An Unexceptional Exemption

The Conservatives call the Buy American exemption a great victory. In reality, it’s a continuation of long-held policy.

Ever since Canadian businesses received exemptions from certain provisions of Buy American legislation in the U.S., partisanship in Ottawa has been turned up a notch.

According to the Conservatives, the agreement reflects the much-improved, constructive relationship with the Obama administration that has been cultivated by Stephen Harper and his negotiating team. To the opposition, the agreement is a sellout. The Harper government has given away far too much – provinces and cities will no longer be able to favour domestic industries in their own procurement exercises – for far too little – most of the American stimulus funding has already been allocated.

But when you move past the partisan hyperbole, the agreement appears much less extraordinary. When historians look back on it a generation from now, they are most likely to view it as part of a wider pattern of mutually beneficial Canadian-American economic diplomacy that began during the Second World War.

Consider the following three examples:

1. The Hyde Park Agreement

In 1941, the war against Germany overwhelmed Britain’s economy. As London struggled to finance its own defence, President Roosevelt introduced the Lend-Lease Act. The act permitted the U.S. government to “lend” or “lease” America’s allies virtually unlimited amounts of military supplies. As a result, the British planned to cease virtually all purchases in Canada.

A quickly arranged meeting between Prime Minister Mackenzie King and Roosevelt solved the problem. The United States agreed to pay for supplies produced in Canada that supported the war effort in Europe and committed to running a $300 million trade deficit with Canada for the duration of the war to guarantee Ottawa a steady supply of U.S. currency.

1. The Marshall Plan

In 1948, with its European allies struggling to rebuild after the devastation of the Second World War, Washington announced another major economic initiative. The Marshall Plan provided funding for European reconstruction so long as the receivers used that money to “buy American,” or at a select group of off-shore locations. (The additional stipulation was meant to encourage purchases in Hawaii.)

Once the U.S. government realized the potential impact of the plan on Canadian industries, it announced that Canada would be considered an acceptable off-shore location.

1. The Nixon Shock

In 1971, President Nixon shocked the international community with a new, America-first economic strategy. Among his many policy initiatives was the imposition of a series of import surcharges and export incentives.

The policies took Ottawa by surprise and once more threatened national economic growth. Despite the difficult relationship between Prime Minister Trudeau and the Nixon Administration, Canadian negotiators were ultimately able to secure partial exemptions.

Although these examples are admittedly selective, there is a pattern here: since the Second World War, when the Canadian economy has faced serious challenges, Washington has made an effort to provide at least a modicum of support.

This is not to say that American leaders have acted altruistically. The Hyde Park agreement made it easier for Roosevelt to keep his still isolationist country officially out of the war; granting Canada access to Marshall Plan purchases kept an important ally active in the Cold War; and the Nixon concessions improved cross-border trade in both directions.

Rather, U.S. policymakers generally come to recognize that, at the strategic level, it is in their best interest if the Canadian economy prospers.

Every year, between 35 and 39 U.S. states look to Canada as their number one trading partner. Canada is America’s most significant and stable foreign supplier of energy. And Ottawa and Washington are partners in NORAD and share much of the responsibility for the defence of North America.

There is no doubt that Canada needs the U.S. more than the U.S. needs Canada, but, considered strategically, the Canadian-American relationship is one of co-dependency.

So, overwhelming praise for the Harper government’s negotiating team in achieving Canadian exemptions from the Buy American legislation is unnecessary: Washington has always been fully aware that a more open border is in its strategic interests.

But criticizing the Harper government too strongly for taking so long to reach a less than ideal agreement is equally unfair. No Canadian of any political stripe has the power to make the increasingly cumbersome U.S. decision-making system function any more quickly. Nor should Canadians expect to receive concessions that do not serve U.S. interests.