Contributing Lawyers

Canada

Cyndee Todgham Cherniak

United States

Susan Kohn Ross

Australia

Andrew Hudson



A Few of Obstacles Re Canada-EU CETA Negotiations Re Government Procurement Chapter

The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) will be under the microscope during the week of January 17-21, 2011 as the sixth rounds of negotiations take place in Brussels. One of the difficult areas for discussion is the government procurement chapter. Some of the problems are:

1. There are many parties on both sides. On the Canadian side, the topic of procurement covers Canada, the provinces and territories (Prince Edward Island, Newfoundland and Labrador, New Brunswick, Nova Scotia, Quebec, Ontario, Manitoba, Saskatchewan, Alberta, British Columbia, Yukon, Northwest territories and Nunavut), and the various municipalities therein.

On the EU side, the topic of procurement covers 27 EU members (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, the United Kingdom, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic, Slovenia, Bulgaria and Romania), the provinces, territories and states and the local municipalities.

In other words, there are a lot of players around the table. If all of the voices speak at once, no one will be heard. If no one speaks, then nothing will be accomplished. Many of the players are playing their cards closer to their vests. Many of the players have sensitive areas where large numbers of government procurement takes place.

2. Many of Canada's municipalities do not want to be covered by the Canada-EU CETA schedules. Municipalities do not want to open their procurement to the rigorous open tendering rules that will be in the Canada-EU CETA procurement chapter.

3. Canada's provinces, to date, have limited experience in opening their procurement markets in international trade agreements. The Canadian provinces did not provide schedules for the purposes of the WTO Agreement on Government or Chapter 10 of the North American Free Trade Agreement (NAFTA). The Canada-EU CETA government procurement chapter must be NAFTA Plus and WTO AGP Plus (more than what was ever offered in the past). This means change is necessary and the status quo is not an option.

4. Even though Canada and the United States agreed in 2010 to some opening of provincial procurement to resolve that "Buy America" conflict, what was put on the table was limited. To see what was agreed in the Canada-US Agreement on Government Procurement (and more importantly what provincial and territorial procurement was offered), please go to the following link - http://www.international.gc.ca/trade-agreements-accords-commerciaux/assets/pdfs/ENG-Canada-USA_Government_Procurement.pdf

Few people have actually looked at this agreement to understand what is covered and what is not covered. A lot of procurement is not covered. As a result ,there is a lot that the EU wants to be opened to them.

5. There will be serious discussion about coverage of education and health care. These areas involve significant purchases by provincial/state/local governments.

The underlying principle as to why trade agreement contain a government procurement chapter is that governments are the largest purchaser of goods and services. if government procurement is outside the scope of a free trade agreement, an area of the market is not accessible and there is potential for protectionism that undermines the benefits of a free trade agreement.

This does not mean that these areas should be opened - it merely creates an obstacle in the negotiations because one party wants greater access and the other does not want to open the doors - usually for budgetary and resource reasons.

6. There will be serious discussion about whether water is covered.

7. There will be serious discussion about suppliers of energy to the public are covered - especially in a time when energy and heating prices are increasing.

8. Governments at all levels are facing a need to cut costs. However, ensuring that government procurement is open an fair requires resources. Government workers must draft RFPs/RFQs, RFTs and hold open and fair procurement/tendering processes. There needs to be question and answer periods. Each proposal/quote/tender must be reviewed and analyzed transparently and fairly.  Inspections (sometimes by third party experts) may be necessary. There needs to be a mechanism to resolve disputes. Government resources will be needed if the the usual NAFTA WTO AGP style open tendering procedures are required to be followed at provincial/state and local levels.

The list of obstacles is longer than the list provided in this blog posting.  For more information, please contact Cyndee Todgham Cherniak at 416-307-4168.

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