With the swearing in of President Joe Biden last month, the impact of the new administration on Canadian business quickly became a key area of interest and focus. When President Biden cancelled the Keystone XL pipeline, the general enthusiasm by Canadians for a change of administration was quickly tempered, with questions abounding about what this will mean for bi-lateral trade. More recent conversations about “Buy American” provisions are coming into the spotlight, as Canadian political actors and businesses position themselves for success in a new political era.
In the third and final installment in our series on the perspective of Ontario’s Agents Generals on the new political era in the United States, we turn to Ontario’s Agent General in Dallas, Jag Badwal. In addition to responsibility for Texas, Mr. Badwal has responsibility for Alabama, Arkansas, Florida, Louisiana, Mississippi, Oklahoma, Tennessee, and Texas. Prior to his appointment in 2019, Mr. Badwal had served as past-president of the Ontario PC Party and has over two decades of sales and marketing experience in private sector which he has brought to bear in his role as Agent General.
In his comments, Mr. Badwal emphasizes the emerging technologies that are an increasing focus for our bilateral relationship, such as AI for automotive, medical and financial technology, and cybersecurity. He also offers an important caution around Buy American provisions.
With the transition of power to the Biden administration, what do you think this will mean for trade between Ontario and the United States?
If Ontario were a country, we would be the United States’ third largest trading partner. This trading relationship has survived multiple shifts of power within the American executive branch and will continue to thrive. The bilateral trade supports millions of jobs on both sides of the border and is worth approximately $400 billion CAD annually. For example, Ontario is the #1 export destination for 19 U.S. states, representing nearly half of the country’s preference for doing business with our province.
Trading relationships within the Dallas TIO’s jurisdiction are particularly robust. Cross-border trade between Texas and Ontario is worth $17b annually. Additionally, within the U.S., Texas is #1 for greenfield Foreign Direct Investment (FDI) from Ontario. Trade and investment with Canada support over 338,000 jobs in Texas, 291,000 jobs in Florida, 104,000 jobs in Tennessee, 66,000 jobs in Alabama, 64,000 jobs in Louisiana, 34,000 jobs in Mississippi, 30,500 jobs in Arkansas, and 5,000 jobs in Oklahoma. In our jurisdiction, this equates to nearly 933,000 jobs. The Ontario TIO Dallas, will continue to promote the value of trading with Ontario within our regional business communities, especially as COVID-19 challenges continue to surface needs for emerging technologies that are being developed in Ontario, i.e., electric and autonomous vehicles, clean technology, etc.
How can Ontario businesses better position themselves for increased trade with our neighbours to the south? Which industries or sectors stand to benefit the most in the years ahead?
With each state in our jurisdiction, companies are increasingly interested in the emerging technologies that are already established in Ontario, such as AI for automotive, medical and financial technology, and cybersecurity. The outbreak of the COVID-19 pandemic and its continued effects on the global economy have accelerated the need for a transition to digital business models, wherever possible, in order to compete. Ontario companies can best position themselves for the future by strengthening current relationships, ensuring their company is able to operate digitally where possible, incorporating new technologies, and modernizing processes to be as efficient and responsive as possible.
The Ontario government encourages businesses to participate in provincially-sponsored programs that showcase Ontario companies at trade shows, trade missions, and other events that aim to create new commercial relationships. In addition, Ontario TIOs are taking a proactive approach not only by creating new relationships with key private sector players in our regions, but also by pursuing Strategic Investment and Procurement Agreements (SIPAs) with U.S. states, to make it easier for businesses in the province and in the U.S. to work with one another. These agreements, for example the newest SIPA between Ontario and Maryland, will increase trade, attract investment, and encourage job creation in both jurisdictions. The agreement is a platform on which to build on the relationship that has been developed over decades of engagement across the U.S.-Canada border.
How significantly does the pandemic/closed land border continue to weigh on the trade relationship?
Even throughout this difficult time, the strength of the Ontario-U.S. trading relationship has prevailed. Thanks to these established relationships, goods continue to cross the border. The closed land border has not significantly affected the supply chain for essential goods, as Ontario has kept the borders open for trade throughout the pandemic. Goods have continued to flow back and forth, keeping food on our tables and ensuring store shelves remain stocked. Ontario and the U.S. have remained steadfast partners, with the equivalent of CAD$981.8 million (US$731.5 million) in merchandise trade per day still crossing our border since the start of 2020. This is vitally important to the resiliency of our two nations.
Digital technologies enable new commercial relationships where face-to-face meetings are not possible and increase the speed at which organizations can connect. The industries that are suffering due to the pandemic are airlines, hotels, restaurants, and other sectors dependent on travel and tourism that do depend on safe land border crossings. Lastly, during these times of crisis, open trade will help ensure both of our economies and businesses recover faster. The Government of Ontario is committed to ensuring the continuity and strengthening of our existing trade relationships.
What kind of signals will you be watching for in the early days of the Biden administration? Are you concerned with a “Buy America” culture continuing or even expanding under this administration?
We are closely watching the statements and directives from the new administration, and the Ontario Ministry of Economic Development, Job Creation, and Trade will provide updates on the current Executive Order, as well as any future Executive Orders, relating to trade or federal government procurement. The U.S. Chamber of Commerce has been clear that “doubling down on already rigorous “Buy American” rules could drive up the cost of government projects, undermining their potential to create jobs and spur economic growth.” Buy American policies disrupt existing Ontario-U.S. cross-border supply chains and erode the deep and long-standing relationships we have built over the years. Our government will continue to call on our federal government to ensure Canada is exempt from any Buy American provisions, and instead advocate for a “Buy North American” approach. We will continue to highlight the costs of Buy American measures to businesses on both sides of the border and work tirelessly to ensure a stable and competitive business environment that creates jobs, opportunity, and growth.
However, it is also important to remember that U.S. state governments hold the power to decide if they will implement Buy American policies, and state procurement is not necessarily affected by federal procurement rules.
Investment decisions are often complicated or put at risk by government regulatory regimes. We support investors and business outcomes through understanding political considerations that often complicate positions and value. Combining our industry-leading market, sector and public policy experience, we ensure compliance obligations while managing political risk.
For more information on how McMillan Vantage Policy Group can support your investment and business expansion goals, contact Karl Baldauf.