Imposing a US bidder ban would create widespread confusion and uncertainty and grind the Canadian government procurement system into gridlock. In addition to harming Canadian suppliers who get caught in the logjam created by the bidder ban, public institutions will still be compelled to award to US suppliers in many areas to support the delivery of public services.
We Have Met the Enemy and He is US
Government procurement does not work the same way as a consumer boycott. Individual consumers have the right to choose how they spend their own money, but public institutions are subject to strict legal standards that regulate how they can spend tax dollars in public procurement. Further, while consumers can make individual choices on how boycotting US products would impact them personally, government institutions that try to impose similar boycotts risk unintended consequences that can inadvertently harm the Canadian suppliers we are trying to protect while seriously damaging critical government operations and putting lives at risk.
If a US supplier ban is imposed, Canadian suppliers will be quickly drowning in a tsunami of red tape filling out forms to prove that their companies and products are sufficiently “Canadian” (whatever that means) to be eligible to bid on contracts that they were previously winning before the ban came into effect.
For example, how would we establish that a company is Canadian? Would a physical presence operating on Canadian soil be the test to qualify as Canadian? Would US-owned companies with US head offices that also operate Canadian offices and facilities and employ Canadians qualify as Canadian? Would it make a difference whether they were operating directly from the US parent company or operated in Canada through a wholly US-owned Canadian subsidiary? Either way, would banning that company and forcing it to lay off its Canadian employees count as a win or a loss in this trade war?
Driving Towards a Cliff of Uncertainty
As complicated as it would be to define and differentiate a Canadian company from a US company, trying to identify and ban US products gets even more complicated. Consider a company operating in Canada that is fully Canadian owned with a Canadian head office staffed by employees living in Canada that supplies products to Canadian government institutions from around the world including products from the US. Would a contract awarded to that company qualify as a contract award to a Canadian company even if a third of the products it delivers come from the US, half of its profits come from selling those US products, and a quarter of its supply chain employees live in the US? What percentage of US-made goods, US-based profits, or US employees would be acceptable before that Canadian company is cut off for being “too American”?
Further, what if the US-goods (consider fleet vehicles for emergency operations for example) include many Canadian materials and components? Would US-assembled vehicles from a US owned company that are resold by a Canadian company count as Canadian if there is enough Canadian content in them? How much Canadian content would be required and how would we calculate that when considering the hundreds of parts in each vehicle and the raw materials that went into making those parts? Given the tight timeframes of the government tendering process, this analysis would be impossible to properly apply prior to each contract award.
Now let’s reverse the equation. How about a Canadian company that manufactures ambulances with the final assembly occurring in the US? Would that company or its products be banned? Assuming someone could figure out how to apply the “too American” formula to the Canadian company, would banning that bidder in favour of a low bid award to ambulances from China count as a win or a loss in the trade war?
Assuming that we could eventually figure out who to ban as US-suppliers, would your local police, fire and ambulance departments be prepared to start phasing out their current fleets of emergency vehicles if they contain too much US content? How about the 911 systems that operate using US-based equipment and software? Would considerations of public safety come into play in any of this or is putting Canadian lives at unnecessary risk a sacrifice that our politicians are prepared to make on our behalf?
Chaos is Not a Bug, It’s a Feature
Now apply that same US content analysis to the laptop computers used by public sector employees across Canada. Would we need to break down each hardware component in the computer to purge it of its US-content? How much US content would be acceptable? How would we quantify the US content? By number of parts, weight, value, or some other yet-to-be-determined arbitrary factor? How much would the US-based operating system used in the computer factor into the total, since arguably software, rather than hardware, is the most valuable and expensive part of that product? After considering the value of the software, would we determine that the computer, with parts from multiple international sources, is ultimately a US product since it runs on a US-based operating system even if it were assembled outside of the US and sold by a Canadian reseller? Would we ban that product from Canadian public sector institutions?
