September 26, 2011, Ottawa, ON – The proposed American Jobs Act contains Buy American measures that will not only hurt Canadian manufacturers and suppliers, but will hurt the economic competitiveness of both Canada and the United States according to MLI Senior Fellow Laura Dawson in a recently released op-ed that appeared in the Toronto Star and The Chronicle Herald.
Dawson explains that the Buy American provisions might preserve jobs if goods were produced in one country and shipped to another, but that is not the case. Canada and the U.S. have an integrated, cross-border production system, which means that "a disruption to any node in the supply chain has far-reaching economic consequences." As MLI pointed out previously in its award-winning book, The Canadian Century, some forty percent of all exports from Canada to the U.S. are so-called intra-company trade, or trade that takes place between parts of individual firms with operations on both sides of the border.
She adds that "depending on what it costs to find a new local supplier, the net economic effect could be negative. This in turn puts jobs and business at risk in both countries and increases the potential to look for off-shore suppliers or to move production off-shore, hurting local communities in each country."
The Buy America provision is yet another example of U.S.-Canadian institutions not reflecting the reality of our integrated economies. Rather than developing institutions supportive of our shared economies, both countries tend to approach bilateral economic issues on an ad hoc basis, jumping from one crisis to another.
She advises that policymakers need to look outside of Washington and Ottawa to find out what is needed by the people who actually make things and sell them.
Dawson concludes, "We cannot expect U.S. lawmakers to put Canadian interests ahead of their local interests. But they need to know that their constituents' interests are intertwined with counterpart Canadian economic interests. Once again, we are reminded that Canadian governments and business need to take their facts about the hugely beneficial bilateral economic relationship to Congress, to every state legislature and to every local chamber of commerce. Take the message clearly and often to the folks whose jobs are on the line."
Laura Dawson is a senior fellow of the Macdonald-Laurier Institute and president of Dawson Strategic.
The Macdonald-Laurier Institute is the only non-partisan, independent national public policy think tank based in Ottawa that focuses on the full range of issues that fall under the jurisdiction of the federal government.