OTTAWA - The ability of provincial governments and cities like Toronto to boost their economies by favouring local companies on major goods and services contracts will be sharply curtailed under the terms of Canada’s free-trade pact with Europe, leaked details of the agreement confirm.
The documents for the first time reveal the full extent of the wide-reaching concessions in the area of government procurement Ottawa made in its efforts to reach a trade liberalization deal with the European Union.
Buying local is often seen as a way for governments in Canada to leverage tax-funded spending for economic growth, so details of what Ottawa has agreed with the EU have been long awaited. Prime Minister Stephen Harper’s government has so far kept the negotiated text secret, but sections of the agreement, which was finalized last week, have been leaking out in Europe.
According to a text obtained by the Star, the deal will require Ontario government ministries and provincial agencies to open up bidding to businesses from EU countries on goods and services contracts worth approximately $300,000 or more. For construction contracts, which tend to be larger, the threshold will be about $7.9 million (the exact thresholds will be based on the value of foreign exchange reserve assets defined by the International Monetary Fund).
The impact of the new requirements will be felt across the public sector in Ontario. The same $300,000 threshold for opening up bidding to European firms will apply to Ontario’s municipal governments, with the exception of municipal energy undertakings, and to school boards, publicly funded academic institutions, hospitals and social service agencies.
Public agencies or utilities that operate airports, rail or bus transport, marine ports, electricity distribution, drinking water provision or the production of gas and heat will also be required to allow EU-based corporations to vie for goods and services and construction contracts. However, with these organizations, the threshold for allowing EU-based companies to bid is higher for goods and services contracts, at about $550,000. For construction, it will remain at $7.9 million.
These thresholds will generally apply to Hydro One and Ontario Power Generation, although other Ontario and municipal energy agencies in Ontario will be exempt according to the text of the so-called Comprehensive Trade and Investment Agreement (CETA).
When purchasing mass transit vehicles, Ontario and Quebec will be allowed to tilt the bidding slightly in Canada’s favour. Bidders will have to guarantee that 25 per cent of the value of any mass transit contract will be spent in this country.
In the construction area, Canada has exempted international projects, which would indicate the Windsor-Detroit bridge could be built without opening up the bidding on the project to EU-based corporations.
Overall, the use of buy-local strategies by Ontario authorities hoping to boost their economies will be curtailed, the CETA text shows. For instance, the agreement will make it harder for governments to require bidders to source parts or labour locally or to extract promises of job-training from bidders.
“This is by far the most sweeping government procurement agreement Canada has ever negotiated,” said Scott Sinclair, director of the trade and investment research project at the Canadian Centre for Policy Alternatives.
“Provincial and municipal governments are going to lose an important tool for improving their economies and creating jobs.”
He said the procurement concessions in CETA are much more valuable to European corporations wanting to do business in Canada than for Canadian firms seeking sales in Europe. And opening up procurement was a trade-off Ottawa made as part of its efforts in the negotiations to gain better access in Europe for Canadian beef and pork producers, Sinclair commented.
But the Harper government says the deal, which will give Canadian companies access to a market of 500 million consumers, has huge economic potential for Canada.
The government has not commented on the documents, saying Wednesday it doesn’t comment on leaks of purported negotiating texts.
Many business leaders and trade experts say that, overall, CETA will be a benefit to Canadians.
“It will make procurement more competitive and allow governments in Canada to spend our tax dollars more efficiently,” said Simon Potter, a lawyer at McCarthy Tétrault with experience in trade and competition issues.
If final approval goes ahead in Canada and the EU, the trade agreement is expected to come into force in 2016.