Canadian municipalities adopt resolution to counter US Buy

UNCLAS SECTION 01 OF 02 OTTAWA 000440 SENSITIVE SIPDIS STATE FOR E, EB/DCT, WHA/EX, WHA/CAN STATE PASS USTR (SULLIVAN) COMMERCE FOR ITA/MAC (WORD; WOODWARD) TREASURY FOR IA (WEYER) E.O. 12958: N/A TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA SUBJECT: Canadian municipalities adopt resolution to counter US Buy American measures Ref: Ottawa 424 SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY ¶1. (U) SUMMARY: On June 6, the Federation of Canadian Municipalities (FCM) adopted a non-binding "Buy Canadian" resolution on municipal procurement to counter alleged Canadian losses resulting from "Buy American" legislative provisions. The resolution called on municipalities to only purchase goods and materials from countries that did not impose trade restrictions against Canadian suppliers of government purchases. However, in light of the federal government's June 5 announcement that it intends to seek a negotiated solution to U.S. procurement barriers through the North American Free Trade Agreement (NAFTA),the FCM will not formally endorse the resolution for 120 days. According to an FCM news release, "The timeframe of 120 days will give the Canadian and U.S. governments some breathing room. At the same time, it will continue to shine a light on this issue and ensure that everyone4s energies remain focused on finding a quick resolution." End Summary ¶2. (SBU) The Canadian municipalities have pledged to work with the federal government - in particular, Trade Minister Stockwell Day - by providing technical advice on local procurement and by reaching out to municipal counterparts in the United States (including the U.S. National League of Cities and the U.S. Conference of Mayors). In a rare show of bi-partisan support, Liberal opposition leader Michael Ignatieff also endorsed U.S.-Canada talks on procurement issues to avoid escalating protectionism. Speaking to the FCM on June 6, Ignatieff stated, "We need to say very clearly and very toughly to the Americans, 'Let's pull back now. Let's sit down around a table and do serious business between neighbors and friends who have lived beside each other for a long time and know what's in our long-term interest. Let us mobilize.'" ¶3. (SBU) For its part, the federal government has talked down the possibility of raising Canadian barriers against U.S. goods. On June 8, Finance Minister Jim Flaherty warned that retaliation "is not the kind of action that helps industry in Canada. We need to talk to the Americans. We need to have a discussion with the Americans." Rhetoric and Reality -------------- ¶4. (SBU) Canadian interest in expanding NAFTA procurement commitments appears to be growing. The FCM resolution follows on the heels of a provincial announcement (reftel) that the provinces will consider expanding procurement market access for U.S. suppliers. (Comment: The Prime Minister, Trade Minister, and senior staff would like to reconfigure anti-Buy American rhetoric into positive action toward securing and expanding market access in the United States. End comment.) However, Canadian trade watchers do not expect rapid action on the procurement front. As one veteran trade lawyer told us, "There is simply too much embedded protectionism in the provinces to root this stuff out overnight - even if the United States were willing to open up everything to us in exchange." Jayson Myers, President of the Canadian Manufacturers and Exporters and a prominent voice calling for Canadian action in response to Buy American, is similarly cautious about the how much Qresponse to Buy American, is similarly cautious about the how much can be achieved in a short period of time since the ARRA funds must be under contract by February 2010. ¶5. (SBU) Helmut Mach - a former Alberta trade minister - has called the federal government's June 5 announcement "a rushed gesture that will not solve the problem at hand, will not deal with the real issues of government procurement differences between Canada and the U.S., seems more like an effort to show that 'something' is being done, and tries to lay the groundwork to blame provinces if no results are evident." ¶7. (SBU) Comment: Canadian officials believe - or profess to believe - that offering to open up Canadian procurement markets will induce USG and sub-federal officials to do the same. Canadian enthusiasm for this tactic may quickly fade if: (1) U.S. states and OTTAWA 00000440 002 OF 002 municipalities show little interest in guaranteeing access to their procurement markets in exchange for access to Canadian markets; or (2) it becomes clear that any potential procurement negotiations would be complex and offer no immediate relief to Canadian concerns. End Comment.