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Buy American UPDATE: Van Loan announces final deal from Vancouver

International Trade Minister Peter Van Loan announced today, from what sounded like an empty press room in Vancouver, that the provinces have all submitted letters endorsing the Canada-U.S. Agreement on Government Procurement, which comes into force immediately. The Minister acknowledged Liberal discomfort with the final deal (“too little too late,” they said last week) but completely ignored widespread civil society opposition to the provinces being included permanently in the WTO’s government procurement agreement (GPA). This included demands from the Council of Canadians, Canadian Auto Workers union, Saskatchewan and Ontario federations of labour, Attac Quebec, the Fédération des travailleurs et travailleuses du Québec (FTQ) and CUPE Ontario that the premiers walk away from the deal, which permanently forbids the provinces from including ‘Buy Local’ or ‘Buy Canadian’ provisions on government contracts in many areas. Van Loan cynically discounted these concerns by falsely claiming, “What was given up was the ability to close our markets and shut down trade and implement protection, something in the past has cost us jobs.” In fact, what was given up was an important economic policy lever that was tragically underused by provincial and municipal governments in Canada but that remains popular and untouchable, under the new Canada-U.S. deal, in the United States. Click on “Read More” for our assessment of the final agreement from February 12.

Why we leaked the ‘Buy American’ deal (and what the heck is the GPA, anyway?) – February 12

Most of you reading this will have seen that yesterday morning, the Council of Canadians and CUPE Ontario went public with a leaked copy of the new Canada-U.S. agreement on subnational procurement (the ‘Buy American’ solution Harper has concocted with the provinces behind closed doors). Harper’s trade ministers announced the final deal on February 5 and gave the provinces exactly one week to say in or out. We only received the documents a few days ago and were concerned enough by the fine print to demand, once again, that the provinces and territories walk away from the deal.

The deal is unnecessary, it will not guarantee Canadian companies substantial new access to U.S. government contracts, and it will permanently restrict the flexibility of the provinces and territories to use procurement as a public policy tool by making the bottom-line the only consideration when spending public money, and by enforcing it legally through the WTO. This is a case where the devil is not in the details — it’s in the principle that free trade dogma should dictate all government policy at all levels, even down to how your local town council spends money.

That said, this agreement is full of little details, some of which we think we have a handle on, others need clarification. The uncertainty in some areas is enough of a reason to hold off on approving the agreement until the provincial and territorial governments have had a chance to consult within their legislatures and with the broader public. In many U.S. states this is mandatory. In Canada, and in typically dictatorial fashion, Harper has only asked for provincial cabinet approval. For a decision as big as permanently binding subnational governments to WTO restrictions on spending — something they have avoided for over 15 years — that’s simply unacceptable.

SO WHAT’S IN THIS DEAL? (TIME TO GET TECHNICAL)

If you haven’t seen this week’s Canadian Centre For Policy Alternatives report ‘Buy American Basics’, it tells you everything you need to know about the legal and historical context to these procurement negotiations — all in easy-to-digest bullet form. (If you want to click away to read it now, we’ll be right here when you come back.)

Canada’s interim commitments to the U.S. and its general new WTO commitments will be both housed under the WTO’s Government Procurement Agreement (GPA) — a plurilateral contract within the WTO signed by only 40 countries, with another 23 listed as observers. The GPA goes beyond enforcing non-discrimination between companies from a member state bidding on government contracts in any other. The agreement forbids listed national and subnational governments and agencies from including any condition or undertaking on government contracts.

Policies that encourage local development, such as the use of domestic content, local hiring, the licensing of technology, investment requirements or similar action will be banned. Free trade theory says (without much empirical evidence, we should add) these kinds of social clauses attached to government spending distort trade flows and lead to higher costs. It’s less helpful at explaining why you wouldn’t put a premium on community priorities (as U.S. cities and states do all the time aka ‘Buy American’).

