March 30, 2015 - by Dr. Valerie D'Erman, University of Victoria
The Comprehensive Economic and Trade Agreement between Canada and the EU was hailed by observers as being emblematic of a new kind of free-trade agreement - meaning, one that attended heavily to non-trade barriers (NTBs). One of the thornier areas of negotiation was the issue of public procurement in the Canadian market. For the EU, letting European companies have the right to bid on government contracts within Canada was a critical and necessary component of engaging the two markets. For many Canadians, the perception of public procurement (which accounts for roughly 32% of public sector spending on goods and services) being opened up to the European market created concern for the competitiveness of Canadian businesses. The end result, according to the EU's trade website, is that "both countries will gain from increased access to the respective public procurement markets. All sub-federal levels of government in Canada will be open to European companies to engage in tenders." Transatlantic Trade and Investment Partnership (TTIP) negotiations between the EU and the U.S. are likely to take on public procurement in the same fashion, but with potentially greater conflicts.
The EU and the U.S. have the largest public contract markets in the world and each side has its own respective rules on how public money can be spent on such contracts. In the U.S., public purchases of goods, services and works accounts for approximately 27% of public spending. The conclusion of CETA, however, sets a powerful new precedent in opening up public calls for tenders - one that negotiators for TTIP will not be able to ignore. At present, debate over TTIP remains centred around proposed investor-state dispute mechanisms, but the potential for concern over public procurement is high, given the size of markets and the nature of public services on either side. The size of the U.S. market gives more leverage to state-side interests invested in maintaining some of the protectionist regulations in public procurement. As well, the proportion of U.S. public spending on defense is high, which is notable given that defense is an area exempt from WTO framework rules on public procurement. Taken together with the fact that there is uneven state vs. federal authority over public procurement bids and spending, TTIP negotiations in this area are likely to encounter numerous obstacles. It remains to be seen to what extent CETA holds power as a new model for trans-Atlantic trade.
Dr. Valerie D'Erman is a sessional instructor at the University of Victoria in the Department of Political Science. She has published in International Politics, the Journal of Homeland Security and Emergency Management, and contributed to a co-authored book titled "Protecting Our Ports: Domestic and International Politics of Containerized Freight Security," in 2010 with Ashgate Press. Her dissertation, "The Europeanization of Industrial Relations in Ireland and Italy," was successfully defended in December 2012.