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Ontario municipalities ill served by cautious approach to CETA

The Association of Municipalities of Ontario (AMO) has issued a Breaking News update to its broad membership of councillors and mayors on the Canada-EU free trade negotiations (posted below). The AMO notice is clearly in response to the passage since the summer of several new resolutions demanding that municipalities be completely excluded from the procurement commitments in the proposed Canada-EU Comprehensive Economic and Trade Agreement (CETA). Many cities and towns are taking this position after presentations from constituents who are members of the Council of Canadians, Canadian Union of Public Employees, or other groups opposed to subnational procurement commitments in CETA.

The AMO has different plans. Around the time of its annual meeting this year, the association announced it had adopted the Federation of Canadian Municipalities’ (FCM) stance with respect to CETA. The FCM has listed seven principles (see below) it is using to guide ongoing discussions with the federal government related to the EU trade deal. A preference for a municipal exemption from CETA is not one of them but it is by far the best option for Canada’s cities and towns.

Now the AMO is going further by encouraging municipalities to pass a different, much weaker resolution which uncritically accepts the Harper government’s assertions in favour of free trade with the EU. The resolution, which you can read below or by clicking here, says CETA “holds great potential for growing Canada’s trade and collective prosperity.” It politely asks the federal government to uphold the principles in the FCM statement and to give municipal associations “detailed updates on the status of the European Union trade negotiations to the fullest extent possible.” (Italics mine.)

With respect to the AMO and FCM, where is the proof of CETA’s “great potential” for the Canadian economy. The joint Canada-EU study Harper and Trade Minister Ed Fast use to prop up this statement has been thoroughly debunked by CAW economist Jim Stanford in his report “Out of Equilibrium” for the CCPA. You can watch a video of Stanford explaining Harper’s faulty economics here. It is also contradicted by an independent sustainability impact assessment, otherwise supportive of the agreement, which predicts CETA is worth 1/4 to 1/2 the economic benefits the Harper government is promising for Canada.

There are other problems with the FCM-AMO light-touch approach to CETA. I’ve made a few comments below after each of their seven principles to guide their interactions with the federal government. Here’s what the FCM and AMO are shooting for:

Reasonable procurement thresholds: Inappropriately high or broad procurement thresholds may force municipalities to tender projects when tendering is neither practical nor financially justified. (ST – Why not specify what the FCM considers an appropriate threshold. We know Canada and the EU have already decided it will be around $300, 000 for goods and services and $8 million for construction. So this first principle doesn’t make sense anymore. The FCM should come out and state whether these are acceptable to municipalities.)

– Streamlined administration: Ensuring that municipal procurement policies are free-trade compliant will likely create new costs and may require specialized expertise. The administrative design of these rules must be as streamlined as possible and developed in close cooperation with municipal procurement practitioners. (ST – So the FCM has accepted at face value that municipalities should have their spending powers further constrained to appease EU negotiators as long as there is support for bringing local policies in line with trade rules that most municipalities globally are not bound by, nor would they want to be. The FCM does not even call for financial help to absorb the costs when it is desperately seeking billions from the federal government for badly needed infrastructure.)

Progressive enforcement: Enforcing provisions of any deal should be progressive, starting with verbal or public warnings before moving to financial penalties, and should recognize and not penalize inadvertent non-compliance, particularly in cases where municipalities do not have the expertise to appropriately apply the rules. (ST – A verbal warning under trade agreements is as good as a threat to take further action, especially from the EU whose main objective from CETA is winning more municipal contracts for services and construction. The EU recently joined the Japanese WTO case against Ontario’s Green Energy Act — a procurement deal that supports local manufacturing by requiring a strong percentage of solar and wind components on renewable projects be sourced locally in order to receive high energy tariffs. EU firms will make use of these procurement guarantees once Canadian municipalities grant them.)

Canadian content for strategic industries or sensitive projects: A trade deal must recognize strategic and public interest considerations before barring all preferential treatment based on country of origin. There may be industries of strategic significance to a particular region, such as transit, or projects where considerations of quality, public benefit, environmental protection or business ethics means that a local government may wish to implement minimum Canadian-content levels. This should be allowed, within reason. (ST – Absolutely this should be allowed and encouraged within reason. The problem for municipalities is they are at the mercy of the provincial and territorial governments, and there is enormous pressure on them to come up with as ambitious a deal as possible, covering as many sectors as possible. In Brussels this past July the Quebec negotiator, Pierre-Marc Johnson, would not commit to keeping Quebec Hydro off the table. The McGuinty government would be hard-pressed to carve out transit. The FCM should have demanded an exemption for transit, energy, infrastructure and other sectors where it would like to continue to use local preferences or minimum local content quotas that any jurisdiction worth its salt continues to apply globally.)

– Dispute resolution: A dispute-resolution process, like the one in NAFTA, may require a careful review of the municipal role in that process so they can appropriately defend their policies and by-laws as an order of government. (ST – The FCM should be exploring the dispute resolution system being developed by the three westernmost provinces to bring procurement policies in line with the New West Partnership, otherwise known as TILMA. What has been the experience of Alberta, BC and Saskatchewan municipalities with these new procurement restrictions? Certainly BC workers are finding out the hard way how electricity jobs are leaving the province with profits going to corporate headquarters in Texas.)

– Consultation and communications: Consultation and communications during negotiations are required to ensure any resulting agreement responds to municipal concerns. (ST – Information from the federal government, provinces and territories about which municipalities and which sectors will be bound by CETA’s procurement rules should be the bare minimum. This information should be public and debatable before the provinces can make a final decision. Municipalities should retain the right to opt out of CETA’s procurement chapter.)

