Prime Minister Mark Carney recently introduced a "Buy Canadian" procurement policy aimed at prioritizing Canadian suppliers for federal spending. This initiative includes funding for a new set of national projects, which Carney is set to announce on Thursday. The government plans to allocate nearly $186 million to support this policy, which is designed to assist small and medium-sized Canadian businesses in accessing federal contracts.

At first glance, the policy appears to promote national pride by encouraging the purchase of domestic goods and services. However, critics argue that it marks a significant shift away from the free trade principles that have historically benefited Canada. They contend that the policy does not address the country's ongoing productivity challenges and may foster a reliance on corporate welfare, where the government favors certain businesses based solely on their nationality.

The "Buy Canadian" approach guarantees a market for Canadian companies, regardless of the quality or efficiency of their products. Critics warn that such guarantees can lead to complacency among businesses, reducing their incentive to innovate or cut costs, ultimately resulting in higher prices for consumers.

For example, Canadian regulations have long protected major banks and telecom companies from competition, leading to high fees and costs for consumers. Similarly, supply management policies in agriculture restrict foreign competition, driving up prices for essential goods like eggs and milk.

Moreover, there are concerns that prioritizing domestic businesses can lead to corruption and inefficiency. The $59 billion ArriveCan procurement scandal highlighted issues with contract awards to Indigenous-owned firms, where some companies misrepresented their status to secure contracts. Critics also point out that Ottawa's IT procurement policy has faced scrutiny for lacking diversity in suppliers.

The Bank of Canada has indicated that a more competitive business environment could enhance innovation and efficiency, particularly for small and medium-sized enterprises. Critics argue that Canada’s productivity issues will not be resolved by limiting competition but rather by embracing it.

Free trade has historically benefited both Canada and the United States, with the Bank of Canada reporting that real income increased by 15-40 percent due to trade agreements. Canada is a key export market for 36 U.S. states, supporting millions of American jobs. The trade deficit with Canada primarily stems from energy imports, which have been provided at below-market rates, benefiting U.S. industries.

As the U.S. Supreme Court prepares to rule on the legality of tariffs imposed by former President Trump, experts suggest that Canada should not adopt a protectionist mindset. Instead, they advocate for an outward-looking approach that champions trade and seeks to expand market access for Canadian firms.

In summary, while Carney's "Buy Canadian" policy may resonate with nationalistic sentiments, critics warn that it could undermine competition, stifle innovation, and ultimately harm consumers. They argue that Canada should prioritize trade over protectionism to maintain its economic advantages.