Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



Canada's Ambassador Pens Against Senate Buy America Provisions in Stimulus Bill

Canada's Ambassador to the United States, Michael Wilson, has written a letter to Senator Harry Reid and Senator Mitch McConnell, the respective leaders of the Democrats and Republicans in the Senate, asking the Senators to refrain from bringing in new "Buy America" protectionist laws that would restrict trade.  He diplomatically warned the Senators the U.S Senate could spark the kind of worldwide trade retaliation that led to the Great Depression.

In the letter, Ambassador Wilson writes:

"A negative precedent set here in the United States can have repercussions around the globe and could provoke debilitating beggar-thy-neighbour policies."

He goes on to state in the letter:

“We are concerned about contagion, that is, other countries also following protectionist policies. If Buy American becomes part of the stimulus legislation, the United States will lose the moral authority to pressure others not to introduce protectionist policies...”

Ambassador Wilson is predicting global retaliation -- and leaders are considering it -- even Canadians.  The Canadian NDP Leader, Jack Layton is pressing for the Canadian Government to table in the House of Commons "Buy Canada" legislation.  This is a slippery slope towards action and reaction.

Why are Candians worried - the protectionist mesures being debated by the U.S. Senate go beyond a requiremnet to use U.S steel.  The proposed measures include all manufactured goods.  That is, billions of dollars of Canadian goods/ exports to the United States are at risk. 

To read a copy of the letter, please go to the following link - http://www.cbc.ca/news/pdf/letter-reid-mcconnell.pdf

However, Ambassador Wilson's letter is does not go far enough to state the threat to world trade.  More lobbying is needed by companies.  The risk of retaliation is real given the current state of the U.S moral authority.  President Obama has not been in office long enough to change the world view of the United States that is residual from the Bush Years.  Also, the world economic situation is so fragile that "hope" of change may dissipate quickly.

There is the potential for countries to arbitrarily raise tariffs on imported goods above WTO bound rates.  There is the potential of new quantitative restrictions (quotas).  There is the potential for export restrictions, new customs user fees, new marking requirements, new licensing requirements, other new fees and other non-tariff barriers to trade.  The risks extend to technical barriers to trade and sanitary and phytosanitary measures.  Companies who are affected by restricted access to foreign markets will want to protect their home turf with trade remedies.

All these actions and reactions could lead to tradedisputes. Countries may retaliate first and ask for permission to retaliate later.  This will result is crossing litigation before the WTO and under free trade agreements.  Not only will there be governement-to-government disputes, there may be investor-to-state disputes filed by companies who have set up cross-border trading investments.

We are not just talking about a slippery slope, we are talking about a potential downward spiral that can be fueled by actions of non-governmental actors.  Once affected companies get into the mix and start to use legal measures at their disposal, the governments will not be able to stop what may be a devastating trade war.

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