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Canada-U.S. Reach “Buy American” Exemption Agreement

This is wonderful news!

(Of course, it would have been better if Congress and the White House never put those lame-brained, idiotic, economically-ignorant, and did I mention job-killing “Buy American” provisions in the stimulus to begin with.)

A deal may be imminent that will exempt Canada from the controversial Buy American provision included in the U.S. stimulus package, CBC News has learned.

According to Canadian government sources, Ottawa expects that the White House will use its discretionary power to exempt Canada from the clause very soon. In return, Canada would simultaneously announce that its provincial and municipal doors are now wide open to U.S. companies.

Sources say the announcement could be made when the two trade negotiators, Ottawa’s Don Stephenson and Washington’s Everett Eissenstat hold their first formal meeting.

The provision gives priority to U.S. iron, steel and other manufactured goods for use in state-level and municipal public works and building projects funded with taxpayer stimulus money. Canadian governments and businesses have railed against the policy.

During Prime Minister Stephen Harper’s visit with U.S. President Barack Obama last week, Harper again made a pitch for an exclusion for Canada from “Buy American” provisions.

Harper and Obama said the two sides were looking into ways of addressing the issue, including the possibility of including the provinces in a multilateral deal.

Obama has said the clause conforms with all World Trade Organization and NAFTA regulations because it deals with what’s called sub-national governments — such as states and municipalities — which aren’t included in trade treaties.

Last week, Obama suggested that Canada’s provinces must open their local markets to American companies. Canadian officials say the White House first stated its terms last spring, after Obama’s visit to Ottawa.

One worried trade partner seemingly satisfied, Lord only knows how many more will now come knocking on the door for their exemption as well.

I’ve said it before, and I’ll say it again: Congress and the White House need to revoke that provision in the stimulus bill.

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Telecom Industry Given “Buy American” Waiver

A quick follow-up on a story I posted on earlier in the month.

Well, at least the sane people are still running the Commerce Department five months in.

Cisco Systems, Alcatel-Lucent and other companies do not have to follow “buy American” rules for some computer components supplied under a $4.7 billion program to build high-speed Internet lines, a federal agency ruled. The domestic-sourcing rule is waived for equipment used in tasks including broadband switching and routing, according to a notice from the Commerce Department’s National Telecommunications and Information Administration. The rules aimed at protecting American jobs must be followed for fiber lines, coaxial cables and wireless telecommunications towers.

The broadband funding is part of a $787 billion economic stimulus that largely prohibits spending on foreign-made iron, steel and factory goods. Alcatel-Lucent and Cisco said the “buy American” provision would be hard to meet because computers rely on a global supply chain.

Roughly $7.5 billion of the stimulus package was set aside for building a national broadband network.  No one appears to know what the actual strategy of use for this appropriation is or was.

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Is My Car American?

The column is full of factual holes which I’ll try to fill in when I quote from it, but an “okay” column from Saturday’s New York Times about what is and isn’t an American car in today’s hyper-globalized, regional manufacturing, supply chain-dominate world in which we live.

Of course in reality, this column appears to be nothing more than a well-hidden piece of propaganda for the UAW.

There has been a lot of talk this year about American cars. Bailout money has gone to companies with the goal of preserving the jobs of Americans who make American cars. Legislators have debated cash-for-clunker bills that would provide incentives for buying new American cars. Foreign investments have been scrutinized to see whether they would further the goal of producing more American cars.

So what’s an American car?

In today’s economy, propped up by global investments and free-trade zones, it isn’t so easy to tell. As Cheryl Jensen points out in her introduction to our new interactive resource detailing where cars and trucks are made in North America, “Which is the more American product, a Honda Accord built by Ohioans for a company with its headquarters in Japan, or a Ford Fusion built in Mexico for a corporation that is based in Michigan?”

Indeed, under the North American Free Trade Agreement, vehicles built in Canada and Mexico can be considered “domestic.” So don’t tell your flag-waving super-patriot neighbor that his Chevy Impala, the one with the “Buy American” bumper sticker, came from Ontario.

