Mr. Speaker, I rise today to speak to the report of the Standing Committee on International Trade on the deal signed between the Conservative government here in Canada and the Obama administration on buy American that ostensibly was to deal with the risk that U.S. protectionism and protectionist policies represent to Canadian industry.
In terms of some historical perspective, I heard my colleague from the NDP earlier today credit U.S. protectionism in the 1930s with helping the U.S. emerge from the economic downturn. I have never heard that argument before. I am always curious to hear new arguments and I always find NDP economic arguments curious and not necessarily thought provoking, but from time to time illustrative of what happens when absolutely no time is spent ever studying economics in the real world.
Earlier today when I heard the NDP say that the policy that the Americans implemented in the 1930s that was principally responsible for the U.S. recovery from the Great Depression was a protectionist policy, I really thought I was going to fall out of my chair.
In fact, there is a global consensus that crosses party lines that trade is good, that trade is important, that trade creates jobs and prosperity, that trade helps create goods and services that are affordable for all citizens and consumers. Social democratic parties around the world, the British Labour Party and the U.S. Democratic Party, by and large, have embraced this. The only social democratic party in the world that is still tied to the past, still filled with global-phobic socialist Luddites, is the New Democratic Party of Canada when it comes to trade policy.
The fact is that during the 1930s what turned a regionalized recession into a global depression was U.S. protectionism. The U.S. protectionism in the 1930s that led to reciprocal protectionist action around the world deepened and broadened that depression and that downturn.
One of the things we have learned from that is not to repeat the mistakes of the past. If anything, in this current economic downturn that we have seen over the last couple of years, there is a global consensus that we ought not repeat those errors.
It is particularly important from a Canadian perspective that we do not respond to U.S. protectionism with our own reciprocal protectionist measures, because we depend disproportionately more on U.S. markets than American companies depend on our markets. Anything we do ostensibly to protect our companies through Canadian domestic protectionist policies will have the unintended consequence of denying our companies access to the big prize, and that is the U.S. market and other international markets.
The provinces have shown great leadership on this issue. Premier Charest was very engaged in the discussion. He helped lead discussions with provincial governments and provincial premiers across Canada to reduce protectionist and interprovincial trade barriers that existed. Getting the provinces to agree on a consensus on subnational government procurement was a big step forward. It enabled the federal government to do more than it was able to do previously.
The U.S.-led global downturn teaches us the important lesson that we have to not only do a better job defending Canadian interests in the U.S., but we also have to significantly diversify our trade interests. That is something that the Conservative government, in my opinion, has not done enough of.
The Conservative government spent its first three years attacking and provoking China, and then a year sucking up to China, trying to make up for the damage that it wrought on the Canada-China relationship, a profoundly positive relationship going back to not just Pierre Trudeau, who helped open up China, but in fact, Richard Nixon, who was the first leader of a developed nation to establish diplomatic ties with post-revolution China. Also, to be non-partisan, former Progressive Conservative Prime Minister John Diefenbaker was also instrumental in deepening ties with China.
The Conservative government's denial of the importance of China for the first three years of its government did not reflect what has been a bi-partisan commitment to deepen Canada-China ties, a commitment that established great social and political ties over the years, but today, now that China is leading the global recovery in terms of economic growth and opportunity, creates a huge economic opportunity for Canada.
Therefore, first of all, I do not believe the Conservative government has done a good enough job in defending Canadian interests in our biggest market, the U.S.; and I do not believe it has had a sensible, forward-thinking policy to diversify our trade relations with countries such as China, India and Brazil as examples.
Protectionism is popular. Protectionism, particularly during times of economic downturn, can be very good politics. That is why we are seeing increasingly in the U.S., in Congress and in government at the state level, a lot of protectionist policies. We are seeing it here in Canada.
The fact is, when people lose their jobs, obviously the first instinct is to protect themselves and protect their jobs. The first instinct is to try to put up barriers and try to do what they can to ensure that things do not get worse.
We are particularly vulnerable to the politics of protectionism in the U.S. right now. In the U.S., there is a statistical recovery but a human recession. One in five Americans between the ages of 25 and 55 are out of work and it is not clear where the jobs of tomorrow are going to come from.
