Will Biden's Buy American plan hurt Canada? Check the fine print

There's a reason Canadian officials have been circumspect in reacting to the big Buy American boosterism in Joe Biden's state of the union address.

They're still trying to figure out,days later,what it does to Canada if anything.

That speaks toa truism among trade wonks when it comes to Buy American policies: nevermind the headline,read the fine print.

The president drew a rare bipartisan standing ovation, and news headlines, by promising in his speech tougher Buy American rules for upcoming public-works projects.

That was the rhetoric. Next comes the harder part: the math. Specifically, how many actual dollars are at stake.

Canadian officials say they're awaiting assessments from industries Biden listed as Buy American priorities: Glass, lumber, drywall, fibre-optic cable and certain metals.

There's a thicket of unknowns to wade through including technical details still not released, promised exemptions, and a litany of free-trade agreements involving federal and state governments that will have a softening effect.

Ottawa isn't yet sure how many of these products are even being sold into the U.S. for public projects subjected to the new Buy American policy.

The Canadian industries affected

For starters, among the top 25 products exported by Canada to the U.S. in December, just two fall under the Biden policy: lumber and aluminum.

Canadian lumber companies have some protection: they've been buying up mills inside the U.S., in part to avoid U.S. duties.

Aluminum companies, meanwhile, will be gunning for exemptions: the rules allow exceptions when buying American costs25 per cent more or hurts the public interest.

In the midst of this, the Canadian government plans to submit public comments as the U.S. solicits input over the next month for its upcoming policy.

What is clear is Canadian officials don't sound nearly as concerned as last year when the U.S. was designing discriminatory tax credits against non-U.S.-made cars.

Canada and Mexico feared serious long-term damage. In the end, they won a coveted exemption from the auto policy.

Canadian officials expressed confidence this will also be resolved.

"I'm not worried," Canada's industry minister, Franois-Philippe Champagne, told reporters Friday during a trip to Washington.

Canada's ambassador to Washington, Kirsten Hillman, described Buy American laws as a recurring andnever-entirely-dormant struggle when dealing with the U.S., though she also expressed confidence.

"We've been quite successful over the years in getting exemptions," she told CBC News this week. "That's what we're busy trying to do now."

One Canada-U.S. trade expert put it more bluntly: this, in her view, is a relatively minor irritant.

"The impact on Canada is probably negligible," said Laura Dawson, executive director of the Future Borders Coalition. "Canadian suppliers are very used to this routine."

Whether it's lumber companiesor pipe companies, she said, firms worried about this have already set up offices in the U.S.

The backstory: Law was passed in 2021

It's no secret that protectionism is in vogue,and not just in the U.S. Canada, in fact, maintains tariff levels that are similar or higher than the U.S.

What's undeniable is the new political fervour for reviving manufacturing in the U.S.: across both parties, it's become an article of faith that communities, individually, and the country, generally, suffered from the decades-long decline of hard-hat jobs.

That was on display in the House of Representatives when Biden spoke.

In one of the notable bipartisan applause lines of the evening, friends and foes alikestood to cheer vigorously during the state of the union when Biden said: "Made in America! I mean it. Lumber, glass, drywall."

What the audience at home wouldn't have noticed was that Biden snuck this line into the speech, which wasn't in the prepared text: "It's totally consistent with international trade rules."

Let's talk about those international rules.

They include free trade for Canada, the U.K. and Australia in purchases by the U.S. military. They also include large purchases by the 85 U.S. federal entities and agencies in 37 states participating in the World Trade Organization procurement agreement.

You can see how calculating the effectsmight take a while.

In fact, this entire process is taking a while: Biden was talking about a law Congress passed well over a year ago, the $1.2 trillion infrastructure act adopted in November 2021.

What that law says, in its Title IX, is that construction materials are not adequately covered by existing Buy American rules and that federally funded construction should use U.S. parts, like drywall and wood.

Implementation of the law wasn't immediate.

WATCH | What Biden said about buying American during the state of the union:

Biden's new plans for Buy American

2 years ago

Duration 1:05

In his state of the union address Tuesday, U.S. President Joe Biden announced new standards to require all construction materials used in federal infrastructure projects to be made in America.

What's next

Biden later set up a task forcethatissued preliminaryguidancelast year: to count as an American product, 55 per cent has to come from the U.S.

The rule isstricter for the above-mentioned construction materials: they must be entirely from the U.S. What's not clear yet is how many materials will qualify for exemptions.

Also, the definition of a U.S. construction material remains vague.

That's why the U.S. issued a draft regulation on Feb. 9, soliciting public comment through March 13, which Ottawa plans to participate in.

This is what Biden was alluding to in the state of the union: the still-ongoing regulatory process to implement a law passed 15 months ago.

One trade lawyer said the U.S. administration is still sorting through a lack of clarity on how the process will work.

"[They're] soliciting comment on some of the key 'in the weeds' questions," said Dan Ujczo, an expert on Canada-U.S. trade at the firm Thompson Hine LLP.

"What is a construction material? For example, do I have to make sure that the container the gravel comes in is manufactured in the U.S. or not? This really is all about where we are drawing lines."

Lawyer in U.S.: This could help Canada

One Canadian-born trade lawyer living in the U.S. is cheering for strict Buy American policies.

Charles Benoit works for the pro-onshoring group Coalition for a Prosperous America and he says this law could actually be doing Canada a favour.

That's because it's designed to follow WTO rules, leaving Canada among just 47 countries that would retain access to certain U.S. public contracts.

Competitors in the rest of the world would be cut out, including China and most of Asia, as they are not part of the international procurement agreement.

Benoit's main gripe is that the infrastructure law isn't strict enough.

"It's a giant gas-lighting to call it Buy American," he said, complaining that it leaves the door open to too many imports from too many countries.

"[It] should be renamed 'Geographic Sourcing Restrictions Law'."

Here's another wrinkle: The same 2021 U.S. infrastructure law also includes hundreds of millions of dollars for better rail and highway connections to Canada.

So what's the net effect on Canada? We'll get back to you.We still don't have the fine print.