TIME OUT!

OK, factual error here.  According to Customs Regulations, (and trust me on this, I had to know these for a living once and want to return to the life someday. Yeah, crazy ain’t it?) nothing which comes across the border from Canada and Mexico is ever deemed “domestic.”  In fact, we’re about to have a big fight in the NAFTA Arbitration court and WTO with Canada over “COOL” in livestock meat labeling.

“COOL” is short for “Country of Origin Labeling” which is just another well-disguised protectionist tactic which our glorious Congress slipped into a bill in 2007.  Not shockingly, the Canadians got a tad mad.

Anyway, anything which comes over the border from either Canada or Mexico is only “duty-free,” which is a common stipulation of the North American Free Trade Agreement.  Many times, companies in the United States will set up shops in either country to either manufacture or assemble parts because of a rule called “substantial transformation” which allows for duty-free import into America.  “Substantial Transformation” basically states the parts and raw materials can come from elsewhere, but as long as the grunt work of construction is done in a NAFTA nation (the United States is included in this deal as well), it can qualify for this luxury.

A prime example I’ve long used is golf clubs made in Canada.  You import the rubber extract from South America and the raw milled graphite from somewhere else and bring them to your plant in say…Toronto.  After the manufacturing process, you no longer have rubber and graphite, you have a golf club.  Hence it has been “substantially transformed” and made eligible for duty-free status under NAFTA for shipment to either the United States or Mexico.

Finally, my 2004 Chevy Impala, purchased in Plymouth, Wisconsin on Memorial Day Weekend of the same year…also made in Ontario.

While Americans have generally shrugged off these consequences of Nafta — sales of the Cadillac Escalade EXT pickup were probably not much affected by its Mexican origin — a made-in-America bias may be on the rise as a result of Detroit’s troubles.

A while back, my brother in Missouri called to say he was shopping for a new car. Given that he had owned a succession of Fords, Mercurys and Lincolns, I assumed he would consider the midsize Ford Fusion sedan, an agreeable car at a reasonable price. “I looked at the Fusion,” he confirmed. “And I liked it. But I want to buy an American car.”

He’d done his homework. Indeed, the Fusion comes from Mexico, as does the similar Mercury Milan and the related Lincoln MKZ. My brother ended up chucking his brand loyalty to buy a Chevy Malibu that was assembled in Kansas City, Kan., not far from his home.

The Times gives you an interactive map if you are the type of person who thinks “County of Origin” matters more than say…functionality of the vehicle you’re about to throw $15,000-30,000 or more down on.

Pleasant car shopping.

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What Do You Know, Retaliation

Glad to see we started a trend.

China has imposed a requirement for its stimulus projects to use domestically made goods — a move that could strain ties with trading partners after Beijing criticized Washington’s “Buy American” stimulus provisions.

Projects must obtain official permission to use imported goods, said an order issued by China’s main planning agency and eight other government bodies.

Even before the order, business groups worried that foreign companies might be excluded from construction and other projects financed by Beijing’s 4 trillion yuan ($586 billion) stimulus. Foreign makers of wind turbines complain they have been shut out of bidding on a $5 billion stimulus-financed power project.

“Government investment projects should buy domestically made products unless products or services cannot be obtained in reasonable commercial conditions in China,” says the order, dated June 1 and reported this week by state media. “Projects that really need to buy imports should be approved by the relevant government departments before purchasing activity starts.”

Beijing’s stimulus is aimed at insulating China from the global slump by boosting domestic demand through higher spending on construction of highways and other public works.

The communist government promised in February to treat foreign and domestic goods equally in stimulus spending and has appealed to other governments to support free trade and avoid protectionism.

Two things:

1) The official stance of the Chinese government is ‘this is not a stance caused by the United States’ “Buy American” provisions in its stimulus plan.  Believe that on your own risk.

