CIIT Committee Report

Dissenting Opinion of the Conservative Party

May 2010

Since the inception of the Buy American provisions outlined in the American Recovery Act, Canada has been actively engaged with our American counterparts to address our concerns with this legislation and the implications it has had and continues to have on Canada. By negotiating and resolving this agreement, our Government stood up for Canadian businesses and workers who were clearly negatively affected by the protectionist measures included in the Buy American portion of the American Recovery and Re-investment Act (ARRA). The final product of these negotiations is an agreement that will benefit business and workers on both sides of the border.

Canada initially presented a proposal to address this issue to the United States on August 20, 2009, with negotiations that concluded in less than six months. These negotiations resulted in the Canada-US Agreement on Government Procurement. This is a significant accomplishment for any government negotiating an agreement in any country in the world. The Canada-US Agreement on Government Procurement entered into force on February 16, 2010. This type of timeframe for the creation, negotiation, and implementation of an agreement is unprecedented and an “impressive accomplishment” as stated by Ms. Shirley-Ann George (Senior Vice-President, Policy, Canadian Chamber of Commerce).  Ms. George also heralded the agreement as vital in combating the protectionist sentiments within the U.S. Congress and U.S. political arena. By signing such an agreement with the United States, Canada has clearly established a special relationship with the United States and set the stage for improved consultations and negotiations in the future.

In addition to the exceptional speed that this agreement was negotiated and brought into effect, the signing of this agreement marks another historic accomplishment for Canada. For the first time, the provinces and territories played an integral part in the decision making process for an International Trade Agreement. This cooperation towards a common goal between the provinces, territories, and the Federal Government is promising for future negotiations. Market access offers were received from the provinces and territories, as well as a list of municipalities within the temporary agreement. Municipalities are in the realm of the provinces and territories, as such, the provinces and territories were responsible for municipal consultations. Whether or not the provinces and territories consulted with procurement experts in their municipalities is unknown. In any case, Minister Day consulted and spoke with the Federation of Canadian Municipalities (FCM) in June 2009, and again in September. The consultation of the provinces and territories throughout this process is important to consider as critics of the agreement claim that the Federal Government has brokered a bad deal for the provinces and territories. These critics fail to mention the extensive manner in which the provinces and territories were consulted throughout the process, and how their input was integral in brokering this historic agreement.  

Within the agreement, Canadian companies gain access to contracts financed with U.S. stimulus fund.  Additionally, Canada received permanent access to government procurement from 37 U.S. states. Beyond this, Canadian firms also have the right to participate in a number of infrastructure projects funded by 7 programs under the American Recovery Act until it expires on September 30, 2011. Finally, Canadian firms have the ability to bid on the lucrative sub contracts of many of these projects that have already been allotted. It is due to these lucrative sub contracts that the true value of funds to be sought by Canadian firms remains unknown. This view was strongly supported by Ms. Marie-Josee Langlois (DFAIT - Director of North American Trade Policy) when she appeared before the committee on March 11, 2010.  These sentiments were further echoed by the testimony of other witnesses such as Steve Ross (GM Cherubini Group Inc.) who indicated that his company planned to bid on many of these sub contracts that remain to be tendered. Mr. Ross expressed that for many of the largest contracts, the more basic cosmetic elements had already been tendered however the lucrative aspects such as the steel fabrication that his company produces had yet to be purchased and would be secured by the aforementioned sub contracts.  Mr. Ross went on to state that his company felt completely comfortable competing with American companies and was confident that his company would find success in bidding on the available sub-contracts.

In addition to the direct provisions of the Canada-US Agreement, Canada now has a fast track consultation process to address any future bilateral government procurement issues. This is one of the many aspects of the agreement that was heralded by several of the witnesses heard by the committee including Shirley-Ann George (President, Canadian Chamber of Commerce). The reason behind this support being that the United States has never given such a commitment in the past. Additionally, the United States went to the negotiating table with the intention of not giving such assurances and despite this, our Government was able to produce them.

Canada-US Agreement on Government Procurement is a great deal for Canada. This Agreement demonstrates that the benefits of open markets are recognized on both sides of the border. Finally, this agreement further enforces the special nature of the relationship between our two governments and sets a positive example for all future negotiations as well as the development and enhancement of that special relationship.

For the most part the Government is in agreement with the findings of the Standing Committee on International Trade (CIIT) report on “The Canada-US Agreement on Government Procurement” however there are some changes that have been put forward and approved by the collective opposition parties that the Government views as inaccurate. It is in light of these changes by the opposition parties that the Government submits this dissenting report and proposed changes.

