U.S. and Canada Should Exchange Electric Utility Procurement in the TPP

In light of the recent Canada-EU agreement, the United States and Canada should bolster the procurement coverage in the TPP by exchanging access to their electric utilities.

Canada’s opening of the procurement of its energy utilities to the European Union (EU) in their recent trade agreement represents a major change in its procurement policies.  It also sets a precedent that Canada should carry forward to the Trans-Pacific Partnership (TPP) negotiations.  Canada’s offer of its electric utilities in the TPP would break a long-standing impasse with the United States on procurement in the electricity sector.  Moreover, coverage of this sector would be an important contribution to the aim of making the TPP a high-standard 21st Century agreement.

Under the Canada-EU Comprehensive Economic and Trade Agreement (CETA), concluded in October 2013, Canada is providing the EU with access to 75-80 percent of procurement by its major energy entities.  That agreement marks the first time Canada has opened the procurement of its energy utilities to a trading partner.  Canada withheld that coverage from its commitments in both the WTO Government Procurement Agreement (GPA) and the North American Free Trade Agreement (NAFTA).

In response to Canada’s withholding its utilities, the United States reciprocated by denying Canada access to the procurement of the electric utilities that it covers under both the GPA and NAFTA.  Specifically, the U.S. excludes Canada from the procurement of the Tennessee Valley Authority and the four Power Administrations — Bonneville, Western Area, Southeastern and Southwestern.

In NAFTA, the United States set out the condition for allowing Canada to participate in the procurement of federal utilities: it would provide Canada with the benefits of the coverage of its electric utilities only when Canada opened the procurement of its provincial hydro utilities to the United States.  In the ongoing TPP negotiations, the United States and Canada should break their impasse and exchange coverage of procurement in their electricity sectors.

U.S. Coverage of Procurement in the TPP

In the TPP, in addition to the exchange of electric utility coverage with Canada, the United States should offer coverage that is as broad as the coverage that it provided in the recent revision of the GPA.  In the revised GPA, the United States added the procurement of 12 federal agencies, bringing its total federal agency coverage to 89 agencies – the most it offers in any agreement.  In addition, the United States added the funding of telecommunications projects by the Rural Utilities Service to its GPA coverage commitments.

If the United States offers its revised GPA coverage in the TPP negotiations, it should insist that the four TPP countries with which it has exchanged procurement commitments in free trade agreements (FTAs) — Australia, Chile, Mexico and Peru – offer more procurement in the TPP than they cover under their FTAs with the United States.

With regard to Mexico, the United States offers significantly fewer federal agencies in NAFTA than it does in the FTAs with Australia, Chile and Peru.  As a consequence, the United States could give Mexico greater access to U.S. procurement in the TPP than it has under NAFTA, provided Mexico offers a comparable expansion of its NAFTA coverage in the TPP negotiations.

Since the TPP is intended to be a high-standard, 21st Century agreement, the TPP partners should offer under the TPP the broadest coverage of procurement that they provide under any agreement.  That would set an important example for the two TPP partners that are opening their procurement for the first time – Malaysia and Vietnam.

Jean Heilman Grier

November 15, 2013

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