– Reciprocity: Canada´s negotiating position must support reciprocity in Canadian and foreign municipal procurement practices. (ST – The sustainability impact assessment produced for the EU Commission by a private firm and released in August, which is otherwise supportive of trade liberalization, shows that the gains for Canadian firms will be less than for EU firms in Canada. We also don’t think a reciprocal loss of policy space at the local level in the EU is worth the loss here. We should be supporting efforts by European municipalities and civil society organizations (ex. fair trade groups, labour unions) to expand their policy flexibility to encourage local, sustainable spending and local development.)

There are other issues for local decision makers to consider in the CETA negotiations, for example the intellectual property chapter, which may increase the cost of public employee drug plans paid for by cities. Services commitments in areas such as transit, energy and drinking water will exert pressure on municipalities to treat private bidders for essential services the same as the public sector. And for Ontario in particular, losing the right to support local industry or research and development would more than likely lead to job losses, putting more pressure on municipalities. Free trade is not a magical potion — it simply transfers control over local economies from local governments to fickle transnational capital.

The Council of Canadians will continue to encourage municipalities in Ontario and beyond to demand a total exemption from CETA’s procurement rules. Anything else is conceding too much to the EU and federal government for far too little in return (and quite possibly for job losses here at home). The value of procurement is measured in more than dollars. Sometimes there is more value in tendering based on job creation, sustainability and other criteria that multiply the benefits of spending public money.

To speak to your local councillor about CETA and to propose your municipality pass a CETA resolution, see our Action Alert here: Municipal governments need a say in CETA.

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October 5, 2011

Canada – EU Comprehensive Economic and Trade Agreement Update

Canada-European Union talks toward the Comprehensive Economic and Trade Agreement (CETA) continue to evolve and AMO is committed to updating members with information as available to ensure that discussions regarding CETA by Ontario’s local governments are as informed as possible. In our Breaking News of August 15, 2011, we provided members with information on the status of negotiations, areas under discussion in a final deal and resources for members to obtain more in-depth details on the talks.

As members may know, CETA negotiations have progressed through eight rounds since they began in 2009 and as many local governments are now aware, access to sub-national (provincial/territorial/municipal) procurement markets for Canadian and European firms is being actively discussed as part of the final deal.

AMO understands that municipal governments and citizens groups across the province continue to be interested in the progress of the CETA discussions and the potential impacts on municipalities. Members have informed us that some citizens groups are seeking to make presentations to councils regarding CETA, including a draft resolution for adoption.

AMO is guided by the multiple interests of municipal governments and local decision making in all matters of policy and administration – interests that consider local autonomy, municipal property taxpayer value and the broader economic well-being of communities and Ontario among the myriad of other interests – so that municipalities are safeguarded in any initiative. We recognize that while some members of our communities may have some concerns about the agreement’s impact on municipalities and some businesses, others are looking to take advantage of the opportunities presented to Ontario businesses by the agreement to grow and diversify trade and operations.

To help to articulate the interests of municipal governments in trade negotiations generally, and for CETA specifically, the Federation of Canadian Municipalities set down some principles to guide the federal government in its discussions. The principles, which were adopted by AMO, require that any deal offer significant opportunities for economic development for our local companies for any limitations that may be accepted.

In September, the federal Minister of International Trade, the Honourable Ed Fast, attended the FCM meeting in Nelson BC along with Canada’s Chief Negotiator for CETA. Minister Fast confirmed to FCM at that meeting and in a letter to FCM’s President, Berry Vrabanovic, that the federal government accepted the principles and that he believed the final CETA deal would conform to them. In his letter Minister Fast stated that CETA would not affect municipalities’ ability to use procurement selection criteria that included relevant experience, social and environmental factors and quality nor would it require privatization of municipal services or affect the ability of municipalities to regulate within their jurisdiction. Minister Fast also confirmed that municipalities would not be subjected to any disputes under CETA as these would be between the signatories of the agreement: the governments of Canada and the European Union.

AMO considers these statements encouraging and will continue to work with FCM and the next provincial government to ensure the interests of Ontario municipalities are understood and addressed in the final agreement.

In the meantime, recognizing these developments and the concerns shared by citizens, some AMO members have passed resolutions which encourage the Province of Ontario and the federal government to continue to engage with FCM and AMO to address the interests of our members. The resolution is provided below for members to consider and adopt should councils wish to take action on CETA.

Whereas the Government of Canada and the European Union have been negotiating a trade agreement known as the Comprehensive Economic and Trade Agreement (CETA);

And Whereas the Canada-European Union relationship holds great potential for growing Canada’s trade and collective prosperity;

And Whereas the Council has been made award that some members of our community have concern regarding the impact of CETA negotiations currently underway between Canada and the European Union;

And Whereas the (municipality of ____) supports the guiding principles as set out by the Federation of Canadian Municipalities (FCM) and endorsed by the Association of Municipalities of Ontario (AMO);

Be it Resolved that the (municipality of ____) requests the Federal Government and the Province of Ontario to continue to ensure that the municipal sectors’ interests are represented in the ongoing negotiations; and

That the federal government’s negotiations ensure that the FCM guiding principles will be fully reflected in any trade agreement reached between Canada and the European Union; and

That the federal and Ontario governments provide FCM and AMO with regular, detailed updates on the status of the European Union trade negotiations to the fullest extent possible.

This resolution be forwarded to the Minister of International Trade; our local MPs, the Premier of Ontario, our local MPPs, the Ontario Minister responsible for Trade and Economic Development, FCM and AMO.