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UNCLAS SECTION 01 OF 02 OTTAWA 000084 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR E, EB/DCT, WHA/EX, WHA/CAN 
 
STATE PASS USTR (SULLIVAN) 
 
COMMERCE FOR ITA/MAC (WORD) 
 
TREASURY FOR IA (NEPHEW) 
 
NSC FOR TOMASULO 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA
SUBJECT: Canada warns "Buy American" legislation would trigger 
global protectionism. 
 
SENSTIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY 
¶1. (SBU) The "Buy American" provisions in the U.S. economic stimulus 
bill in the Senate have received widespread critical attention in 
Canada - the United States' largest trading partner. 
-- Running front-page headlines, newspapers across Canada have been 
uniformly negative about the "Buy American" provisions. 
-- On January 29, when the provisions were limited to steel, Prime 
Minister Harper stated that "this is obviously a serious matter and 
a serious concern to us.  I know that countries around the world are 
expressing grave concern about some of these measures, that go 
against not just the obligations of the United States, but frankly, 
the spirit of our G20 discussions.  We will be having these 
discussions with our friends in the United States, and we expect the 
United States to respect its international obligations." 
-- On February 2, Canadian Ambassador to the United States Michael 
Wilson sent a letter (see paragraph 2) to Senate Leaders Harry Reid 
(D) and Mitch McConnell (R) expressing Canada's concern over the 
"Buy American" provisions.  (International Trade Minister Day has 
also written a similar letter to A/USTR Allgeier and the Department 
of Commerce, following up their discussions in Davos.) 
-- On February 2, senior Department of Foreign Affairs and 
International Trade (DFAIT) officials and officials in Day's Cabinet 
told EMIN that the "Buy American" provisions were "extremely 
worrisome."  The officials expressed concern that the controversy 
might "sidetrack" President Obama's February 19 visit to Ottawa, and 
expressed their hope that the issue would be resolved soon. 
¶2. (U) Begin text of Wilson letter 
CANADIAN EMBASSY 
Dear Majority Leader Reid and Minority Leader McConnell, 
I am writing to you to express Canada's concern about a possible 
broadening of "Buy American" provisions in the American Recovery and 
Reinvestment Act currently under consideration by Congress. 
In November, G-20 leaders agreed that protectionism would fuel the 
economic crisis.  Canada views some elements of the legislation you 
will be considering this week as protectionist and contrary to the 
very goals of economic recovery that this bill is intended to 
support. 
We are concerned about contagion, that is, other countries also 
following protectionist policies.  If Buy America becomes part of 
the stimulus legislation, the United States will lose the moral 
authority to pressure others not to introduce protectionist 
policies.  A rush of protectionist actions could create a downward 
spiral like the world experienced in the 1930s. 
We support the implementation of a stimulus plan to offset the 
impacts of the global downturn.  We submitted our own plan to 
Parliament on January 27.  We are mindful that the response to the 
global economic crisis will only succeed if governments work 
cooperatively and in a coordinated manner.   In this vein, we have 
deliberately chosen to avoid the introduction of new protectionism 
measures, as agreed to during the G20 summit. 
Specifically, given the highly integrated nature of our two 
economies, it is in both our national interests to resist the pull 
of growing protectionism in implementing our respective economic 
Qof growing protectionism in implementing our respective economic 
stimulus packages.  One third of all cross-border trade between 
Canada and the United States takes place within companies with a 
presence on both sides of the border; and two-thirds is within 
established supply chains. Over $1M worth of trade and commerce 
crosses our border every minute, and approximately 7 million U.S. 
jobs are supported by that trade with Canada.  Importantly, the 
United States enjoys a surplus of exports in manufactured goods to 
Canada. We are your largest single customer.  If either of our 
governments were to introduce new barriers or preferences at this 
time, we would load increased costs and burdens onto businesses, 
cause delay, disrupt and distort the way businesses have organized 
themselves in our two countries, and decrease North American 
competitiveness, thereby killing jobs rather than creating them. 
We recognized concerns about "leakage" - taxpayer money going to 
create jobs in other jurisdictions.  However, our two countries 
build goods together; and our supply chain is fully integrated. 
These concerns have to be balanced against the real costs to our 
respective economies and treasuries of restricting competition and 
the free flow of goods and services. 
For both international and bilateral considerations, we would ask 
 
OTTAWA 00000084  002 OF 002 
 
 
you to ensure that the legislation does not include elements which 
restrict trade, such as broadened "Buy American" provisions.  In any 
event, we assume that the United States will comply with its 
international trade obligations.  A negative precedent set here in 
the United States can have repercussions around the globe and could 
provoke debilitating beggar-thy-neighbour policies.  In the end, we 
got into this economic crisis together.  We need to work together to 
build ourselves out of it. 
Yours sincerely, 
 
Michael Wilson 
 
c.c.: United States Senate 
 
End text of letter.