2) Unlike the United States, China – while a member of the World Trade Organization – is not a signatory to the WTO’s “Government Procurement Agreement (GPA) and has yet to sign onto the agreement.  It’s been held up by a number of things, the least of which is how the WTO is going to deal with letting both mainland China and Taiwan into the agreement at the same time.  Taiwan’s ready to go at last check, the Chi-Coms are either late on the paperwork or stalling.  Since all stimulus funding is from the government, all funding would be exempt to GPA rules and regulations.

Private industry in China is free to pick and chose the vendors and part suppliers they want.

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“Buy American” Hits Telecomm Industry

Seriously, how often can I say “I told you so” on this topic?

Apparently not enough.

Cisco Systems and Alcatel-Lucent said they wanted “Buy American” provisions waived in a $7.2 billion U.S. program to expand high-speed Internet access, saying the rules were difficult to meet and undermined the economic stimulus program.

Requiring parts made in the United States would be “grossly inefficient” and a “radical departure” from normal practice, said Cisco, the largest maker of networking equipment. The comments were filed with the National Telecommunications and Information Administration, the U.S. agency running the broadband initiative that is part of $787 billion in stimulus spending.

The rules might slow projects the stimulus was meant to spur because telecommunications networks contained parts from around the globe, the two equipment makers said. Congress, seeking to create jobs in the United States, said funds provided under the program generally could not be used for iron, steel and factory goods that were not produced in the United States.

“We’re talking about technologies that are no longer made in the United States,” said John Marinho, vice president of public affairs for Alcatel-Lucent, which is based in Paris. The company operates in 130 countries, and “you need a global scale,” he said.

At stake was access to about $2.8 billion of the broadband funding that would go for equipment, said Jeff Evenson, a senior analyst with Sanford C. Bernstein in New York.

Cisco, which is based in San Jose, California, and Alcatel are arguing their case in filings and conversations with officials at the National Telecommunications and Information Administration, part of the Commerce Department.

We living in a world where everything can be sources out anywhere in the world.  The continued folly of these idiotic “Buy American” provisions highlights this as often the cheapest, best price for American taxpayers are found elsewhere.  Clearly – and the quotes defending “Buy American” continue to show this – only union spokesmen, or the economically ignorant are defending the provision as jobs are lost across America because these rules are causing delays in productions, a mess of supply chains, and a list of logistical problems only climbs.

There is no reason to exempt companies like Cisco and Alcatel-Lucent from the “Buy American” provision, said Debbie Goldman, telecommunications policy director for the Communications Workers of America, a union based in Washington.

“This is about creating American jobs — not Chinese jobs,” Ms. Goldman said.

Granting a blanket exemption “in effect awards companies that have created a global supply chain that excludes the United States,” Ms. Goldman said.

In a filing, she said applicants should request exemptions for each piece of equipment, subject to possible vetting by the N.T.I.A.

“Show us,” Goldman said. “If you’re claiming a router isn’t made in America, show us.”

Officials should approve the use of equipment from the 51 countries with U.S. trade agreements that might be considered as satisfying the “Buy American” requirements, Ms. Goldman said.

The list, put out by the Office of Management and Budget, which supervises spending by U.S. government agencies, does not include China.

Yeah, I spoke about the B.R.I.C. nations getting screwed before.  Ms. Goldman no doubt knows this; how the Chinese haven’t retaliated for this is beyond me.

Ah well, in “Solidarity, Brother” shall we all suffer then.

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HRC: We Understand Your Concerns Canada

As the continued attempts to alleviate a possible trade war and retaliation with our neighbors to the north, it’s good to hear language like this from the Secretary of State.

Now if it could be repeated by the U.S. Trade Representative and President of the United States.

Secretary of State Hillary Clinton is pledging that the United States will work with Canada to relieve its concerns over the ‘Buy American’ policy in the U.S. economic stimulus bill.

The legislation, passed in February, gives priority to steel and manufactured goods made in the United States when bought with federal funds.

