To counter Trump’s tariff threats, we need to make ‘Buy Canada’ count

Article by PhD Candidate, Noah Fry. Prime Minister Justin Trudeau included giving preference to Canadian businesses in government procurement as part of our response to U.S. President Donald Trump’s tariffs threats in early February. “Buy Canada” is now on the table. This seems like a win for localism. The Canadian Centre for Policy Alternatives and Unifor, among others, have called for this.

Posted on February 26, 2025

Prime Minister Justin Trudeau included giving preference to Canadian businesses in government procurement as part of our response to U.S. President Donald Trump’s tariffs threats in early February.

“Buy Canada” is now on the table. This seems like a win for localism. The Canadian Centre for Policy Alternatives and Unifor, among others, have called for this.

But, as currently contemplated, Buy Canada will have little impact on American suppliers. Without a larger transformation of our procurement regime, the move to buy Canadian would be a shadow of the host of measures already taken by our southern rival to encourage local purchasing.

Buy Canada could be a significant economic tool if properly structured. The federal government should take this opportunity to redesign it to strengthen domestic industry, simplify procurement commitments and ensure greater local benefits.

Trump’s tariff threats are still up in the air. But regardless of whether or how he follows through, the picture is clear. The United States is not a reliable trading partner anymore.

Therefore, it makes sense for Canadian governments to localize their purchases. Rather than punishing our non-cooperative neighbour, this approach mitigates economic uncertainty, facilitates social goals, and supports Canadian industry and workers.

In 2021, Canadian public procurement totalled 13.4 per cent of GDP – a major impact on the economy. Governments around the world are developing policies to steer public purchasing to meet domestic objectives. Why not Canada?

The current state of Canadian procurement

Provincial governments have already announced localization initiatives. Quebec, Ontario, New Brunswick and British Columbia have or soon will have procurement policies that favour nearby suppliers.

For the most part, however, the federal government has resisted approaches that limit competition to domestic suppliers. Instead, its policies offer vague frameworks with little prescriptive content. These include the policy on social procurement, the policy on green procurement, and the procurement strategy for Indigenous businesses.

The latter aims to set aside five per cent of total federal contracting dollars to Indigenous businesses. But outside a mandatory component that applies to only a fraction of contracts, it relies on procurement officers deciding when to set aside contracts. This ambiguity came to the fore during the ArriveCan scandal.

It’s the same for the other two policies. The social procurement policy aims to include socio-economic considerations but has only limited guidance on how to achieve that. The green procurement policy urges consideration of life-cycle costing – including a good’s longevity and disposal – without any particular indicators to guide that consideration.

As Michael Wernick, the former clerk of the Privy Council, notes, public procurement is weighed down by too many rules.

Outside of trade agreements, federal procurement is undercut by ambiguous frameworks. By contrast, localization initiatives such as Buy Canada are prescriptive and administratively simple. They also generate greater local returns – particularly for workers.

But there are problems.

The challenges of implementing Buy Canada

First, it is challenging to determine supplier origin. Foreign suppliers may have small domestic branch operations but send contract work to be completed outside Canada.

Second, the vast majority of Canadian procurement spending already goes to suppliers with domestic addresses. Only a small fraction goes to American suppliers.

Third, more than other countries, Canada has opened its public procurement market to foreign suppliers. Even if American suppliers are barred or restricted, many other countries still have access. While these countries make up a small portion of successful suppliers, they force public entities into burdensome processes with robust dispute-resolution mechanisms.

Building a stronger procurement strategy

So, how do we get the most out of our procurement dollars – not just to hurt the United States but to build up Canada?

First, we should observe what the Americans are doing. Buy America(n) is more robust than privileging its domestic suppliers. It requires subcontracting, material sourcing and set-asides for small businesses. The latter also prioritizes disadvantaged businesses. America can do this because it has avoided excessive international trade commitments.

By contrast, Canada has over-committed to trade treaties, many of which conflict in terms of market access. For example, the Canada-Korea Free Trade Agreement has a lower services threshold – the minimum value of a deal before the agreement applies – than our internal Canadian Free Trade Agreement (CFTA). Over time, we should simplify access in line with the World Trade Organization agreement.

Intergovernmental trade agreements have made procurement only more complicated. The New West Partnership Trade Agreement among British Columbia, Alberta, Saskatchewan and Manitoba, as well as the Trade and Cooperation Agreement between Ontario and Quebec, each have their own procurement chapters. We should replace these rules with only the CFTA – with higher thresholds and a shared dispute-resolution mechanism.

Third, we should fully embrace Buy Canada as far as possible. To avoid workarounds, we should strengthen our definition of origin. In the interim, Ontario’s definition should suffice: the supplier must either have its headquarters in Canada or employ at least 250 Canadians.

Fourth, we must create the capacity to publicly track subcontracted work above a set amount. Then, we can slowly introduce subcontracting expectations – such as mandated community returns – into new contracts where possible.

Fifth, we cannot ignore the role of Crown corporations, which have been conservative in their procurement policies, although some – such as the National Gallery of Canada and Via Rail – have relatively sophisticated social procurement policies that are worth studying.

Sixth, we should incorporate measurable indicators for existing procurement policies. To drive up wages, the social procurement policy could enforce average hourly wage criteria. To advance climate action, the green procurement policy could enforce point-based criteria.

Buy Canada is a step in the right direction if it is properly calibrated. Let’s make this moment count.