Wanted: Leadership on Trade

Written By Allan E. Gotlieb and Milos Barutciski

Originally published in the National Post on Saturday, February 07, 2009

Less than three weeks into his presidency, Barack Obama has been faced with the first serious test of his commitment to tackle America's important challenges head on: The overtly protectionist “Buy American” provisions inserted into the U. S. stimulus bill by Congress threaten to trigger a wave of retaliation by America's trading partners, with potentially disastrous results for the global economy.

The Buy American legislation has strong support from many of President Obama's key supporters. In the face of massive job losses, approaching 500,000 per month, the popular appeal of “recycling taxpayer dollars” by spending them on domestically-manufactured goods is unmistakable. It does not matter that every objective economic assessment concludes that “Buy American” will destroy more U. S. jobs than it saves as U. S. goods are excluded from export markets by retaliatory measures. “Buy American” is seductively attractive to politicians because it allows them to claim credit for saving jobs at specific companies and industries; never mind the thousands of jobs dispersed throughout the economy that will be lost, since they are not as poignantly visible as a single steel mill laying off 50% of its workers.

Despite the short-term political appeal of “Buy American,” President Obama appears thus far to be staying true to his commitment to make the hard choices. He has challenged his own party's Congressional leadership to go back to the drawing board and make the stimulus bill comply with international trade rules. President Obama went even further by telling America and the world that it would be “a mistake” to send a message that the U. S. is just looking after itself and is not concerned with world trade. There are now clear signs of compromise from the Democratic congressional leadership, which has begun serious discussion of amendments that would require any domestic preferences to be consistent with international trade rules such as those of NAFTA and the WTO.

Canada can take its share of the credit for slowing down the protectionist U. S. train. The government, the official opposition and provincial leaders have publicly called for the U. S. to reverse course on the “Buy American” legislation, underscoring the fact that protectionism would unequivocally harm the U. S. economy, and especially its border states.

Equally important, but less noticed, Canada's federal and provincial governments have thus far led by example, by avoiding politically attractive protectionist measures in their responses to the economic downturn.

The job, however, is far from done. With close to 70% of our economy dependent on international trade, Canada has a bigger stake than most other countries in showing leadership in the face of global protectionism. The “Buy American” legislation may be the most visible attempt so far to invoke protectionism, but we can be certain that it will not be the last.

Both the governing Conservatives and the Liberal Official Opposition have an important stake in bipartisan co-operation on this issue. Voters expected them to work together to get the budget through and they did. There is every reason to believe that our economic relationship with the U. S. is on the same order of importance to Canadians.

There are three concrete steps that Canada can take that will have important implications for world trade.

First, it is essential that Canada, speaking with one voice, continues to press the U. S. administration and Congress to resist the lure of protectionism. Despite President Barack Obama's clear stand against protectionism, Congress has primacy over international trade. We must closely monitor developments and pool all available resources to respond effectively to future protectionist slippage by the United States.

Second, Canada must return to the front ranks of international trade negotiations under the WTO Doha Round. A mere decade ago, the pace of global trade negotiations was set by the so-called “Quad,” comprising the U. S., EU, Japan and Canada. Canada played a central role in the Uruguay Round of trade negotiations that concluded with the establishment of the WTO in 1994. Since then, we have slipped from leadership to invisibility, as Canadian governments have equivocated on politically “sensitive” issues like supply management. Today, it is the so-called G6, comprising the U. S., EU, Brazil, India, Japan and Australia that sets the pace.

Our trade officials are second to none in ability and creativity, but their effectiveness has been undermined by political timidity. The Doha negotiations need a jolt to get them up and running. Canada is well placed to give it.

Third, the government must be vigilant in invoking its international rights under the WTO, NAFTA and other trade and investment rules, to protect Canadian industry from unfair trade. As the global economy struggles through the current crisis, some countries will be tempted to buy their way out of trouble through subsidies, currency manipulation and other instruments of unfair trade. The Canadian government has internationally lawful tools at its disposal to protect industries that are injured by unfair trade and should not hesitate to use them in appropriate circumstances.

As the United States' ally, neighbour and principal trading partner, we are uniquely well positioned to influence U. S. policy through persuasion rather than confrontation. But to influence, we must have access; hence the importance of our Prime Minister establishing close personal relations with the President. In doing so, Stephen Harper can help restore some of the leadership that Canada has lost on the international stage, and reclaim our historic role as one of the world's greatest trading nations.