Buy America(n) policies and the need for long-term protection Paul Clipsham Director of Policy & Programs Director of Policy & Programs To: Halton Planning and Public Works Committee May 20, 2015 �
Buy American policies are back � American Recovery and Reinvestment Act (ARRA) of 2009 was a reality check for many Canadian manufacturers and various industry sectors. Showed how much we are vulnerable to Buy American policies � Still today, there is no long-term protection against new Buy American policies in public transit or in any other sector. � Buy American policies are now front and centre of American politics, at all level of government (Executive, Legislative, State legislatures). It won’t go away after the November 4 th Congressional midterm elections. � We need to act now, in a coordinated way, in order to get long-term protection against future Buy American policies and legislations. �
Recent Buy American measures adopted (Legislative Branch- U.S. Congress) • In 2014, U.S. Congress has clearly targeted Water Infrastructure for new Buy American legislations • January (2014): Consolidated Appropriations Act of 2014 included Buy America provisions for the water/wastewater sector. The Act stipulates that construction materials for these projects, such as iron, steel and other manufactured goods must be predominantly made in the U.S. manufactured goods must be predominantly made in the U.S. • June (2014): U.S. Congress passed the Water Resources Reform and Development Act , another source of funding for municipal water and waste water infrastructure. The bill includes Buy American restrictions on iron and steel products . The WRRDA also made the Buy America restrictions in the Consolidated Appropriations Act permanent . �
Iron and steel restrictions at the state level • U.S. States are not covered under NAFTA. • Thirteen states are not covered by the WTO-GPA agreement. Therefore, they can continue to impose Buy American procurement policies in the future. • • Among these 13 states, four already have specific restrictions on the use of Among these 13 states, four already have specific restrictions on the use of steel in government procurements: Alabama, Indiana, Ohio and West Virginia. • Among the 37 States that have signed the WTO-GPA, about 15 also have specific exclusions in the steel fabrication sector (“construction grade steel”): Delaware, Florida, Illinois, Iowa, Maine, Maryland, Michigan, New Hampshire, New York, Oklahoma, Pennsylvania, Wyoming. �
Buy American measures adopted recently (State Legislatures) • Minnesota: $1 Billion Capital Investment Bill Includes a Buy America component that requires a public entity receiving funds under the bill to use American-made steel. The bill also has a stand- alone Buy America provision for the Iron Range Regional Airport project which requires the use of American-made steel. • New York State Buy American Act The bill aims to harmonize New York procurement statutes with those already in effect when New York has to execute programs funded by federal grants with Buy America restrictions attached. The bill uses the definitions in place under the U.S. Department of Transportation: all iron and steel must be 100% made in the U.S.; in terms of manufactured products, all manufacturing processes take place in the U.S. and more than 60% of the components of the good are of domestic origin. �
Buy American measures adopted recently (State Legislatures) • Massachusetts Buy America The bill establishes a preference for products made in the U.S. for purchases made by State Agencies. For iron and steel, all manufacturing processes must take place in the U.S. and for manufactured products, all manufacturing processes must take place in the U.S. and all components must be of U.S. origin. must be of U.S. origin. • New Jersey Buy America The bill being considered would expand the American-made requirement for nearly every business that may contract with the state , including state agencies, municipalities and public educational institutions. �
Why current trade agreements offer us no protection against Buy America(n) policies �
International agreements: no protection International agreements such as NAFTA and WTO-GPA do not protect Canadian suppliers from the imposition of Buy America(n) policies • NAFTA, Chapter 10, Article 1001,Paragraph 5(a) is available to all three signatories of the trade agreement and is the justification used by the US to impose Buy America to Canadian suppliers. “Procurement includes procurement by such methods as purchase, lease or rental, with or without an option to buy. Procurement does not include: Non-contractual “agreements or any form of government assistance , including cooperative agreements, grants , loans, equity infusions, guarantees, fiscal incentives, and government provision of goods and services to persons or state, provincial and regional governments…” Source: NAFTA, Chapter 10, Article 1001,Paragraph 5(a) �
What about WTO-GPA? Definition of government procurement under WTO-GPA: “The procurement process is the process that begins after an entity has decided on its requirement and continues through to and including contract award . It does not include non-contractual agreements or any form of government It does not include non-contractual agreements or any form of government assistance, including but not limited to, cooperative agreements, grants, loans, equity infusions, guarantees, fiscal incentives, and government provision of goods and services, given to individuals, firms, private institutions, and sub-central governments . It does not include procurements made with a view to commercial resale or made by one entity or enterprise from another entity or enterprise of Canada.” �
Emerging Markets: No Commitments for Public Infrastructure Projects • Many emerging economies have not made any commitments to Canada through bilateral or multilateral agreements for accessing their public infrastructure projects. • Examples of restrictive trade practices related to infrastructure procurements: procurements: – Brazil: Preferential margin for domestic suppliers up to 25%. – Russia: Preferential margin for local suppliers. – Turkey: Legislation with reference to reciprocity and applies a preferential margin of 15%. – China: Applies a national content requirement and specific targeted measures aimed at steel exports. ��
Steel Industry: Negative Trade Balance Steel Industry: Negative Trade Balance • Over past decade, sharp reduction in exports and an equally pronounced increase in imports of fabricated structural steel in Canada. – Led to a negative trade balance affecting Canadian steel manufacturers since 2009. �������� �������� �������� ������� �������� ���������� �������� ������ ������� ������ ������ ������ ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ���� ��
Concrete Examples: Absence of Level Playing Field Field ��
Marcon Metal Fab, Delta, BC The Bay Area Rapid Transit System (San Diego, California, 2012) • Located in Delta, BC, no production capacity in the U.S. • Supported a Nevada/Washington-based company in bid to supply steel and rubber parts required for the rapid transit system in California. – Existing supplier relationship, their portion of the overall contract was valued at $880,000. � Supplier awarded contract but subsequently expressed concern about relying on Canadian supplier for steel required given the source of funding for the project Canadian supplier for steel required given the source of funding for the project from the Federal Highway Administration • Marcon MetalFab was recently advised it would not be retained for this opportunity given their non-compliance with the domestic content restrictions ��
Johnson Street Bridge Replacement Johnson Street Bridge Replacement (Victoria, BC) (Victoria, BC) • Total project cost: – $92.8M - $37.5M from the Government of Canada ($21M from Building Canada Fund + $16.5M from the Gas Tax Fund) – $10.2M via a low-cost CMHC infrastructure loan – Remaining paid by the City of Victoria • • Construction and project management contract awarded to PCL Construction, Construction and project management contract awarded to PCL Construction, headquartered in Edmonton. • No obligations were imposed to the contractors in order to provide domestic economic benefits. • PCL Construction has subcontracted important components of the bridge to ZTSS Bridge based in Shanghai. These components account for approximately 20% of the overall contract value (over $16M). ��
Champlain Bridge Replacement, Montreal, Quebec • CME, CISC and CSPA have urged the federal government to use this $5 billion infrastructure project, not covered by Canada’s trade agreements, to provide a level-playing field for Canadian steel manufacturers, without success. • The request for submissions did not include any criteria • The request for submissions did not include any criteria related to domestic steel components • A missed opportunity for Canada: No obligations on the winning consortium to provide Canadian steel products for this domestic project ��
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