Canada and some of America’s other trading partners have complained that the policy is shutting their companies out of lucrative U.S. contracts.

Rodham said Saturday that the Buy American provision isn’t overriding America’s international trade obligations. She spoke during a joint press conference with Canadian foreign affairs minister Lawrence Cannon.

Then the President needs to layout – preferably in an Executive Order – that “Buy American” concerns do not override existing trade agreements with the United States.  He also needs to have the various Inspectors General in charge of seeing how the stimulus is being handed out, punish those municipalities willfully ignore NAFTA procurements rules.

Finally – and I mentioned this in an earlier post – the President or someone in Congress needs to get an amendment in the Canada-United States Free Trade Agreement of 1988 to include all state, provincial, and municipality procurements.  It’s a loophole the size of Kansas which needs to be closed to ensure this thing has legal teeth.

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Because Wars Start Small…

Copied verbatium from the National Association of Manufacturers’ (You know, the people in this country who employee Americans and build stuff.) “Shop Floor” blog.

No, we don’t expect a renewal of 1812 hostilities, but in matters of trade …

Tony Clement is Canadian Industry Minister.

Michael Wilson is Canada’s ambassador to the United States.

Jim Flaherty is Finance Minister.

Michael Ignatieff is leader of the opposition, the Liberal Party.

The German and Mexican links are included just to make the point that the rest of the world is watching and making plans.

We are being warned folks.  Will Congress heed these warnings in time before economic ruin?

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Hey, Who Needs Exports?

My continued quest to warn the world about the coming Congressional Democrat-Obama started trade war goes on.

Today, Canada begins to officially strike back.

Canadian mayors have passed a resolution that would potentially shut out U.S. bidders from local city contracts.

The resolution is in retaliation to “Buy American” provisions in President Barack Obama’s stimulus bill. Mayors voted 189-175 to approve the resolution at the Federation of Canadian Municipalities conference in Whistler, British Columbia.

The resolution says the federation should support cities that adopt policies that allow them to buy only from companies whose home countries do not impose trade restrictions against Canadian goods.

The mayors also voted to hold off on any action for 120 days while Canada is negotiating a possible compromise with the U.S. government.

There are moments, especially with this Congress and its “Protectionist” default setting on trade, that I feel like I’m tilting at windmills here on this topic, but one can’t fault me for trying to warn people.  I mean it is only thousands of jobs and people’s livelihoods at stake here.

Nothing much.  I mean, it’s not like Canada is Wisconsin’s largest recipient of export goods or something to the tune of $6.5 Billion in goods last year alone.

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Tit for Tat, “Buy American” Starts Backfiring

(Originally wrote for The Heritage Foundation’s “Foundry” blog.)

By now, you are well aware of the infamous “Buy American provisions” inserted into the $787 Billion “Stimulus Package.” These were even watered-down and reworded after concerns their language lead to outrage from many of the United States’ key trading partners. In the end, language was added to alleviate international fears stating the provisions “shall be applied in a manner consistent with United States obligations under international agreements.”

The purpose of this was to ensure that trading partners like Canada and Mexico were not effected by the provisions because of language in the North American Free Trade Agreement (NAFTA), and signatory nations of the World Trade Organization’s Governmental Procurement Agreement (GPA).

As the slow trickle of stimulus money goes out across America, the Washington Post reported many local municipalities and state governments are either are ignorant of international trade agreements, or just simply ignoring the added language all together.

The results are having effects across both sides of the Canadian-U.S. border.

Ordered by Congress to “buy American” when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.

Outrage spread in Canada, with the Toronto Star last week bemoaning “a plague of protectionist measures in the U.S.” and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

One such town is Halton Hills in Ontario, Canada, which last week passed a resolution asking for the U.S. government to repeal the “Buy American” provisions; a movement which appears to be gaining steam in Canada.

On the surface Halton Region’s recent resolution calling for the U.S. legislature to repeal ‘Buy American’ requirements in a number of already-passed or proposed bills may appear to be a case of David versus Goliath.

