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Wednesday, September 30, 2009

Canada to be exempted from "Buy American" rules UPDATE: Not so fast

According to the CBC, Canada is likely to be exempted from the "Buy America" laws passed by Congress. This is undoubtedly good news. It keeps trade free(ish) between Canada and the United States.

It does raise a question; if the buy America clause is stupid when applied to Canada then why is it not stupid when applied to other countries?

The answer is that it is stupid.

It rips off taxpayers who are forced to pay more. It harms the economy by diverting capital in inefficient ways. It also harms economic freedom, because people cannot sell products to those who demand them.

I truly am glad that it is looking like Canada will be exempt. I just wish that everyone was exempt.

Update (by KK): A Canadian exemption to the "Buy America" provisions? Not so fast, say US and Canadian officials:

Government officials on both sides of the border say they have not yet struck a deal that will see the United States exempt Canada from protectionist Buy American provisions, despite a report to the contrary.

“Canada has submitted our proposal. Our negotiators are meeting. At this time however we have not reached an agreement,” a senior Canadian official said.

U.S. Trade Representative Ron Kirk also said there is no deal.

“We don't have it nailed down, but I'm going to be talking with [Canadian Trade] Minister [Stockwell] Day this afternoon on another matter,” Mr. Kirk said. 

Posted by Hugh MacIntyre on September 30, 2009 in Free trade | Permalink


A law that required people in Nebraska to "buy Nebraskan" is clearly a bad idea. But one consequence of not requiring people to buy Nebraskan could be that Nebraskan businesses go bankrupt and jobs are lost in Nebraska. So some people in Nebraska might have to move to Iowa or Michigan or Florida or wherever the successful companies are that put the Nebraskan ones out of business. But there's nothing wrong with that.

One consequence of not requiring people to buy American could be that American businesses go bankrupt and jobs are lost in the US. But Americans can not just simply pick up and migrate to France or Germany or Argentina or wherever the more successful companies that put them out of work are located. There is no free flow of labour across borders. So until the restrictions on movement of workers - both into and out of the US - are removed, there can be good reasons to enforce a "buy American" policy, even if just temporarily because of particular economic circumstances. To some extent the two policies (flow of goods and flow of workers) must be kept in sync.

Posted by: Fact Check | 2009-09-30 10:05:54 AM

actually, this is good for Canada. It is bad for the U.S. it is bad for everyother country in the world. but it is slightly good for us.

We aren't footing the bill, so we dont get reduced bang for our buck, and we aren't being excluded whereas others are. So basically it is an inefficient transfer of wealth from the american taxpayers to inffective American AND Canadian businesses.

Stupid? yes. Bad for America? yes. Bad for the world in general? yes. Bad for Canada? perhaps not...

I dont support it. I'm just playing devil's advocate.

Posted by: stevenwilson | 2009-09-30 10:08:51 AM

Funny, I see this issue as regulation versus deregulation. Free trade forces firms to be competitive and governments to establish regimes which foster competition, productivity, and innovation. This results in less regulation, lower taxes, and lower prices for consumers. Assuming of course your money supply is sound ... then you get Reagonomics.

Barriers to free trade encourage the opposite.

Posted by: Charles | 2009-09-30 11:27:55 AM

"if not you get Reagonomics"

Posted by: Charles | 2009-09-30 11:28:58 AM

Buy America is most harmful to the US and their citizens than anyone. Exempting Canada from buy $US is mutually beneficial.

The question is: is the trade restrictions between the US and the world-ex Canada good for Canadian consumers and producers?

Posted by: Doug Ransom | 2009-09-30 11:30:56 AM

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