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Canadian and American flags fly in Point Roberts, Wash.

Darryl Dyck/The Canadian Press

A simmering feud over the spread of Buy America rules to a remote B.C. ferry terminal has mutated into a full-blown trade fight, highlighting growing

Canadian frustration with U.S. protectionism.

The federal government invoked a seldom-used anti-sanctions law Monday that will make it illegal for construction companies to bow to U.S.-only steel purchasing rules during the rebuilding of a B.C. ferry terminal.

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"The application of protectionist Buy America provisions on Canadian soil is unacceptable and an affront to Canadian sovereignty," Trade Minister Ed Fast said.

The Canadian government signed an order under the Foreign Extraterritorial Measures Act, a federal anti-sanctions law, has been used only once, in 1992, to counter the U.S. trade embargo on Cuba.

Ottawa decided to dust off its anti-sanctions law after Alaska Governor Bill Walker denied a Canadian request to seek a waiver from the Buy America law on a U.S.-funded overhaul

of a ferry terminal in Prince Rupert, B.C. The state of Alaska, which runs the Alaska Marine Highway System, is now slated to close bids on the project Jan. 21 and then award final contracts.

Alaska's decision ends weeks of quiet diplomacy aimed at finding a compromise, led by Canadian ambassador to Washington Gary Doer.

The ferry terminal sits on Crown land in Prince Rupert's federally run port, but is leased to the Alaska Marine Highway System under a 50-year lease that expires in 2063.

Under the Canadian anti-sanctions move, companies seeking to work on the ferry terminal will immediately run afoul of Canadian law by simply agreeing to the Buy America provisions of the contract. That will expose them to fines of up to $1.5-million. The situation appears to put any company agreeing to supply steel for the ferry-terminal overhaul in contravention of either U.S. or Canadian law, possibly creating a stalemate on the project.

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The spat is about more than a few million dollars worth of steel at a tiny ferry terminal.

The Buy America showdown demonstrates how difficult it is for Ottawa to counter protectionist purchasing rules, which are legal under World Trade Organization rules and deeply ingrained in U.S. political culture, Toronto trade lawyer Lawrence Herman pointed out.

"It's an illustration of how inward-looking U.S. governance is, generally," he argued. "They only consider what's good for the U.S., and what's good politically for immediate vested interests."

U.S.-only purchasing rules, mandated by Congress, continue to be politically seductive. Politicians and officials risk being tarred as enemies of U.S. job creation for opposing Buy America.

Mr. Fast said Ottawa would continue to try to convince the U.S. government to waive the Buy America restrictions in the Prince Rupert case and to "end the harm such policies are doing within our shared North American economy."

"Buy America provisions deny both countries' companies and communities the clear benefits that arise from our integrated supply chain and our commitment to freer and more open trade," he said.

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The port of Prince Rupert, located nearly 800 kilometres north of Vancouver near the southern tip of the Alaska Panhandle, sits on Canadian Crown land. The port authority sublets the ferry terminal to Alaska.

Bidding documents posted on the Alaska Department of Transportation website make clear that "all iron and steel products associated with this project are subject to the Buy America provisions." The $10-million to $20-million (U.S.) terminal and wharf project, is slated to be completed in 2016.

In a statement, Mr. Walker, the Alaskan Governor, said: 'I remain in contact with Canadian officials to find a way forward regarding this issue."

The federal move comes as a Canadian steel group launches a public campaign to convince Ottawa to require minimum Canadian content on the multibillion-dollar replacement of Montreal's Champlain Bridge.

"If we're going to be shut out in some markets then you have to find a way to protect our projects such as the Champlain Bridge," said Tareq Ali, marketing and communications director for the Canadian Institute of Steel Construction.

"There is no requirement for [the bridge] to have any Canadian content. They should have some," he said.

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About the Authors
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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