The EU-Canada agreement details Canada’s unprecedented opening of its procurement markets.
A year ago, when Canada and the European Union announced the conclusion of their negotiations of a major trade agreement – the Comprehensive Economic and Trade Agreement (CETA), I discussed the government procurement results in a November 1, 2013 blog post, based on a summary of its content. Last month, the parties released the full text of the Agreement. That document reveals that Canada is opening far more procurement that it has opened under the revised WTO Government Procurement Agreement (GPA) or any other international agreement. The EU, on the other hand, has not added much, if any, new procurement. Rather, it removes restrictions to Canada’s access to its GPA-covered procurement.
Procurement Covered Under CETA
Canada will cover 98 federal entities, 20 more than it covers under the GPA. Many of the new entities are boards, commissions and offices, which are likely to be small. But, several may be more significant. For example, Canada is covering the Canadian Space Agency, but limiting its coverage to procurement related to satellite communications, earth observation and global navigation satellite systems. It also retains the right to withdraw coverage of that Agency after five years. Also of note, seven entities that Canada lists in the GPA are not listed under CETA.
The EU provides Canada with access to three EU-wide entities and the central government entities of its 28 member states set out in an exhaustive list from the GPA. The EU provides Canada with greater access than it has under the GPA, but less than it gives its most favored GPA partners. Those partners are given access to all central government entities – both existing and any created in the future.
In the new Agreement, Canada substantially expands its coverage of sub-central government entities. Most significant is Canada’s first-time coverage of the so-called MASH sector (municipalities, academia, school boards and hospitals). As an example, Ontario covers all municipalities, school boards and publicly-funded academic, health and social service entities. Only the Yukon does not appear to cover the MASH sector.
Most provinces and territories are apparently providing comprehensive coverage of their government entities, with certain exceptions. New Brunswick and Yukon limit their coverage to listed entities. Canada has also reduced the threshold for the goods and services purchased by its sub-central entities from 355,000 Special Drawing Rights (SDRs) under the GPA to 200,000 SDRs, the same threshold applied by the EU. For its part, the EU is giving Canada access to procurement of its cities and regions, which it withholds in the GPA.
Canada has also substantially expanded its coverage of other entities from just 10 entities under the GPA to most Crown corporations at both the federal and sub-central levels, as well as corporations controlled by municipalities. It excludes several energy entities, including Labrador Hydro. In addition, Ontario limits its coverage of energy entities to Hydro One and Ontario Power Generation. Ontario Power also reserves the right to apply preferences to tenders providing benefits for the province.
Canada covers mass transit procurement under CETA, but allows Ontario and Quebec to require local content in purchasing mass transit vehicles (buses, subway cars, passenger rail cars and subway or rail locomotives), but limits the local content to 25% of the contract value. That value includes the costs of components, sub-components and raw materials produced in Canada and all costs related to a final assembly of the vehicle in Canada.
In the GPA, the EU denies Canada access to a broad range of utilities: drinking water, electricity, airports, maritime or inland ports, railways, urban railways, automated systems, tramway, trolley bus, bus and cable. Under CETA, it opens all of those sectors, except airports and maritime or inland ports, to Canada. The EU also covers utilities providing gas or heat, which are not cited in its GPA coverage.
CETA Procurement Text
The CETA procurement chapter adheres to the text of the revised GPA, with provisions tailored to a bilateral arrangement, and a couple of elaborations. One clarifies that sub-central entities may not favor local goods, services and suppliers. It directs Canadian provinces and territories and EU member states and their sub-central regions to provide treatment to the other party that is no less favorable than they provide to their own goods, services and suppliers. Another provision expands on the GPA provision that prior experience may be required, by prohibiting procuring entities from requiring such experience to be acquired in the territory of the party.
In addition, Canada and the EU have simplified the process for modifying the annexes that specify the procurement covered by CETA. The GPA allows parties to modify annexes only if there is no objection from another party. In contrast, CETA gives the parties the right to modify their annexes, but requires notice to the other party and an offer of compensation, where necessary, to maintain a comparable level of coverage. The other party may object to the proposed compensation and to the characterization of the modification.
By closely following the revised GPA, the CETA procurement text advances its use as the standard for bilateral and regional agreements.
Jean Heilman Grier
October 6, 2014