‘Ottawa’ Reevely: Ontario Fights ‘Buy American’ Rules While Applying ‘Buy Canadian’ at Home
Fresh off a win against protectionism in New York, Premier Kathleen Wynne was in Chicago on Monday to continue the fight.
It’s become an urgent battle for Ontario, whose economy depends profoundly on goods and services we sell to states led now by the nationalist and capricious Donald Trump. So far it’s going pretty well, but it might go even better if we practised more of what we’re preaching.
Much of the fighting goes on behind the scenes, and overwhelmingly at the state level, where Ontario has to deal with a dozen governors and scores of legislators. Monday, Wynne announced she was meeting with Boeing executives, with Illinois Gov. Bruce Rauner, with leaders of groups that promote trade and co-operation around the Great Lakes, and with participants in a roundtable led by former U.S. ambassador David Jacobson — none of which took place in public.
The New York win was a withdrawal of harsh new rules that would have made it very difficult for the state government there to buy Ontario products for anything. Gov. Andrew Cuomo proudly included the rules in the state budget he proposed to his state legislature in January.
“This initiative will reinvest in the talent that made this state and this country what it is today and strengthen our role as a global leader in manufacturing for years to come,” Cuomo said. There were a bunch of exceptions — the head of a state agency could certify that buying American wasn’t in the public interest, for instance, and put the rules aside — but overall they’d be the toughest such rules in America.
Wynne, her cabinet, business leaders and diplomats all went to work to explain to New York legislators why this would be a problem: how much stuff New York buys from Ontario ($17.7 billion worth each year), how much stuff Ontario buys from New York ($12.6 billion), how badly screwed-up our relationship could get. Car parts and raw materials go across that border all the time in tightly integrated supply chains.
In successive iterations, the protectionism in the budget bill got ground down harder and harder until by the time the legislature sent a final version to Cuomo to be signed, the Buy American provisions were simply gone.
Cuomo’s a pretty liberal Democrat and a naturally kindred political spirit for Wynne; the Illinois governor’s a Republican and so’s Rick Snyder, the governor of Michigan with whom Wynne has spent hours in the past six months. The swing-state Republicans will be the key to resisting protectionism from the U.S. federal government.
Appealing as it is, protectionism in procurement is crummy government policy. By definition, it means favouring more expensive, lower-quality vendors because they happen to be nearby, when you could get more for your public dollars with wide-open competition.
Toronto sole-sourced a huge contract for new subway cars to Bombardier a decade ago, partly on the grounds that it meant employment for fellow Ontarians in Thunder Bay. Competitor Siemens alleged Toronto overpaid by as much as $100 million — though there was no bidding, so it’s hard to know for sure. Toronto followed up in 2009 with another massive contract for streetcars that’s already a legendary transit fiasco of delays and poor assembly. And now Bombardier and Metrolinx, the provincial agency that handles big-picture transit in greater Toronto, are squabbling in court over whether delays in filling yet another order are Bombardier’s fault or Metrolinx’s for changing its specifications.
One reason for favouring Bombardier is that Ontario has its own Buy Canadian rule. It’s not as stringent as the one Wynne fought in New York, but it still requires that 25 per cent of a large transit procurement be spent on Canadian goods and services.
Ottawa has a whole light-rail assembly operation on Belfast Road now thanks to this, putting together trains we’re buying from Alstom, a French company. We had to send Canadians to an Alstom plant in, ironically, southwestern New York to learn how to do the assembling. The New York plant “builds” the trains before sending them up here in pieces to be put together like Ikea furniture.
It’s providing work for Canadians, no question. How sustainable the business of assembling a particular model of train is long-term, and how much less tax money we might have needed to spend if we just let the New Yorkers tighten the bolts themselves, those are different questions.
“We can always accomplish more by working together and today, Gov. Rauner and I reaffirmed our commitment to the foundation of our economic partnership — free trade,” Wynne said after seeing the governor in Chicago. We need them and they need us. Living the free-trade ethos we promote to others would help that crucial case.