A Trade Agreement We Didn’t Have to Do

Meant to post on this last week.

The U.S. and Canada, its largest trading partner, reached a preliminary deal to settle what had become an acrimonious dispute over "Buy American" provisions in the U.S. stimulus package.

The deal, if approved, will give companies on both sides of the border access to government procurement contracts at the state and local levels. U.S. Trade Representative Ron Kirk said the increased access for U.S. firms in Canada would be worth billions of dollars in contracts.

Last year's U.S. stimulus package requires that manufactured products used in projects paid for with federal stimulus funds be made in the U.S. While the restrictions were meant to exempt countries like Canada that have existing trade treaties with the U.S. and have signed on to the World Trade Organization's government procurement pact, the Canadian government in the 1990s excluded its provinces and towns from those rules.

That hitch had frustrated companies on both sides of the border and provoked threats of retaliatory "Buy Canada" action from some Canadian municipalities.

Rep. Kevin Brady (R., Texas) said the deal is "helpful but doesn't fix the problem," predicting the Obama administration will remain on the defensive with other countries over Buy American provisions. Administration officials hailed the agreement.

"This administration made clear to Canada from the outset that any agreement to provide Canada with expanded access to U.S. procurement absolutely must provide guaranteed reciprocal access for U.S. exporters to supply goods and services to Canada through provincial and territorial procurement contracts," Mr. Kirk said.

Resolution of the percolating trade spat comes as the Obama administration aims to double U.S. exports in the next five years—a plan many experts agree will be a reach without a global economic recovery and the conclusion of new trade agreements the White House has so far been reluctant to push. Free trade is deeply unpopular with many core Democratic constituencies.

Canadian Minister of International Trade Peter Van Loan said his government "stood up for Canadian businesses and workers in resolving this issue with our U.S. partners."

Pardon me, but this is that one time in free trade deals where I don't feel like celebrating.

If anything should be celebrated, it should be the colossal stupidity of Wisconsin's own Dave Obey (D) and other writers of last year's stimulus package.  By their "progressive, forward-thinking ways" at the behest of their union buddies in the government contractor set, we were able to piss off our largest trading partner, willing violate two -- count 'em two -- two trade agreements our nation is signatories to, and now setting up a system where only those with side agreements like this are allowed to have what they did pre-2009.

In short, we set up a new trade barrier to all nations, and have given one nation, that being Canada, a return to the previous status they had.  One wonders when Australia, Mexico, and the legions of other nations will ask for their own.

And now the punchline: Congress, which hasn't given the thumbs up to a trade agreement since 2007, may still have to vote on this thing!

Former CATO Institute scholar and now practicing DC Trade Attorney Scott Lincicome wrote something similar over the weekend at his blog.

So basically, the United States erected a massive trade barrier last year and now is patting itself on the back for: (i) exempting a single country from that barrier's obviously nasty provisions, while keeping the protectionism in place for more than 100 other trading partners; and (ii) using Buy American as a club to force Canada into opening its own procurement market, thus reinforcing the outdated and dangerous idea that reciprocity should be the goal of all trade negotiations.  And it only took them a year to do it!

Please pardon me if I don't applaud this exciting breakthrough.

I'm not applauding it either.  I'm not applauding it either.

Just stop this kabuki theater and end the damn "Buy American" Provisions already.