If so, could we swap out all Windows based computers from government offices and start using Apple computers instead since arguably Apple software and hardware is technically no longer made by a US-company? Would replacing Windows based computers with Macs be the result we were looking for when we set out to ban US companies? Would that be a win or a loss in the trade war for those who are still trying to keep score?
Even if we could sort that issue out, how about the specific applications that run on those “non-US” Mac computers? Before proposing a ban on US suppliers, has anyone consulted government IT departments to ask them about the feasibility of phasing out Microsoft Word (whether on PC or Mac) in favour of one of the niche applications out there that we could use as a substitute? That would be an interesting and lengthy tendering process to replace that current software on every government computer. Once that bidding process is over in about a year and a half from now, we can then expect major delays as government IT departments divert their attention from their current duties to work up migration and training plans for a corporate-wide rollout of the new word processing software. That rollout may be successfully completed by the time the next US president is sworn in.
Paralyzing the System
Vehicles and laptops are just two straight-forward examples of what are considered relatively basic purchases in government procurement circles in support of government operations. There are literally thousands of products purchased from our globally integrated supply chains, many for much more complex contracts than these examples, by public institutions across Canada every week. Those public bodies are nowhere close to having enough staff or internal expertise to figure out how to apply US bidder and content analyses in real time prior to each contract award. It is no exaggeration to say that each new procurement could easily be delayed by at least three to six months and likely longer as public institutions look to hire consultants to help them figure out how to properly apply a US supplier ban.
It doesn’t take too much foresight to see how a ban on US suppliers would paralyze our public procurement system since the gridlock would be similar to how Trump’s recent attempt to tariff low-value consumer products from China immediately overwhelmed US Customs and the US Postal Service and forced him to back down. Weeks later US officials were still scrambling to figure out how to apply those tariffs without crippling consumer supply chains. Don’t expect those tariffs to be re-imposed any time soon.
US Bidder Ban is Redundant and Self-Defeating
Getting back to the original purposes of the ban, while government procurement systems are logjammed within the river of chaos created by trying to purge US content, how would this be helping the Canadian suppliers who are supposed to benefit from the ban? Those Canadian suppliers would be struck in the same logjam as all other bidders while government institutions try to sort out this bidding boondoggle.
If they are still in business once this gridlock clears (think pandemic but many times worse) the Canadian suppliers we were originally trying to help are unlikely to be pleased when they find out that the US bidder ban was never really enforced even when the bids were “too American” since public institutions couldn’t do without US products that were critical to government operations and any alternatives, if they existed at all, were too expensive or low quality or would take too long integrate into current operations.
Unfortunately, bid boycott advocates tend to forget that government procurement is not a subsidy program full of frivolous spending that can be switched on or off without any impact on the spending institution. Rather, government procurement contract awards are based on fierce competition through the public tendering process. When US suppliers win Canadian government contracts, they do so since non-US alternatives do not exist, are lower quality, or are more expensive. Like all other successful bidders, they win contracts when they offer the best deal. Banning US bidders means we would be substituting inferior alternatives, would be banning US bidders who wouldn’t be winning the bid in the first place, or would be bending the rules and not enforcing the ban when there are no feasible alternatives.
In addition to causing widespread confusion in the government procurement system, the ban would put Canadian lives at risk if critical government systems fail because we cut ourselves off from critical US supplies. Ultimately a US bidder ban is at best redundant and at worst reckless and self-defeating.
Respectfully Declining Your Invitation to Chaos
In summary, supply chains are both complicated and critical. Politicians should stop playing games with public procurement since blindly implementing sanctions to fan the flames of false patriotism draws Canadian institutions, suppliers and citizens together into a circular firing squad. Before jumping on the anti-US supplier bandwagon, the Canadian public has the right to know whether Canadian politicians have done their due diligence to determine the impact of banning US suppliers on Canadian companies, on Canadian public sector operations, and on critical service delivery to the public. Until they do their due diligence and come to their senses, Canadian politicians should keep their hands off government procurement and focus on ending, rather than escalating, this nonsensical trade war.
