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FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 9461
INFO RHEHAAA/WHITE HOUSE WASHDC
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UNCLAS SECTION 01 OF 02 OTTAWA 000393 
 
SENSITIVE 
SIPDIS 
 
STATE FOR E, EB/DCT, WHA/EX, WHA/CAN 
 
STATE PASS USTR (SULLIVAN) 
 
COMMERCE FOR ITA/MAC (WORD) 
 
TREASURY FOR IA (WEYER) 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA
SUBJECT: Talk of Retaliation Against "Buy American" Escalates in 
Canada 
 
Refs: (A) Toronto 85 
      (B) Toronto 98 
      (C) Ottawa 364 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY 
 
¶1.  (SBU) Summary:  Calls for retaliation against "Buy American" 
provisions in U.S. federal legislation are growing in Canada. 
Canadian officials and businesses claim "Buy American" actions 
threaten serious economic damage here, both to American and Canadian 
firms and their joint supply chains.  In addition to retaliation 
threats, some Canadian companies are reaching out to U.S. customers 
whose own enterprises may be negatively affected by "Buy American" 
actions.  End summary. 
 
Foreign Ministry Revises Its Assessment 
--------------------------------------- 
 
¶2.  (SBU) "Buy American" provisions in the American Recovery and 
Reinvestment Act of 2009 (ARRA) and pending federal legislation 
affecting purchases in water, environment, and education have 
sparked deep concern in Canada (reftels).  In a May 21 meeting, 
senior Department of Foreign Affairs and International Trade 
officials outlined Canadian concerns to EMIN.  In contrast to 
discussions earlier this year - when DFAIT officials believed "Buy 
American" was unlikely to have deep or lasting impacts - the 
officials expressed alarm at the "escalating" effects of "Buy 
American" provisions.  Offering only anecdotal evidence, the 
officials stated that the reach of the "Buy American" has gone well 
beyond initial predictions, and has the potential to cause serious 
and lasting damage to Canadian business. 
 
¶3.  (SBU) DFAIT officials stated that their concerns stem from the 
expanding reach of Buy American beyond the original ARRA stimulus 
measures into: 
 
--  similar provisions in other federal legislation, such as the 
Water Quality Investment Act and the 21st Century Green 
High-Performing School Facilities Act; 
 
-- similar provisions at the state and municipal level (e.g., 
Denver's  prohibitions on foreign steel); 
 
-- over-zealous enforcement of existing legislation (e.g., Surface 
Transportation and pre-existing "Buy American" rules); and 
 
-- a chilling effect that stops distributors with federal and 
sub-federal government buyers from sourcing from international 
suppliers in order to avoid accidentally running afoul of "Buy 
American" legislation (e.g., removal of carwash pipes from Camp 
Pendleton). 
 
¶4.  (SBU) DFAIT alleges that these elements represent a 
pervasive/systemic problem that has expanded beyond procurement to 
general municipal spending.  Canadian officials plan to reach out to 
Washington agencies, state governors, and congressional delegations 
to press their concerns (and we are aware of senior meetings that 
have already taken place between State, USTR and USDOC and Canadian 
officials visiting Washington). 
 
Retaliatory Pressures Gain Momentum 
----------------------------------- 
 
¶5.  (SBU) The Harper government has attempted to dampen opposition 
party calls to retaliate against alleged U.S.  protectionism.  In 
February, Bill Richardson, Chair of the House of Commons 
International Trade Committee, stated in Parliament that a "kneejerk 
reaction" for retaliatory "Buy Canadian" legislation would be 
"profoundly counterproductive." As the reach of Buy America has 
expanded, however, the government has had more difficulty defending 
Qexpanded, however, the government has had more difficulty defending 
status quo trade relations with the United States. On May 26, New 
Democratic Party MP Irene Mathyssen introduced "Made in Canada" 
legislation to cover the federal purchases of goods and services not 
already covered by trade agreements.  Parliamentary experts give the 
bill little chance of success given the limited time left in the 
 
OTTAWA 00000393  002 OF 002 
 
 
current session but the bill adds fuel to a growing anti-"Buy 
American" backlash. 
 
¶6.  (SBU) Most Canadian retaliation discussion has centered on 
municipalities and labor unions.  The Canadian Auto Workers (CAW) -- 
supported by the Canadian steel union -- have campaigned for a "Buy 
Canadian-Building Communities" resolution that makes Canadian 
content a key determinant in municipal tendering decisions.  While 
there are no specific thresholds for Canadian content (except for a 
minimum fifty percent domestic content for public transit vehicles), 
the CAW proposes that municipal contracts will be awarded to bidders 
who can offer the greatest level of Canadian content.  The CAW 
claims that their resolution has been adopted by more than thirteen 
communities, many of which are located in economically hard-hit 
steel and manufacturing regions. 
 
¶7.  (U) The community of Halton Hills (refs A, B) near Toronto has 
passed its own resolution and is leading a push to make "Buy 
Canadian" provisions a focal point of the upcoming Federation of 
Canadian Municipalities annual meeting on June 6.  The Federation, 
representing 1775 member cities (ref B), will vote on an emergency 
resolution that encourages its members to exclude from municipal 
purchasing those companies whose countries of origin "impose trade 
restrictions against goods and materials manufactured in Canada." 
The resolution also contains measures aimed at encouraging greater 
cross-border cooperation at the federal, municipal, and business 
levels in order to reduce procurement barriers. 
 
¶8.  (SBU) Not everyone is convinced that Canadian retaliation would 
be effective.  Clive Thurston, president of the Ontario General 
Contractors Association, states that trying to identify the source 
of goods and level of Canadian content would create logistical 
nightmares for contractors bidding on projects. "It's great to be 
patriotic, it's great to want to buy locally, but we cannot ignore 
the fact that we live in a global economy," he said. 
 
U.S. Businesses Reportedly Affected 
----------------------------------- 
 
¶9.  (SBU) In an effort to gain support in the United States, some 
Canadian industry associations, such as the Canadian Manufacturers 
and Exporters, have pointed to the unintended negative effects that 
"Buy American" provisions are allegedly having on U.S. firms who 
supply or buy from Canadian companies.  Reportedly, some of the 
hardest hit suppliers are in the integrated water and wastewater 
sector where, for example, U.S. firms manufacture pumps and 
chemicals while Canadian firms provide pipes and engineering 
services.  Similarly, the Canadian steel industry is predicting 
considerable difficulty isolating U.S. steel within the supply chain 
since steel fabrication activities are shared between related firms 
in Canada and the United States (ref B).