By: BARRIE McKENNA
Posted on Thursday, October 6, 2011 12:08PM EDT- Saskatchewan Premier Brad Wall has joined the howls of Canadian indignation over President Barack Obama’s decision to insert a Buy American clause in his latest jobs plan.“The Canadian and U.S. economies are highly integrated with protectionism causing harm to both economies,” Mr. Wall wrote. “The way forward is to work together in a spirit of co-operation to increase our collective exports.”
A nice sentiment to be sure, and based on sound economics.
As Mr. Wall knows, many U.S. companies have extensive and longstanding chains of supply that reach deep into Canada. U.S. manufacturers often have Canadian subsidiaries that supply vital components to their U.S. operations.
Cutting off those Canadian suppliers needlessly inflates the cost of government purchases. The result is less good work getting done, lower productivity and lost jobs in both countries.
But, hello. Isn’t this the same Mr. Wall who demanded that Ottawa bend and twist its foreign investment rules to keep Potash Corp. of Saskatchewan -- a widely held public company listed on the TSX -- from falling into foreign hands?
Mr. Wall’s newfound distaste for protectionism smacks of hypocrisy.
Protectionism, in all its guises, and for whatever higher moral purpose, always comes at a price.
Blocked takeovers deprive Canadian shareholders of potentially higher returns they might get from a foreign buyer. They also deter future investment by sending the message to would-be foreign acquirers that their cash isn’t always welcome in Canada.
And protectionism gives Canada’s trading partners cover to shield their own corporate interests from Canadian companies shopping for acquisitions in the world.
And yet somehow, Mr. Wall argues that it’s Saskatchewan that is the model of an open economy that the U.S. Congress should look to us for example.
“We have been working hard to tell the Saskatchewan story around the world to attract investment and make key contacts,” Mr. Wall tells members of Congress. “Saskatchewan's unique position on strategic global issues like energy security and food security has opened many doors. We want to use those open doors to advocate for things like fair procurement.”
Open procurement, but closed investment. Mr. Wall apparently wants it both ways.
The contradiction undercuts the legitimacy of his message.
And that, after all, is the way trade often works. Do unto others as they do to you.
The problem with protectionism is that it has a powerful political and populist appeal, particularly during tough economic times.
Buy American provisions are insidious. They distort trade and cost taxpayers dearly.
But ask Americans what they think, and it’s a clear winner. A 2009 poll by Harris Interactive for the Alliance for American Manufacturing found 84 per cent support for Buy American.
Similarly, ask Canadians about keeping foreigner hands off iconic Canadian companies, and the sentiment isn’t that different. A 2010 Angus Reid Public Opinion poll found strong support among Canadians for blocking the Potash sale. Unscientific online polls by The Globe and Mail showed similarly strong support for Ottawa’s decision.
Mr. Wall shouldn’t be too surprised then that populism trumps economics on Buy American.
http://www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/walls-scorn-for-protectionism-smacks-of-hypocrisy/article2193065/
1 comment:
President Obama has decided to insert a Buy American clause in his latest jobs plan. It states that no funds will be provided by the jobs act for public buildings and projects unless all iron, steel and manufactured goods are products of the U.S.A. A similar situation occurred in 2009, however Canada was granted an exemption from this protectionist policy. Brad Wall knows that this will be to the detriment of the Canadian steel, iron and manufactured goods industries. This plan will effectively give American-made products preference over Canadian ones which will in turn lessen the export of these goods. However, Mr. Wall is also guilty of hurting foreign investment in Canada with the Potash Corp. incident. He fought against a foreign take-over of Potash Corp. which deterred future foreign buyers from acquisitions and investments. Both of these issues deter trade and create a wall between Canada and foreign investment. To reopen markets, barriers like the jobs plan must be deregulated and the Canadian government must regain the trust of foreign buyers.
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