles and light duty trucks to the United States equaled $47 billion. The United States exported only $21 billion into Canada.

Yes, that’s right. Our trade surplus with the United States in light trucks and automobiles was $26 billion in 2007. Over the past 10 years, our auto surplus has equaled $362 billion. In the first 11 months of 2008 Canada boasted a surplus of $20 billion.

U.S. trade has kept Canada’s manufacturing sector going. Over the past 10 years, we have exported $2.6 trillion of manufactured goods to the United States with a $600 billion surplus. Our overall trade surplus over that period was an astonishing $1.2 trillion. In recent years it has averaged around $150 billion a year, more than 10 per cent of our economy and that’s just the surplus.

Can you imagine what Canadian nationalists would have been saying if the trade surplus went the other way?

So why are some Canadians so anxious to fuel up the protectionist urge, despite the great threat that poses to Canadians? Are they simply putting their anti-trade ideology ahead of the interests of the people they claim to lead?

A U.S.-trade war would devastate Canada’s economy and throw tens of thousands of Canadian workers out of a job. The United States has a continent-size economy and can easily do without Canada, but Canada can’t do without the U.S. market.