9 November 2009

Buy American quickly becoming double-edged sword for industry

The following is excerpted from the 7 November 2009 edition of "Canwest News".

For the second time in six months, pipe fittings in California are being ripped from the ground because they were stamped "Made in Canada," a move manufacturing companies say hurts both sides of the border.

Cambridge Brass Inc., a Canadian brass fittings manufacturer, discovered Thursday that it stands to lose more than $1.5 million in this most recent fallout from the Buy American protectionist measure.

Greg Bell, vice-president of sales and marketing for the Cambridge, Ont., company, received a call Thursday from the City of Sacramento, where the parts were being fitted into the public water system. He was told his product was no longer acceptable because it was not made in the United States....

Anything already in the ground will have to be ripped back up at Cambridge Brass's expense, Bell said.

Between the costs of losing the project, pulling up the pipes and legal fees, he estimates his company stands to lose money in the seven-figure range.

Cambridge Brass has been based in southern Ontario for more than a century and has survived two world wars and the Great Depression, but Buy American may be what finally causes the company to bid farewell to the province.

Bell said losing a major project like this would mean more layoffs for the already suffering company.

It has already lost a supply distributor in Maine, and it has had to lay off half of its own employees in Cambridge -- from a workforce of 140 it is now down to 77 -- since the introduction of Buy American policies this year.

And if these protectionist measures continue, he said, the company will likely be forced to move its manufacturing to the United States in order to stay in business....

The $787-billion U.S. economic stimulus bill south of the border requires that only U.S.-manufactured goods be used in state and municipal infrastructure project bought with the funding.

The federal government has been hoping the Obama administration would make an exception for Canadian goods in exchange for a guarantee that city and provincial bids in Canada would be open to U.S. firms. Gary Doer, Canada's new ambassador to the U.S., discussed the policies with President Barack Obama in a meeting Wednesday, but momentum has yet to be seen.

Other Ontario pipe producers who have lost business because of the U.S. policy say the Canadian government needs to intervene.

IPEX Inc., a Toronto pipe-fittings manufacturer, made headlines in May when it was forced to rip its product out of the ground at the Camp Pendleton Marine base in California because the fittings were Canadian-made....

The irony, Sobot [director of corporate affairs for IPEX] notes, is that 90 per cent of the materials IPEX uses to manufacture its product comes from Texas. The U.S. is ripping out U.S. products made in Canada, Sobot said. He adds that, if demand for the IPEX product remains low because of Buy American policies, they will not be able to purchase supplies from the U.S.

"The government has got to stand up and propose some serious retaliation," said John Hayward, president of Hayward Gordon Ltd., noting the Halton Hills, Ont.-based industrial-pump manufacturing company has been barred from bidding on U.S. products. He said he has had to switch manufacturing from three Canadian plants to U.S. sites in order to stay in business, a survival decision that has resulted in layoffs.

What happened to Cambridge Brass is a clear example of a "Buy America horror story," Hayward said.

"This is the kind of unbelievable thing happening between Canada and the U.S.," he said.