It is also important to realize that there is fear not just from unemployment in the U.S., but the fear of people losing their homes. As we see upward pressure on interest rates and the cost of borrowing and over-leveraging, we have had 15 years of over-leveraging in many ways, both in Canada and in the U.S., and now, particularly in the U.S., we are going to see a period where there is going to be a reversal of that policy. The over-leveraging that led to unsustainable economic growth is now going to be countered by a period of time where we are going to see a retraction of credit and we are going to see a pullback that will create a significant challenge both in terms of sovereign debt and in domestic or consumer debt for people to be able to continue to grow the economy in the U.S.
So I think protectionist sentiment in the U.S. is going to be something that we have to be vigilant on and defend ourselves from, and we are going to see the politics of protectionism in the U.S. continue to be popular. The political pressure on U.S. legislators to implement protectionist measures is not going to be reduced, it is going to continue to grow.
We have a Democrat-controlled Congress, at least until November. We will see what happens in November, but the fact is that within the Democratic Party in the U.S. there is a lot of protectionist sentiment. It is unintended in many cases, as we are not necessarily targeted by that protectionism and those protectionist measures, but we do get hit by the crossfire and the results of that protectionism.
When the Conservatives signed the buy American agreement earlier this year, it was largely too little, too late. Last year, many Canadians lost their jobs as Canadian companies were forced to move to the U.S. and relocate distribution and manufacturing because of the buy American clause that was in the 2009 U.S. recovery act.
The buy American clause, which went into effect in February 2009, requires that only American-made iron, steel and manufactured goods be used in U.S. stimulus projects. As a result, Canadian manufacturers were shut out of tens of billions of dollars in U.S. contracts. In the midst of a recession, this was a tough pill for Canadians to swallow, tougher still because the Conservative government had failed to live up to its promise to defend Canadian economic interests in the U.S.
One year later, the Conservatives signed a deal with the U.S. to open up a small number of 2009 U.S. stimulus packages to Canadian firms. This “temporary agreement”, and it is referred to in the agreement as a temporary agreement, for local projects runs only until September 2011 when the last of the 2009 U.S. recovery act is set to expire. However, the vast majority of the U.S. stimulus money from 2009 was spent before the agreement even went into place.
According to media reports, less than $5 billion in local U.S. projects, just to put this into context, 2% of U.S. recovery act funding would be open to Canadian bids under this agreement. Effectively, we were not at the table. We did not defend our interests. If we are not at the table, we are typically on the menu when we are dealing with the Americans on issues like this. American companies had the big meal and we were left with the crumbs. Our Canadian companies were just left with the crumbs because the stimulus package was largely spent.
Even these estimates may be high. An internal Canadian Manufacturers & Exporters briefing notes that. “All funds under the recovery act must be 'under contract by February 2010”.
This suggests that the window had already closed for most Canadian companies even before the buy American agreement had been signed.
In exchange, Canada gave the U.S. unprecedented access to a wide range of local and municipal construction projects until September 2011. What we learned during the committee hearings is that there have been no quantitative analyses of what we were giving up for what we were achieving.
Earlier tonight I credited the Canadian provinces for their leadership on this and for their proactive leadership in eliminating sub-national government protectionism, which I believe that is important, but I also believe it is important to recognize what we were giving up and compare it to what we were gaining. I think that is where the Conservative government failed Canadians during those negotiations.
From February 2010, when the deal was signed, until it expires in September 2011, Canadian municipalities covered under this deal are expected to spend $25 billion on construction services. In the Conservative government's haste to declare a victory over buy American, the Conservatives signed a largely one-sided agreement. There is no reciprocal access to local U.S. infrastructure programs during the same time. For this time period, the Conservatives signed a one-sided deal that is disproportionately beneficial to U.S. manufacturers as opposed to Canadian manufacturers.
