Buy Canadian: A Misguided Blow

Buy Canadian: A misguided blow against Canada's Southern neighbor

In today's global economy, protectionist policies are supposed to be a thing of the past. Yet "in an effort at reviving the flagging American economy, the U.S. federal government is pumping up to U.S.$787 billion into the economy through infrastructure spending… [and] the Buy American provisions require state and municipal projects use only U.S.-made goods" (Perkel 2009). This has caused friction between the U.S. And its 'neighbor to the North,' as Canada is often called. For example, "Halton Hills, a town of 50,000 people about 25 miles west of Toronto, is one of about a dozen Canadian communities forging ahead with plans to amend their procurement policies to freeze out American companies," and "Canadian communities angered by perceived American chauvinism have started a Buy Canadian campaign to exclude U.S. bidders from municipal contracts" (Fritsch & Boles 2009).

The blame cannot be placed squarely on U.S. shoulders, as Canada has brought a great deal of its protectionist economic pain upon itself. The 'Buy American' rules in the stimulus package "are supposed to exempt countries with which the U.S. has free-trade agreements, including Canada. But in the 1990s, the Canadian government chose to exclude its provinces and towns from procurement rules contained in NAFTA and a separate World Trade Organization agreement that would have put them beyond the reach of the new provisions," and thus invalidated the exemptions (Fritsch & Boles 2009). Many Canadian municipalities and some provinces continue to engage in contracting policies that favor Canadian suppliers, spanning everything from renewable energy projects to agriculture.

Such Canadian subsidies and endowments of local products, often fly in the face of traditional notions of the benefits of economic specialization: "It costs Canadian consumers and taxpayers more to keep agriculture alive in this country than it would to pay farmers to do nothing. Between 1999 and 2002, for example, Canadian farmers received support, in the form of either artificially inflated prices or direct subsidies, to the tune of $24.9 billion. Yet, over the same period, after all costs were accounted for, these same farmers made only $8.8 billion in net income. In strict economic terms, that means it would have been cheaper for Canadians to buy all of their food abroad (where it is subsidized even more handsomely by foreigners) and pay domestic farmers just to sit on their hands" (Subsidies, 2009). Canadian farmers defend the government's protectionist policies for its corn and dairy farmers because of the agricultural heavy subsidies in the U.S. For these products. However, many Canadian citizens claim that this policy is, in effect, a lump sum or regressive tax with an unduly burdensome effect upon their wallets: by making corn or dairy products more expensive through artificially inflated prices, they must pay more at the cash registers for food. Poor people traditionally pay a larger proportion of their income in food, hence the extremely regressive nature of the de facto tax through subsidization.