TVO: Kathleen Wynne is going to build a trade wall, and Ontario is going to pay for it

OPINION: The province’s new “Buy Canadian” policy is little more than political grandstanding that will hurt Ontario businesses and taxpayers

Kathleen Wynne’s government plans to retaliate against U.S. states that adopt “Buy American” policies. (Carlos Osorio/AP)

Since taking office in January, U.S. President Donald Trump has harped on about bringing jobs back and protecting American workers. He’s demanded greater access to the Canadian dairy market for Wisconsin farmers and threatened to tear up the NAFTA, which he calls “one of the worst deals our country has ever made.” And most recently, he signed his “Buy American, Hire American” executive order.

A few states have seen the way the political wind is blowing and adjusted their sails accordingly. New York Governor Andrew Cuomo included a Buy American provision in his budget proposal in January, although it didn’t make it through the legislature. On Wednesday, the Texas state senate approved a measure that would expand a Buy American measure for iron and steel. It’s on its way to the House legislature for approval.

Now Ontario, concerned about the impact that protectionist U.S. policies will have on its economy, is fighting fire with fire. As the Globe and Mail reported today, “Ontario Premier Kathleen Wynne’s cabinet is prepared to unleash a Buy Canadian-style policy to turn the tables on any U.S. state that adopts Buy American provisions despite the province’s aggressive lobbying.”

But if Ontario does retaliate, it will mostly hurt itself. “The challenge is it has surface appeal. Every taxpayer wants their taxpayer money spent locally,” says Dan Ujczo, an international trade lawyer at Dickinson Wright, in Ohio. “What we don’t always think about is how that may raise the costs of what our government is buying.”

“It’s really large-scale infrastructure projects on wastewater, large bridges, tunnels, where you need that type of international expertise, where it’s going to limit the number of potential bidders. And so you don’t always get the best taxpayer value,” he says.

In 2006, for instance, after Toronto’s then-Mayor David Miller sole-sourced a TTC subway contract for 232 new cars to Canada’s own Bombardier, German manufacturer Siemens said that they could have done it for $100 million less. Now the city is dealing with Bombardier’s cost overruns, technical problems, and massive delays — all in the name of ensuring Toronto’s subways were built close to home.

Or consider how protectionism in our dairy and poultry sectors results in higher prices for Canadian consumers. "There is an entire country full of consumers — taxpayers and voters — who are paying one and a half to three times more for their milk, other dairy products, chicken and eggs than they should be,” notes a report from the University of Calgary School of Public Policy, “amounting to more than $200 more a year per average family.”

Dairy farms have scaled up over the past 30 years, which should mean lower prices for consumers. Instead, the report says, prices have risen faster than the rate of inflation.

Ontario’s Trumpian policy is not smart economics; it’s political grandstanding meant to convince voters that Wynne is fighting for Ontario businesses (and, presumably, to boost the premier’s dismal polling numbers). Some Ontarians will no doubt perceive this as a David-and-Goliath scenario. But really, it’s a Shih Tzu confronting a Great Dane: brave, but stupid.

Because what if these new, vengeful measures mean an Ontario business can no longer buy from a company in the U.S. and has to source their products or services from elsewhere at higher cost? What does that help?

“Ontario supports free trade — increasing Ontario’s exports and trade is a key part of our plan to grow the economy and create jobs,” said Trade Minister Michael Chan. “In fact, Ontario’s economic present and future are deeply intertwined with the U.S., and the ability of our businesses to participate in each other’s procurement processes helps individuals on both sides of the border live better lives, while allowing governments to get the best value for taxpayers.”

Which makes starting a trade war sub-optimal.

Before New York backed down on its Buy American plan, Wynne was there, along with members of her cabinet, talking up Ontario and its trade relationship with the Empire State. “She needs to continue the path that she was on, which was outreach with the governors,” Uzjco says. “She’s done an amazing job of contacting governors from various states.”

Threatening retaliation against a country spoiling for a fight is risky. So instead of building trade walls, perhaps we should try to find mutually beneficial solutions, like reciprocal procurement agreements. Otherwise, Ontario businesses — and taxpayers — will end up paying the price of Premier Wynne’s petty revenge.