Ontario’s retaliation against New York state’s Buy American law will likely entail a prohibition on the use of iron and steel from the state in provincial government construction projects, and possibly a ban on New York-based construction firms from bidding for the contracts, The Globe and Mail has learned.
A day after Premier Kathleen Wynne announced that she would table legislation this month giving her government the power to bring the hammer down on the Empire State for its protectionist procurement policies, new details emerged on what the fight-back will entail.
A source with knowledge of Ontario’s plans said on Wednesday that the idea is to mirror New York’s law as closely as possible. Because Albany is mandating that American iron and steel be used in state road and bridge construction for projects of more than US$1-million, Queen’s Park will likely limit its reprisal to construction contracts and may narrow it further to encompass only iron and steel. The source said details are still being worked out, but the province would probably enforce these restrictions by having them written into public tenders.
The U.S. legislation was signed into law by Governor Andrew Cuomo in December and takes effect on April 1. The Ontario bill will land on Feb. 20. After it passes, it will be up to Ms. Wynne’s cabinet to enact the actual retribution. The proposed law would allow the government to take similar action against any state that implements protectionist policies. A Buy American bill passed the Texas legislature last year, for instance, but has not been signed into law.
Lobbying from the Ontario government last spring helped kill a far more extensive New York proposal that would have imposed Buy American requirements on most government contracts worth more than US$100,000.
How effective Ms. Wynne’s move will be is an open question.
Infrastructure Ontario, the Crown corporation that handles most public construction projects – from hospitals to roads to transit lines – uses “local knowledge” criteria when evaluating bids, giving a leg up to Ontario companies. The effect is that U.S. companies already face a disadvantage when bidding for Ontario contracts, which dilutes the impact of Ms. Wynne’s new restrictions, said Mark Warner, a former Ontario government lawyer.
“I hear the huffing and puffing for this, but what does Ontario ultimately have to offer? We already have things that are closed off,” said Mr. Warner, who now practises trade law in both Ontario and New York. “I don’t see how Canada can win a trade war with the United States, and I don’t see how Ontario can win a trade war with the United States.”
Also unclear is whether the subnational spat will have any ramifications for NAFTA talks. Queen’s Park won an exemption for Infrastructure Ontario from the procurement rules in Canada’s free-trade deal with the European Union, and would have to be willing to forgo this for Canada to make a compelling offer on more open government contracting in the renegotiation of the North American free-trade agreement, Mr. Warner said.
Mr. Cuomo’s office did not respond to The Globe’s requests for comment.
The Ontario government played down the protectionism of its “local knowledge” requirements, arguing that they are “not intended to discourage international companies.”
“Local knowledge requirements are a relatively small component of Infrastructure Ontario’s scoring system and are relevant to specific projects. They are primarily related to health and safety regulations; they do not apply to local content or suppliers,” Alex Benac, a spokesman for Infrastructure Minister Bob Chiarelli, wrote in an e-mail.
But Mr. Benac did not answer questions about whether Queen’s Park would allow Infrastructure Ontario to be included in future NAFTA procurement provisions.
The Premier announced her retaliation plan during a visit to Washington to lobby the Trump administration – including chief NAFTA negotiator John Melle – on the benefits of preserving the trade deal. “My first choice is not to be in some kind of trade conflict with a particular state or with the United States. That’s why I support NAFTA,” she told The Globe. “But if there is going to be this kind of action that would disadvantage Ontario workers and Ontario companies, then we have to respond.”
Ms. Wynne spent Wednesday in New York City meeting business leaders and holding a “fireside chat” with urbanist Richard Florida. Her office said she raised New York’s Buy American legislation at roundtables with the Business Council for International Understanding and RBC Dominion Securities Inc.