North America, it seems, is falling apart. Traffic is at a gridlock in every major city, wasting countless hours and gallons of fuel. According to the Water Main Clock, 850 water main breaks occur every day in North America, wasting precious water and costing millions in repairs for municipalities and the residents whose homes are inundated with spillage.
A new report from the Building America’s Future Educational Fund explains why the U.S.A. ranks 18th in railroads, 19th in ports, 20th in roads, 30th in airports, and 33rd in the quality of its electrical system. Compared to our economic competitors, we systematically underfund infrastructure investments, have no national infrastructure planning, and, most importantly for the purposes of this blog, we fail to use rigorous measures of evaluation and accountability for the projects we do manage to fund.
Winding its way through the U.S. Congress is The Water Infrastructure Finance and Innovation Act which, among other projects, would establish a 5-year pilot program that would supply secured, low-interest loans from the U.S. Treasury for 10 water supply and wastewater projects costing at least $20 million each or $5 million for water systems serving 25,000 or fewer people.
In Canada, the Economic Action Plan 2013 calls for $70 billion over 10 years for public infrastructure, including the $53 billion New Building Canada Plan to build roads, bridges, subways, commuter rail, and other public infrastructure in cooperation with provinces, territories, and municipalities. It is starting in 2014-2015.
Sounds like a gold mine for EPCs and suppliers on both sides of the border. But therein lies the rub. Thanks to what some Canadians consider a protectionist attitude in the U.S., Canadian infrastructure projects could be closed to U.S. manufacturers. Canadian manufacturers and steel producers are urging Ottawa to channel those tens of billions of dollars their way over the next decade.
"The origin of the problem is the American Recovery and Reinvestment Act of 2009 (ARRA)," said Jayson Myers, president and chief executive of the Canadian Manufacturers & Exporters Association (CMEA) (Toronto, Ontario), in a recent interview. "That law prohibited U.S. municipal infrastructure projects from receiving federal funding if any of the iron and steel came from outside the U.S. The ARRA locked Canadian firms out of the U.S. market."
Given “Buy America” and other protectionist policies, Canadian industry representatives want the federal government to leverage the power of $47-billion to support Canadian companies. The proposed strategy is designed to even the playing field with countries such as the United States and was laid out in a letter signed by three Canadian industry lobby organizations: the Canadian Manufacturers & Exporters, the Canadian Institute of Steel Construction and the Canadian Steel Producers Association, and was sent to federal cabinet ministers in November.
The letter said that while Canadian public procurement practices offer “essentially open and equal access to foreign bidders,” the same foreign bidders benefit from “protective advantages” in their own domestic markets.
While it may seem like a retaliatory move, the Canadians do have a point. If the U.S. government will not even entertain a bid from a Canadian supplier, why, then, should U.S. suppliers be able to bid on Canadian projects? You can see how this could escalate.
Basic economics argues that, for the short term, protectionism can help right a country’s trade balance. But in the long term, trade protectionism weakens industry. Without competition, companies have no incentive to innovate and improve their products or services. Eventually, consumers, including municipalities and the federal government, will pay more for a lower quality product than they would get from foreign competitors.
What effects would a protectionist stance on either side of the border have on your business?