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NEWS: Europe dissatisfied with provincial procurement offers in CETA talks

Le Devoir reports – in French – that, “While both Canada and the European Union say that CETA negotiations are nearing completion, the standoff is not over. Le Devoir has learned that the negotiating team of the European Commission says sufficient gains have not been made for a deal to be completed. And Europe will not be content with a partial opening of public procurement, the heart of negotiations.”

The newspaper explains that, “Europeans wanted nothing to do with a free trade agreement with the Canadians. Too complex to negotiate because of the power of the provinces, the European Union did not see significant benefits. …To convince Brussels, Ottawa decided to stimulate the appetite of European companies with the help of Quebec Premier Jean Charest. On the menu: the attractive public contracts across the country, also known as procurement. Those of federal, of course, but especially those in provinces, currently provided with great flexibility … and protectionism.”

“Sectors of energy, medical equipment, transport and water treatment are among other giants such as targeted by the German Siemens and French Alstom and Veolia. With the conclusion of CETA, these companies hope to have out of the way to win major contracts in Canada. But this open procurement would not be made without undermining the way we do. …The value of public contracts in Canada is substantial: $ 127 billion annually. For the EU, this is the most interesting public market of OECD after the United States (715 billion) and Japan (376 billion). Much of this spending is done by provinces, cities and other entities outside of Ottawa, including school boards, CEGEPs, universities, hospitals and corporations. The lucrative contracts awarded by Hydro-Quebec are particularly salivating Europeans.”

“What about water management by the private sector? ‘There is no obligation for Europe or Canada to privatize public services,’ said MEP Vital Moreira, president of the International Trade Commission, attached to the group of Socialists and Democrats… ‘(But) if they decide to open these public services to private, they will be forced to open not only to domestic companies but also companies of the other party,’ says Moreira, who is familiar with the negotiations and the current Canadian offerings. This interest has been confirmed by the European employers: ‘If there are decisions in some cities to open it to competition [the service water treatment], we want to participate,’ says Van den Hoven, BusinessEurope.” At the same time, the article notes that many private water utilities are now being ‘remunicipalized’ in Europe, notably in Paris.

Where are some of the key actors on the procurement issue?

Quebec – The newspaper reports highlights though that the Charest government – the champion of this agreement – has not been acting in accord with the principles of it. “On October 5, 2010, Charest announced with great fanfare the award of a contract for $ 1.2 billion at Bombardier-Alstom consortium to replace Montreal subway cars. …The Spanish firm CAF was rejected even though it claimed to build cars at lower cost. One of the reasons given by Quebec to protect hundreds of jobs in the Bas-Saint-Laurent. What seemed legitimate could become illegal with CETA… The agreement of ten million signed last September between the City of Quebec and Quebecor to manage the new arena would perhaps not be either.” Charest has also said he wants Hydro-Quebec excluded from CETA because of the utility’s role in regional development.

Ontario – In March 2010, the Globe and Mail reported, “European officials say the deal’s biggest obstacle is the province of Ontario. …Officials close to the talks said in briefings that Ontario’s reluctance to open up its government procurement procedures to European bidding has become a sticking point. …Europeans say that a particularly contentious point is Ontario’s new Green Energy Act. This energy-efficiency bill is also a job-creation program that specifies projects that hire Ontario residents and use Ontario companies, offering subsidies to local suppliers of energy-efficient products and services.The EU negotiators said in a position paper they tabled in the negotiations this year that the Ontario legislation is a perfect example of the sort of protectionist legislation that would prevent European access to markets and make CETA unworkable. …They have also expressed concern about provincial liquor-sales monopolies in Ontario and Quebec.”

Manitoba – The province’s trade minister Peter Bjornson recently stated, “We will ensure that any agreement with Europe continues to preserve the flexibility and integrity necessary to make sound public policy in Manitoba by excluding public services such as healthcare, public education and social services, as well as Manitoba Hydro and Manitoba Public Insurance from the agreement.”

The European Union – In February 2011, Postmedia News reported, “The European Union, which has stirred a controversy by demanding that Canada open up the lucrative government procurement market to European competitors, is launching a new campaign against widespread protectionism within the 27-nation EU. The effort, which includes possible adoption of tougher rules against ‘favouritism, corruption and conflicts of interest’, underscores the difficulty Brussels will have in offering reciprocal access to Canadian firms on the procurement front, say analysts. An EU document released last week cited recent research saying that (in Europe) 87 per cent of contracts for government-purchased goods and services, from fire trucks to syringes to educational services, went to domestic companies. …Simon Evenett, director of the Swiss Institute for International Economics, said the EU’s poor results suggest that ‘Canadian exporters, especially those that don’t have subsidiaries in Europe, won’t gain much from any negotiated opening up of the EU procurement market.’”

In 2005, when a Canada-EU free trade deal was last attempted, the lack of a unified position among the federal government and the provinces led to the Europeans walking away from the talks.