Members of the U.S. congress, which passed the legislation— including the $787-billion stimulus bill endorsed by the U.S. government and signed into law by President Barack Obama in mid-February— likely don’t know where Halton Region is.

They may, however, soon find out.

Taking the lead from Halton Hills council, which passed a similar resolution several weeks ago, Region officials last week adopted a resolution that also calls for Canadian municipalities to consider buying goods and materials from companies in countries that don’t impose local trade restrictions against products manufactured in Canada (read U.S.).

Some may see this as a case of tit for tat. Not so, say Region officials.

“This is not ‘Buy Canadian,’” said Halton Hills Regional Councillor Clark Somerville of the resolution. “This is (about) fair trade and free trade.”
Somerville, Halton’s representative on the Federation of Canadian Municipalities, said the issue will be discussed at the executive committee of FCM later this month and will likely be debated at the organization’s annual general meeting in early June.

That could mean municipal leaders across the country jumping on the Halton bandwagon.

This is a new modern form of the classic trade war, but instead of raising taxes, nations will require preferential treatment in governmental procurement under various legislation. Violations that mock the tradition the United States has had being a leader in free trade and open markets for decades.

Heritage Foundation scholars have long said the “Buy American” provisions were a misplaced and poorly thought out idea which would kill jobs. Congress would best use its time repealing these provisions instead of throwing new roadblocks to trade up which could have harmful effects to the American and world economies.

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The “Buy American” Back-fire

Far be if for me to do this, but…

I told you so.

I told you so.

I told you so.

I told you so.

And so it begins…

Ordered by Congress to “buy American” when spending money from the $787 billion stimulus package, the town of Peru, Ind., stunned its Canadian supplier by rejecting sewage pumps made outside of Toronto. After a Navy official spotted Canadian pipe fittings in a construction project at Camp Pendleton, Calif., they were hauled out of the ground and replaced with American versions. In recent weeks, other Canadian manufacturers doing business with U.S. state and local governments say they have been besieged with requests to sign affidavits pledging that they will only supply materials made in the USA.

Outrage spread in Canada, with the Toronto Star last week bemoaning “a plague of protectionist measures in the U.S.” and Canadian companies openly fretting about having to shift jobs to the United States to meet made-in-the-USA requirements. This week, the Canadians fired back. A number of Ontario towns, with a collective population of nearly 500,000, retaliated with measures effectively barring U.S. companies from their municipal contracts — the first shot in a larger campaign that could shut U.S. companies out of billions of dollars worth of Canadian projects.

Do remember that after weeks of negotiations in the Senate and fretting from guys like me, the negotiators put in the following clause into the “Buy American” provisions.

(d) This section shall be applied in a manner consistent with United States obligations under international agreements.

The idea was that this language was going keep everyone happy and all would be fine.

Obviously it’s not; as not just foreign companies are getting burned, but those inside the U.S. by the start of this Dave Obey-Barack Obama Trade War.

Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there.

The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company’s coils do not fit the current definition of made in the USA — a designation that the stimulus law requires for thousands of public works projects across the nation.

In recent weeks, its largest client — a steel pipemaker located one mile down the road — notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce.

“You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs,” said Bob Miller, Duferco Farrell’s executive vice president. “I’ve got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?”

The United States is not alone in throwing up domestic policies assailed by critics as protectionist. Britain and the Netherlands, for instance, are forcing banks receiving taxpayer bailouts to jump-start lending at home at the expense of overseas clients. French President Nicolas Sarkozy initially insisted that his nation’s automakers move manufacturing jobs home in exchange for a government bailout, but backed down after outrage surged among his peers in the European Union, of which France is a central member.

The language needs to be reversed and soon.  We live in a global economy where frankly not everything produced is going to be made in America, or even produced completely in America.

By all that is holy, can we please keep this Congress away from trade laws?  They clearly have no idea what the hell they are doing.

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