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More on the Lunenburg CETA resolution to FCM: The problem with reciprocity

A couple of days ago I wrote about the Lunenburg, NS CETA resolution passed by the Federation of Canadian Municipalities board of directors at a meeting in Iqaluit, NU this month. Now we have the full resolution, I’m pasting it below with a word of caution on the final RESOLVED, which was not in the original: “That FCM call on the Government of Canada to adopt a negotiating position that supports reciprocity in Canadian and European Union municipal procurement practices.” This was a strange addition for the FCM board to make because it contradicts the intent of the Lunenburg and Burnaby resolutions, “to protect the right of municipalities to specify local priorities in purchasing decisions.”

Reciprocity and fairness sound like worthy goals in a trade deal but they can often mean the exact opposite of what you’d think. After all, reciprocity is already the stated aim of EU trade negotiators when they ask for cities to be included in CETA’s procurement chapter. On paper it means that Canadian companies will have the same access to bid on or challenge municipal contracts in Europe as European companies have in Canada. In practice, it simply means removing the rights of cities and towns in both Canada and the EU to set local preferences on public spending for economic, social or environmental reasons. Reciprocity, in other words, is lose-lose.

After we sent letters to FCM board members this month urging them to support the Burnaby resolution, which advocates exclusion of municipalities from CETA, I received one email from an Ontario councillor calling such a move “paranoid protectionism.” Here’s part of what I wrote back in response:

– Canadian companies already enjoy open access to the European market. There could be improvements in the area of recognition of professional certification, and it is a hassle for Canadian engineering firms to have to open a bank account in each member state where they operate, but these things will be sorted out outside of the procurement chapter.

– A recent Leger poll commissioned by UPS found that the vast majority (upwards of 90 per cent) of small and medium sized Canadian businesses would not look to Europe to increase business even with a new free trade deal in place. European supply chains, especially for manufacturing, are well established and lowering remaining low tariffs on Canadian goods will do little to change that. In other words, the decision to increase exports of Ontario products to Europe does not become all that attractive when tariffs drop from say 2-3 per cent to zero.

– Canada is not bargaining procurement-for-procurement, according to our lead negotiator, Steve Verheul. The goal is therefore not reciprocity in procurement markets. Recognizing that Canadian firms already do well in Europe (and clearly European firms do well in Canada, in private and public sector procurement), we are offering procurement in exchange for the EU using a negative list for services commitments (under which everything is included unless stated otherwise). The benefits will flow to EU companies picking up more contracts in Canada (replacing Canadian bids) and Canadian service companies operating in Europe. Canadian construction firms, cement etc, in particular would almost certainly lose out. Canadian cities need to think about this when they claim that liberalizing procurement will naturally lead to jobs at home. It’s not necessarily the case.

– A decision by cities to be excluded from the deal would not affect the deal. This was clear to me after a meeting I had last week with the EU trade delegation to Canada. I asked if cities were fundamental to a deal and the delegates responded that it will come down to the overall quality of the offer. EU firms are more interested in provincial commitments around electricity, transit, etc.

– The City of Burnaby doesn’t seem to be asking for all that much in this resolution. It’s certainly not a vote against open markets. Close-to-home companies are not going to be punished when they bid overseas or across the US border if we don’t liberalize municipal procurement. To commit cities in CETA or in a permanent deal with the US in the hopes it will open market opportunities abroad is like tossing a quarter into a fountain and making a wish. Burnaby simply wants cities to from time to time exercise their right to buy locally where it makes sense (which isn’t to say all the time).

– Like US cities and states, the trend in Europe is toward more flexibility in public contracts. In other words, there’s no guarantee that European cities will play by the rules of these procurement chapters. Also, there’s the embarrassing fact for Europe that for years they were (and largely still are) a contained market. They are the largest economy in the world because they bought locally, fostered local industry, etc.

Again, there’s hope the Burnaby resolution will pass at the Union of British Columbia Municipalities meeting at the end of this month. We’ll keep you posted.

Here’s the resolution on CETA, proposed by Lunenburg, N.S. and amended by the FCM board of directors:

Jul 5, 2010


WHEREAS The Government of Canada has entered into negotiations with the European Union for an EU-Canada Comprehensive Economic and Trade Agreement; and

WHEREAS The Government of Canada and the European Union have developed a mandate to seek an ambitious agreement that would negotiate a wide range of areas, included central and sub-central government procurement; and

WHEREAS Provinces and Territories are responsible for implementing any treaty obligations resulting from such trade negotiations; and

WHEREAS municipal governments have expressed an interest in local sustainable economic development which can be impacted by a Canada European Trade Agreement that could reduce or eliminate the right to specify local priorities when public money is invested in goods, services or capital projects; therefore, be it

RESOLVED That the Federation of Canadian Municipalities encourage the Government of Canada to inform municipalities of those aspects of the Trade Negotiations which may affect municipal government procurement and, further, to protect the right of municipalities to specify local priorities in purchasing decisions, be it further

RESOLVED That FCM call on the Government of Canada to adopt a negotiating position that supports reciprocity in Canadian and European Union municipal procurement practices.

Municipality of the District of Lunenburg, Nova Scotia

2010 SEPTEMBER BOARD DECISION: Category “A”; concurrent. Resolution adopted.