From what we can tell, the interim deal between Canada and the United States, which includes construction projects by Crown corporations (for the first time) and municipalities, only applies to U.S. companies and at a threshold of $8.5 million. Over that limit, municipal construction projects, with a few exceptions including urban rail and transit projects, must treat U.S. bids as if they were Canadian and cannot consider local content quotas or other local investments when picking a winning bid. As reported in the Globe and Mail today, this includes the construction of hospitals, schools, community centres, etc. where it makes total sense to try and get the most out of your large public investment.

Municipal spending on goods and services is not included in the interim U.S. agreement and Canada’s cities appear to be excluded entirely from Canada’s permanent subnational commitments to the WTO, which will be eventually promised to all GPA signatory counties — not just the United States.

Public utilities are currently excluded from both arrangements (interim with US and permanent GPA), as is university, school and social service procurement. However, we stand by our statement yesterday that in Ontario and Quebec, procurement of goods, services and construction by any listed government entity on behalf of, or for the benefit of schools, universities, social services and hospitals seems to be covered.

The limited carve-outs in these areas, as well as for energy agencies and culture in most provinces, are far from secure as this agreement goes forward. Continued talks with the United States on an even bigger permanent procurement agreement, not to mention European requests to include all of these entities in a proposed free trade deal with Canada (see below), are reason for concern. Also, three things are important to note with respect to municipal governments:

1. As Scott Sinclair, author of the CCPA report on ‘Buy American’, explains on the Progressive Economics Forum this week, “the deal does not provide Canadian suppliers any meaningful exemptions from Buy American preferences at the state and local level.” Sinclair continues:

In fact, if the day after this deal was signed, a U.S. municipality (acting on its own volition and not at Washington’s direction) tore Canadian pipes out of the ground, neither the Canadian supplier nor the Canadian government would have any legal recourse under this deal or the GPA. On the other hand, if a Canadian municipality thumbed its nose at a U.S. construction company, that U.S. supplier would have access to a Canadian administrative tribunal with the authority to recover damages and even overturn the contract. I know that sounds incredible, but sadly it’s true.

In other words, Canadian cities are on the hook for their procurement decisions but U.S. cities aren’t legally bound. That’s hardly reciprocal as the Harper government claims.

2. The Can-U.S. deal is destined to become permanent. Countries rarely go back on agreements once they’re signed, and Canada and the U.S. have committed to even deeper liberalization of procurement in a permanent Can-U.S. agreement to be negotiated over the next year or so. So while goods and services at the municipal level are exempt for now, with this first foot in the door we’re cruising toward including them in subnational procurement in future deals.

3. Based on an Embassy Magazine article this week, we know the European Union is demanding access to municipal goods and services contracts and have said they will walk away from a deal that does not include them. So the pressure on Canadian municipalities to open up their spending even more will be heavy over the next two years.

KEEP WRITING YOUR PROVINCIAL GOVERNMENTS

Today is the provinces’ and territories’ last day to approve this deal before the text will be emailed to Geneva for consideration by the WTO’s government procurement council. It will come into effect between Canada and the United States on Tuesday. Yes, this Tuesday (February 16).

But that shouldn’t discourage us from writing our provincial governments and local councils to let them know how angry we are that no one but a few cabinet ministers in each province and territory were consulted on this unprecedented and permanent agreement in the WTO. The bottom line is that this deal will not get Canadian companies significant new access to U.S. markets — so why tie our subnational government’s hands in this way forever?

The answer is ideology — the continuous application of the free trade mentality to every level of government action. It’s an ideology that is increasingly out of favour globally, even among once fervently neoliberal economists. Britain’s Prime Minister Gordon Brown went as far as to say the “Washington Consensus” on opening markets as a panacea for economic growth “is dead.”

But as Stockwell Day knows well, dinosaurs do roam the earth with people. One of them is running this country, trampling on democracy and good economic sense, while roaring over top of legitimate opposition to his plans. On this issue, like many others, it’s time we roared back.