Canada braced for negative impact of 'Buy American'

10 September 2009

11 September 2009

"Buy American" provisions will hamper Canada's economic recovery next year, according to a report by the Canadian Imperial Bank of Commerce (CIBC).

The bank said suppliers in the country would not benefit from growth generated by the US economic stimulus package because they have been barred from contracts.

"Much of the US growth in 2010 will be generated from government stimulus on projects where Buy American provisions shut the door on Canadian suppliers, or in sectors like education that don't benefit Canadian industry," said CIBC chief economist Avery Shenfeld in the Canadian Press.

"In a normal year, Buy American provisions might not bite that much because the US economy would be growing on several channels, but in the case of 2010, with a lot of the growth coming out of that stimulus, that will be one reason why we may underperform."

While the CIBC has upgraded its forecast for Canadian economic growth next year by half a percentage point to 2 per cent, it is low as a result of the impact of the American policy. The CIBC estimate was 1 percentage point below the Bank of Canada forecast, the Canadian Press reported.

Buy American rules cover $280 billion (£168 billion) of government infrastructure projects and require US states and municipalities to purchase only US-produced iron, steel and other manufactured goods.

The Canadian government and business groups have been campaigning for the regulations to be dropped since they were introduced in February.

Last month the Canadian trade minister Stockwell Day offered US firms "guaranteed" access to the country's contracts if Buy American rules are scrapped.

SMsep2009

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