Saturday, February 6, 2010

Buy America Provisions in the Stimulus

The U.S. and Canada, its largest trading partner, reached a preliminary deal to settle what had become an acrimonious dispute over "Buy American" provisions in the U.S. stimulus package.

The deal, if approved, will give companies on both sides of the border access to government procurement contracts at the state and local levels. U.S. Trade Representative Ron Kirk said the increased access for U.S. firms in Canada would be worth billions of dollars in contracts.

Last year's U.S. stimulus package requires that manufactured products used in projects paid for with federal stimulus funds be made in the U.S. While the restrictions were meant to exempt countries like Canada that have existing trade treaties with the U.S. and have signed on to the World Trade Organization's government procurement pact, the Canadian government in the 1990s excluded its provinces and towns from those rules.
Even if this issue gets resolved sensibly, it should never have arisen in the first place.  When the government builds infrastructure, it should do so at minimum cost (quality adjusted).  The Buy America provisions interfere with that objective and risk killing jobs when our trading partners retaliate.


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