There is a number of spending bills before the U.S. Congress with buy American provisions that are not even covered under this deal and there are more to come. The government ought to have negotiated an approach to prevent these kinds of measures applying to Canada on a go-forward basis. Instead, we have to repeat this process. Every time we see a piece of U.S. legislation, stimulus or otherwise, that has protectionist measures that hurt Canadian interests, we have to go through this whole process again. Based on the last model, we will see once again that it will take the Conservatives almost a year to get any action and then, whatever package, stimulus proposal or government legislation in the U.S. that is introduced, by the time it expires we will have already missed out.
It is clear that Canada needs a better deal, but with Canada's local procurement markets already open to the U.S. until September 2011, what is left for Canada to negotiate away?
We need a fair, permanent and comprehensive agreement that would give Canada a meaningful exemption from buy American-type protectionism. We need an agreement with lower thresholds that allows small and medium-sized enterprises, the backbone of our Canadian economy, to sell their goods in the U.S. while keeping jobs here in Canada.
Instead of playing shortsighted domestic politics, the Conservative government should have focused on building the necessarily relationships with the U.S. to achieve a long-term solution for Canada. However, with four Conservative ministers in four years, the Conservatives simply have not been able to build the kinds of relationships on the international scene, on trade matters particularly, to defend Canadian interests effectively.
Trade relations are simply human relations. With the Conservatives changing trade ministers four time in four years, that has denied any individual trade minister the opportunity to develop the kinds of deep relationships that can defend our interests.
Compare that with any other OECD country. No other competitor and no other country that I am aware of changes their trade ministers every year. The Conservative government, however, has gone through four trade ministers in four years and that has had a deleterious effect on any one of those trade ministers' capacity to defend Canadian interests abroad.
Canada cannot afford to let the U.S. off the hook by pretending that the buy American problem has been solved by this agreement.
I hope that my colleagues across the aisle will join us in an honest, open and constructive discussion about the buy American barriers that are still in place. Canadian firms and workers who rely on access to the U.S. market deserve nothing less.
It is also important to recognize that as the largest energy supplier to the U.S., we have an opportunity to reframe our trade discussions with the U.S. When we go to the U.S. and we say that buy American policies are bad, that automatically puts the American legislators on the defensive. There is a more constructive way to approach this.
First, the threat to jobs in the U.S. will not come as much from Canadian companies as some of the emerging economies, such as China, India and those areas of growth and opportunity. Any artificial barriers between the Canadian economy and the U.S. economy will cost jobs on both sides.
In terms of the energy side, being the biggest energy provider to the U.S. and recognizing the importance of energy security to the Americans, we have the capacity to leverage on that power, more broadly, to deepen our ties with the Americans and to deepen our economic relationship with the Americans to the extent that it would be self-evident to American legislators that it would be counterproductive, dangerous and damaging to the American economy to put any trade protectionist measures in place that would artificially divide the Canadian and the U.S. economy.
Buy American is one of the protectionist measures we face as Canadians, and one which the Conservative government has not done enough to defend us against. Country of origin labelling is another one. I would argue that the western hemisphere travel initiative is a measure that the Americans introduced that does lead to a thickening of the Canada-U.S. border. I do not believe the Conservatives have done enough to defend ourselves on that.
However, when we focus on the power that the energy relationship gives us, I believe we should be deepening our discussions with the Americans in three critical areas. The first one is on carbon pricing. When we are the American's biggest energy provider, we should not be sitting back as a bystander as they develop a price for carbon, a price mechanism that will have a border mechanism, a carbon tariff that will apply to our exports to the U.S. We should be working with the Americans to develop an approach on that.
We should also be working with the Americans to deepen our relationship around the modernization of energy grids. Some of the provincial and state governments are engaged in that, but there is a area of national leadership and investment. The Obama administration is putting $7 billion into grid modernization and I think we should be working with them on that.
We should also be deepening our relationship with the Americans on the research and development of clean energy technology. The fact is that when it comes to things like carbon capture and storage, Canada has been a global leader. Forty percent of the world's carbon that is sequestered is stored in Weyburn, Saskatchewan, and yet when the Americans signed a deal with China a few months ago to deepen their relationship on carbon capture and storage and on the research and development of those solutions, Canada was not at the table.
We need to be at the table. We need to deepen our trade relations and our energy relations with the Americans. That is the best way for us to defend ourselves against American protectionism.