Manufacturing a trade war

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Local businesses brace for potentially devastating proposed U.S. legislation

At least one local business is girding for the potential effects of a proposed piece of U.S. protectionist legislation, one that Canadian Trade Minister Peter Van Loan has called “badly crafted.”

Peter Draycott, president of Cross & Associates Manufacturing. (photo by Lois Siegel)

by Jennifer Stewart

Cross & Associates Manufacturing, an Ottawa-based defence parts supplier, says it is carefully monitoring progress south of the border on the Foreign Manufacturers Legal Accountability Act. It is proposed legislation brought forward last February by Ohio Democrat Betty Sutton that would ban imports from companies without an American agent or office.

CAM president Peter Draycott said he began receiving letters from U.S. economic development agencies this past summer, offering advice on how to establish a U.S. office. 

He didn't think much of it until relatively recently, after he was made aware of the FMLAA and its potentially crippling impact on his business.

“The letters really didn’t make much sense, until I learned about the bill, and what it could mean for my business. If this passes, it could have huge economic impacts on our operations,” said Mr. Draycott.

The concept for the bill was born in 2006, after the U.S. imported a batch of now-infamous drywall from China to fix extensive household damage caused by hurricanes.  Health issues were reported as a result of the substandard drywall, but U.S. lawmakers had no means of holding Chinese manufacturers legally accountable.

But since it was tabled, the FMLAA has received significant backlash from Canadians concerned about potentially drastic repercussions on local businesses.

Most recently, Canada’s ambassador to the United States, Gary Doer, issued a warning to U.S. congressional leaders citing that the FMLAA violates America’s WTO and NAFTA obligations.

Mr. Draycott said that the FMLAA will, if passed, disadvantage strong and accountable trade partners while reducing its impact on intended countries.

“The FMLAA is hurting its best trading partner, while lessening the punch on irresponsible manufacturers,” said Mr. Draycott. “(If passed), it will be the small companies that will really get hurt that cannot afford to rent an empty warehouse in the U.S. or use lawyers as agents.”

Michel Jullian, president and CEO of OCM Manufacturing, agreed. “I can’t see how it wouldn’t affect (Ottawa),” said Mr. Jullian, also chair of the Eastern Ontario Manufacturers’ Network.

“A lot of manufacturers here export directly to the U.S. And we have some customers that we sell to in the U.S., so if we’ll have to have a U.S. address or agent, that’s going to cause a problem.”

While CAM doesn’t have many clients in the U.S., it sells to larger companies in Canada that regularly export products to the U.S.

“If it becomes harder for [large companies] to get their product into the U.S., they will likely take more work in-house and subcontract less to companies like mine,” said Mr. Draycott.

Given legal accords between the U.S. and Canada, many agree that the FMLAA’s application to Canada is unnecessary, including Washington D.C.-based Birgit Matthiesen, a special adviser to the president of Canadian Manufacturers & Exporters.

“Congress’s knee-jerk reaction is to pass these bills with very good intentions aimed at other countries, but their largest trading partner in their own backyard, and that integrated supply chain, is being very significantly affected,” said Ms. Matthiesen.

A viable solution to the bill, to maintain its objective without hurting legally accountable trade partners, would be an exemption for those countries that have reciprocal legal accords in place in the U.S., said Ms. Matthiesen.

If the bill does pass as currently written, Mr. Draycott said CAM would consider hiring a lawyer to act as an agent in the U.S.

“The bill’s entire application to Canada is unfortunate, but we will do what we need to. It (hiring a lawyer as agent) would be expensive, but not as expensive as being uncompetitive.”

 

FACT BOX - MAKING HAY 

What is it? Foreign Manufacturers Legal Accountability Act

What are the implications? Would ban imports into the U.S. from any company without a U.S. office or agent

 

Organizations: Associates Manufacturing, WTO, OCM Manufacturing Canadian Manufacturers Exporters

Geographic location: United States, Canada, Ottawa China Ontario

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