Saskatchewan Premier Brad Wall written to dozens of members of Congress, state governors and at least two U.S. presidential candidates to warn them of a dangerous slide into protectionism.Liam Richards
Saskatchewan Premier Brad Wall has joined the howls of Canadian indignation over President Barack Obama's decision to insert a Buy American clause in his latest jobs plan.
Mr. Wall did it in a letter this week to dozens of members of Congress, state governors and at least two U.S. presidential candidates, in which he warned of a dangerous slide into protectionism.
"The Canadian and U.S. economies are highly integrated with protectionism causing harm to both economies," Mr. Wall wrote. "The way forward is to work together in a spirit of co-operation to increase our collective exports."
A nice sentiment to be sure, and based on sound economics.
As Mr. Wall knows, many U.S. companies have extensive and longstanding chains of supply that reach deep into Canada. U.S. manufacturers often have Canadian subsidiaries that supply vital components to their U.S. operations.
Cutting off those Canadian suppliers needlessly inflates the cost of government purchases. The result is less good work getting done, lower productivity and lost jobs in both countries.
But, hello. Isn't this the same Mr. Wall who demanded that Ottawa bend and twist its foreign investment rules to keep Potash Corp. of Saskatchewan -- a widely held public company listed on the TSX -- from falling into foreign hands?
Mr. Wall's newfound distaste for protectionism smacks of hypocrisy.
Protectionism, in all its guises, and for whatever higher moral purpose, always comes at a price.
Blocked takeovers deprive Canadian shareholders of potentially higher returns they might get from a foreign buyer. They also deter future investment by sending the message to would-be foreign acquirers that their cash isn't always welcome in Canada.
And protectionism gives Canada's trading partners cover to shield their own corporate interests from Canadian companies shopping for acquisitions in the world.
And yet somehow, Mr. Wall argues that it's Saskatchewan that is the model of an open economy that the U.S. Congress should look to for example.
"We have been working hard to tell the Saskatchewan story around the world to attract investment and make key contacts," Mr. Wall tells members of Congress. "Saskatchewan's unique position on strategic global issues like energy security and food security has opened many doors. We want to use those open doors to advocate for things like fair procurement."
Open procurement, but closed investment. Mr. Wall apparently wants it both ways.
The contradiction undercuts the legitimacy of his message.
And that, after all, is the way trade often works. Do unto others as they do to you.
The problem with protectionism is that it has a powerful political and populist appeal, particularly during tough economic times.
Buy American provisions are insidious. They distort trade and cost taxpayers dearly.
But ask Americans what they think, and it's a clear winner. A 2009 poll by Harris Interactive for the Alliance for American Manufacturing found 84 per cent support for Buy American.
Similarly, ask Canadians about keeping foreigner hands off iconic Canadian companies, and the sentiment isn't that different. A 2010 Angus Reid Public Opinion poll found strong support among Canadians for blocking the Potash sale. Unscientific online polls by The Globe and Mail showed similarly strong support for Ottawa's decision.
Mr. Wall shouldn't be too surprised then that populism trumps economics on Buy American.
Eds Note: The following is a response from Saskatchewan Premier Brad Wall:
I write in reply to Barrie McKenna's recent editorial commentary on his blog.
Mr. McKenna believes it incongruous to be pro-free trade and yet also believe that on rare and clearly warranted occasions, free trading nations may withhold approvals for foreign takeovers. In this view he is opposed by ...well… by nearly every free-trading nation and, from our experience last Fall, a majority of Canadian business leaders and free enterprise champions.
As for the suggestion Saskatchewan somehow "bent and twisted foreign investment rules to keep Potash Corp from falling into foreign hands", this too does not withstand scrutiny.
The federal decision was based on a net benefit test. The United States, like most free countries, has restrictions on foreign acquisitions. I have never challenged these restrictions in either country. They are dramatically different from the measures reflected in the American Jobs Act.
We will continue to challenge the introduction of protectionist measures that disrupt the flow of goods, services and capital between our nations. Our federal government and Ambassador Doer have been effective and determined on this file. I think it important that we utilize whatever US decision-making network provinces have to try to aid in the effort.
There is no equivalency, moral or otherwise, between a takeover refusal under clear and precise guidelines and the risk of future trade wars from systematic protectionism.