U.S. President Barack Obama’s “Buy American” provisions for the country’s massive economic stimulus program could have an impact on the Canadian IT industry, the president of an industry association said Monday.
And Canada’s trade minister said such protectionist measures have “a contagion effect” that could become a drag on all economies.
Trade Minister Stockwell Day told ComputerWorld Canada he’d made progress at a weekend World Economic Forum meeting in Davos, Switzerland, in discussions with U.S. trade representative Peter Allgeier.
Allgeier and the Obama administration have been watching the Canadian Parliament’s reaction to the provisions in an $800-billion American stimulus package that would exclude non-American steel and ore from infrastructure projects, Day said. He said Washington and Ottawa would work through trade offices, embassies and other diplomatic channels to “mitigate the effect” if the measures are passed.
John Reid, president of the Canadian Advanced Technology Alliance, said the effect of such a protectionist measure by the U.S. wouldn’t simply affect the steel and natural resources industries. And in fact, when the measures came before the U.S. Senate after being passed by the House of Representatives, they had been extended to all spending on the infrastructure initiative.
Since 80 to 90 per cent of Canada’s IT sales are in the export market, any time barriers to trade are erected, it limits the industry’s growth potential, Reid said. “Our domestic market is fairly weak,” he said, and the U.S. is Canadian IT’s biggest market.
“We’re equally concerned as the steel and natural resources (industries),” Reid said.
Day said the Senate’s extension to the clause “shows how quickly a dangerous protectionist move can cascade.”
And it fuels the protectionist fire in other countries, making a ripple effect of retaliatory protectionist measures in other countries likely, Day said. “It’s exactly the thing we want to avoid,” he said. “There’s a contagion effect.”
“For an export-driven economy, that’s not a good trend to see,” Reid said.
U.S. stimulus measures call for all U.S. medical records to be computerized within five years, new computers and technology for schools, rolling out broadband to unserved and underserved areas, and smart energy grids that would allow real-time monitoring of a customer’s energy use through Internet technology. When details of the stimulus package were announced in December, Reid said Canada’s reaction to economic strife should mirror Obama’s.
Obama is re-tooling the country for an “innovation economy,” Reid said, and that would be an important opportunity for Canadian tech firms – if they get the chance to participate.
“Today, there may be a limited number of Canadian companies in this niche,” Reid said, but one of those applications could “become a flagship” and create a globally leading company.
Reid said the networked vehicle initiative, which brings together executives from U.S. and Canadian private sector companies, the public sector and academia to develop a vision for the next generation of automobiles, is one example of Canadian industry’s vulnerability to protectionism. There’s $25 billion in stimulus on the table to rebuild the U.S. auto industry, and Canadian firms could be cut out of the loop.
Representatives of the networked vehicle intiative met in Toronto in October. The spring meeting is in the U.S.
“It’s going to be a little awkward when we meet in North Carolina this April” if the measures pass, Reid said.
Day said that “history is painfully clear” on trade barriers – once they start going up, they’re difficult to stop.
“It becomes a drag on all economies,” Day said.