British Columbia’s manufacturers have so far been largely unaffected by the U.S. government shutdown, but that could change dramatically if the Republicans and Democrats cannot come to an agreement over raising the debt ceiling by October 17.
“This is much more a matter of inconvenience than anything else,” Derek Lothian, a spokesperson with the B.C. chapter of the Canadian Manufacturers and Exporters Association, told Business in Vancouver.
“However, the longer it drags on without a solution, the more it will have an impact on and a real detriment to B.C.’s manufacturing sector and right across the country.”
The shutdown started on October 1. It was triggered after a government spending bill, which contained Republican provisions to delay the Affordable Care Act, was rejected by the Democrat-controlled senate.
While the political standoff has affected around 800,000 federal workers, border security is one area that has been deemed essential and is still open for business.
That means Canadian goods are still moving smoothly across the border. Food inspection has also not been affected.
But the shutdown has delayed or stopped some American infrastructure projects, and that does impact B.C. businesses.
“The U.S. government, all three levels, has historically represented a pretty significant source of business for Canadian manufacturers,” Lothian said.
But he also noted that Buy America legislation, which restricts the amount of foreign-made materials that can be purchased for government infrastructure projects, has steadily eroded this source of business over the past decade.
B.C. businesses could start to see more impacts if the current situation drags on, Lothian said.
However, if the two American parties cannot break an impasse on the debt ceiling, the consequences for the global economy could be dire.
Patrick Smith, a political science professor at Simon Fraser University, said, “That’s the more risky state than this current one. If this went on indefinitely, in the current state, it would matter.
“This is almost like a trial run for what’s pending.”
Those consequences could include the U.S. government going into default, leading to a possible credit downgrade, which could shake both investor and consumer confidence. That could threaten the United States’ still-fragile recovery from the recession.
“I don’t think it would take a lot for people to hunker back down with nobody spending any money,” said Smith.
