Canada-EU Free-Trade Deal Creates Opportunities & Challenges for Businesses and Local Governments -

Canada-EU Free-Trade Deal Creates Opportunities & Challenges for Businesses and Local Governments

On September 26, 2014, the federal Department of Foreign Affairs, Trade, and Development released the full text of the recent free trade treaty established between Canada and the European Union (“EU”). The treaty, formally known as the Comprehensive Economic and Trade Agreement (or “CETA” for short), provides for removal or liberalization of a wide variety of trade restrictions, tariffs, and other economic measures that restricted trade and investment between Canada and the 28 member states of the EU.

CETA represents an unprecedented change in Canadian trade policy toward Europe. With a population of over 500 million people, the EU represents the world’s largest integrated economy – almost twice the size of the U.S. economy. With greatly increased access to European markets, businesses throughout Canada will be able to sell their products and services there far more easily. A favourable exchange rate between the dollar and the Euro will create strong incentives for European customers to purchase Canadian manufactured goods. Canadians will have access to not only a wider range of goods and services from Europe, but also greater access to products previously subject to strict limits on the quantity that could be imported, such as wine and cheese.

SorbaraLaw`s Municipal, Land Use and Development Group has been paying close attention to developments under CETA because of its potential impact on how governments acquire goods and services. CETA will be a “game-changer” in this area within Canada, for a variety of reasons. Under CETA, the governments of both Canada and the EU have committed themselves, the governments of their respective provinces and member states, their municipalities, and most of their broader public sector organizations (such as school boards, public utilities, hospitals, colleges and universities) to give equal access to both Canadian and European suppliers to be able to sell products and services directly to those governments, municipalities, and organizations. The new government procurement rules make up one chapter out of the 34 in the whole treaty.

One result of this increased access to government procurement contracts is the virtual elimination of “local preference” requirements. For example, prior to CETA, a municipality could lawfully prefer to purchase goods and services provided by its local suppliers over similar goods and services provided by suppliers from another municipality, province, or country. Under CETA, however, that municipality will have to give equal consideration to goods produced in an EU member-state as it does to goods produced locally.

Another major impact that CETA will have on government procurement is the treaty’s requirement for swift, low-cost dispute resolution methods for suppliers who feel their bids were wrongly rejected. Until now, only procurements made by the federal government have been subject to such easy review, thanks to the provisions of the Agreement on Internal Trade (the “AIT”) (a form of trade treaty between the federal government and the provinces) and the Canadian International Trade Tribunal, which implements and adjudicates disputes governed by the AIT. This review process has made it very easy for potential suppliers whose bids were rejected to successfully challenge the federal government over the choices it made in obtaining goods and services. CETA’s provisions may require the creation of a similar system for local government entities and broader public sector organizations. If that happens, the result could be both increased complexity in their procurement processes and increased compliance and legal costs.

Ultimately, these and all the other provisions of CETA will need to be implemented by federal and provincial legislation. SorbaraLaw lawyers are eagerly awaiting the release of the first draft of the federal and provincial legislation implementing the terms of the treaty. Drafts of the legislation have not yet been released, and their precise wording will establish whether CETA will be a boon for businesses that want to compete in the European market, a source of additional “red tape” for local government entities, or both.

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Michael Letourneau. Michael is a lawyer at SorbaraLaw. He assists clients with a broad range of important municipal and public institutional matters including governance and by-laws, procurement, technology, and operating policies and procedures.

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