Are EU trade talks behind the pressure to end local procurement?

Judging by all the recent hype about “Buy America,” you’d think Canada had suddenly been devastated by some horrible natural disaster.

As if out of nowhere, “Buy America” provisions in the U.S. stimulus Bill are suddenly at the top of the policy agenda for the Harper government, the Premiers and the Federation of Canadian Municipalities [1]. It matters little that the U.S. government has had “Buy America” laws in place since 1933 [2].

The latest is the June 9 statement [3] by the Premiers calling for a whole new trade agreement between Canada and the U.S. Such a deal would restrict the ability of local, provincial and state governments to use their purchases of goods and services to pursue policy objectives like creating local jobs, encouraging equity hiring or purchasing from ethical suppliers.

Reducing this policy power of democratically elected municipalities and provinces would indeed require a new trade agreement, since there is currently nothing in either NAFTA or the WTO which limits local procurement policies [4] by sub-national governments or municipalities.

But the idea that U.S. states and municipalities will agree to reduce their use of local procurement just because Canadian provinces offer to seems absurd, given how deeply entrenched and widespread the practice has been in the U.S. for decades. A 2007 survey [5] by the National Association of Procurement Officials found that 39 states use the location of a firm as a tiebreaker if all other aspects of a bid are equal. Fifteen states allow in-state bidders to ask for a higher price (between 5 and 15 per cent) and still receive the contract. Several dozen cities in the U.S. favour local businesses and products when they purchase and many use procurement as a tool to lever greater opportunities for minorities.

What’s really behind all this sudden pressure then? A lot of the heat is coming from the U.S. Chamber of Commerce [6] and U.S. based trans-national corporations such as General Electric, FedEx, Caterpillar and Boeing. This may seem surprising given these are U.S. based corporations, but it isn’t really since this group uses every opportunity to call for more free trade. The pressure to reduce government powers by strengthening trade deals always comes from the large corporate sector.

Of course, that’s the case in Canada too. Here, the sudden demand to end local procurement is coming from the usual suspects at the Canadian Council of Chief Executives and Canadian Manufacturers and Exporters who have created a front group, Canadian Manufacturers Against Protectionism.

Even though the “Buy America” provisions of the U.S. stimulus bill only apply to federally funded infrastructure projects and has nothing to do with local purchasing by states and cities, the business lobby here is using this as an excuse to insist on a sweeping agreement to eliminate all local procurement. These long time free traders have even appropriated the language of “fair trade.” [7]

I believe this high powered campaign actually has little to do with “Buy America,” which Canada has had no problem with for 76 years. I think the more fundamental reason the Harper government is making this a priority is to prepare provinces and cities for the imminent trade deal between Canada and the European Union.

European corporations and the E.U. have made clear their top objective is access to procurement within provincial jurisdiction. The connection between the recent uproar over “Buy America” and the Canada/E.U. deal was confirmed by International Trade Minister Stockwell Day in a number of recent media interviews. Here’s an example from a CanWest Global story: [8]

“Day acknowledged the pending E.U. free trade talks would likely compel the provinces to commit to opening up their procurement sectors. E.U. officials say there will be no deal unless that happens, arguing the provincial procurement sector -- which involves the tendering of contracts to supply, among other things, infrastructure to municipalities, schools and hospitals is far more lucrative at $22 billion annually, compared with the $5 billion federal market (excluding defence).”

That kind of E.U. advocacy for large European corporations will only intensify given the sharp right turn in the European Parliament election June 7. Right and far right parties made big gains all across Europe. [9]

The Harper government, in concert with sympathetic pro-business Premiers like Charest, Campbell and Stelmach, have been preparing the path for reduced municipal and provincial powers for some time. First with the undemocratic TILMA agreement between B.C. and Alberta [10] and subsequently with changes to the Agreement on Internal Trade that allow for fines of up to $5 million for provinces found to be in violation of government-to-government disputes [11], the pressure has been on to reduce policy choices for cities and provinces. In its 2008 election platform [12], the Harper Conservatives even threatened to use federal constitutional powers to impose reductions in provincial powers if provinces did not comply voluntarily.

Provinces and cities would likely not have simply agreed to eliminate perfectly legitimate economic policy [13] choices like local procurement had they not first been set up by bogus arguments over “interprovincial trade barriers” and second by the recent hubbub over “Buy America”. They’re now nicely softened up for the procurement demands of the European Union.

Fortunately, there are strong and coherent arguments for a more democratic vision for community empowerment. The Canadian Auto Workers has been campaigning for municipal “Buy Canadian” policies [14] for some time and has convinced 21 municipalities across Ontario to pass resolutions committing to purchase domestically.

The City of Toronto ensured that new rapid transit cars be manufactured in Thunder Bay [15]. And Council of Canadians Chair Maude Barlow recently joined Canadian Union of Public Employees President Paul Moist in writing to all provincial Premiers [16] tourge them to resist the pressure for a new procurement trade deal and to instead look to expedited federal infrastructure investment as a far more logical and effective response to the national jobs crisis.

Blair Redlin is a researcher with the Canadian Union of Public Employees, based in Burnaby.

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