“Can we prioritize Canadian-made goods or services? Yes. Yes, we can.”
That was the message to the Capital Regional District (CRD) finance committee from legal and risk management senior manager Steven Carey Wednesday, March 5, as he and chief financial officer Nelson Chan brought board-requested reports analyzing the potential impact of U.S./Canada tariffs on the regional district –– and whether and how Canadian-made products and services can be prioritized at the local level during the escalating international trade dispute.
More to the point, the report examined the potential for an “anything other than the U.S.” procedure across its purchasing, according to regional district staff, with an eye to value for ratepayers already baked in. CRD policy requires the district’s procurement process to be “competitive, fair, open and transparent” and be conducted on a “best-value” basis, according to the report –– a combination of “total cost, performance, economic, environmental and social sustainability, reduced carbon dependency and reduced waste.”
Carey said with respect to suppliers, the regional district is seeing more requests for tariff cost-sharing language in contracts.
“Suppliers say, ‘I’ll bid at the tariffs that are in force on the day that my bid closes, but if they go down or up, I want to share that cost with you,” said Carey.
From a business perspective, Carey explained, that’s not necessarily a bad thing –– it means suppliers build less risk into their bids, which adds stability generally. Given the tariff situation –– and the resulting instability of the U.S. supply market –– staff noted that even without a policy revision to prefer “buying Canadian” it would be unlikely the CRD would use U.S. suppliers “without practical reason,” such as a U.S. company being the only after-sales service provider for something already purchased.
“Staff are already ‘live’ to things like price uncertainty, sources of goods [and] whether or not we can obtain goods from less volatile markets,” said Carey. “We are already looking at those things now.”
Carey noted the CRD typically doesn’t specify a particular product in its contracts but rather enumerates specific results vendors must achieve.
“You might recall we’re paying a lot more for water treatment chemicals as a result of the war in Ukraine,” said Carey, “because they’re only manufactured in certain places and Ukraine isn’t manufacturing them anymore.”
Ironically, Carey noted the CRD’s current supplier is in the U.S.
“To be frank, it’s not something we [previously] put a lot of thought into, because we have a free trade agreement and a very good relationship with our trading partner just south of us,” said Chan. “It’s certainly something staff are much more aware of now.”
The CRD necessarily complies with trade agreements binding upon it as a local government, according to staff –– as well as any not directly binding but with which senior governments would prefer it comply, relevantly the Canada-United States-Mexico Agreement (CUSMA) which replaced the 1994 North American Free Trade Agreement (NAFTA) in 2018.
However, according to the report, CUSMA is not binding on local governments; should the CRD choose to exclude U.S. vendors altogether during procurement, there is no bid dispute mechanism that might impact local governments and result in claims against them.
“While CUSMA doesn’t bind us, we are traditionally expected to comply with it,” said Carey, referring to conditions where, for goods and services valued over $237,000 and construction projects over $8.8 million, the U.S. and Canada each retain one another’s status as “most favoured nation.”
But for anything under those values, the U.S. already restricts its own purchasing under “Buy American” restrictions; the CRD could simply do the same thing.
“Now this really is a moderate response,” said Carey. “Other responses are available.”
For a little good news, Chan pointed to a recently published community resilience report from the Canadian Chamber of Commerce that noted two municipalities within the CRD stood among those best situated to withstand the economic pressures of U.S. tariffs, under a calculated exposure index that incorporates a location’s “excess U.S. trade intensity” and its “excess U.S. export dependence.”
“While it might be of small comfort in these uncertain times, Victoria –– and, coincidentally enough, Nanaimo — were ranked numbers 36 and 39 out of 41 metropolitan areas to be the most impacted by U.S. tariffs,” said Chan. “So, pretty resilient from a local and regional economy perspective.”
The committee forwarded both reports to the broader CRD board for its consideration Wednesday, March 12, electing to hold off making its own recommendation at least partially in deference to what directors indicated might be a forthcoming coordinated initiative involving provincial and local governments.
“The whole thing could shift,” said committee chair Susan Brice. “By the time the board meeting comes, we might have a different discussion based on whatever the issue of that day is.”