Paragraph 3

This paragraph should be restored to the original version as written in the first draft copy and should read as follows:

“The Canada-US AGP is an historic agreement for Canada. In exchange for improved access to sub-national government procurement opportunities in the US for Canadian companies, Canada formally committed, for the first time in any international treaty, to a partial opening of provincial, territorial and municipal procurement markets to US companies. Although in proactive many sub-national procurement contracts in Canada and the US were open to bidders from either country prior to the entry into force of the AGP, Canadian and US sub-national governments were under no obligation to offer the other country’s businesses access to procurement contract opportunities.”

Paragraph 16

Paragraph 16 states in its first sentence that:

“The experience of Steve Ross (General Manager, Cherubini Group) was similar.”

This sentence should read:

“The experience of Steve Ross (General Manager, Cherubini Group) differed.”

Plain and simple, the experiences of Mr. Ross differed greatly from those of Mr. Hammoud and this is reflected through his testimony.

Paragraph 20

This paragraph should be restored to the original version as written in the first draft copy and should read as follows:

“Indeed, this Committee travelled to Washington in April 2009 to meet with Members of Congress and representatives of the US administration. Its objective was to call attention to a number of Canada-US trade and border issues, including the potential impact of “Buy American” restrictions on the integrated Canadian and US economies.”

Paragraph 27

Referring to the opinions of Michael Buda (Canadian Federation of Municipalities), this paragraph should have an additional sentence at the end reading:

“Mr. Buda also stated that this deal was well done and said that it moved things forward with regard to formalizing municipal procurement regulations.”

Paragraph 40

This paragraph does not illustrate the reality of the situation. When describing the exemptions of the deal, it should be noted that federally funded mass transit and highway projects were never on the table for Canada either. Many municipalities such as Toronto enforce strong domestic procurement policies for mass transit. Beyond this, the exemption in this deal with regard to construction grade steel only applies to the province of Quebec. Finally, many of the other carve-outs listed were exempt long before the most recent Buy American provisions and as such were available to alter within this agreement on either side of the negotiation table.

Paragraph 41

This paragraph states that:

“one of the most important carve-outs in the United States’ WTO GPA commitments is the set-aside for small and minority businesses.”

This should read:

“one of the most important carve-outs in the United States’ WTO GPA commitments is the set-aside for small and minority owned businesses.”

In reference to the set-aside program for small/minority-owned businesses there is nothing preventing them from sub-contracting or sourcing from non-qualified companies (companies that do not directly qualify for this specific program), whether large or even foreign, and many Canadian companies are very successful in sub-contracting to successfully qualified US businesses.

Paragraph 50

Noting the opinions of some witness who argued that Canada is reluctant to implement domestic content of buy Canadian policies, this paragraph should have an additional paragraph at the end reading:

“Domestic procurement with regard to mass transit was included in the Agreement with with the province of Ontario signing on.”

Paragraph 55

This paragraph should be restored to the original version as written in the first draft copy and should read as follows:

“The second component of the Canada-US AGP is a series of commitments by both countries to provide temporary enhanced reciprocal access to other sub-national procurement opportunities until September 2011. The temporary commitments are specified in Part B of the Canada-US AGP and in Appendix C of that agreement. These temporary reciprocal access commitments are over and above the WTO GPA commitments described above.”

Paragraph 57

Sentence one of this paragraph should read:

“Canada, in turn, agrees to provide US companies with enhanced access to procurement of construction services by selected provincial and territorial government agencies, Crown corporations and municipalities until September 2011.”

Paragraph 73 of the second copy of the draft should be placed back into the final report. That paragraph read:

“For his part, Steve Ross told the Committee that much of the early work funded by the ARRA was the “shovel-ready stuff” such as paving and painting, and not the major projects which can take a year or two to design and plan. He suggested that there was still another US$20 billion in work yet to be done as part of the US stimulus package.”

Paragraph 74

What would be paragraph 73 in the original draft should be restored to the original version as written in the first draft copy and should read as follows:

“Jean Michel Laurin also observed that one of the main benefits of the agreement is that it sets a precedent in the event that “Buy American” restrictions appear in future US legislation. He stated that Canada has been told repeatedly over the course of negotiations that it could not be given an exemption to US domestic content restrictions because doing so would set a precedent. In Mr. Laurin’s view, Canada was able to get that precedent, along with recognition of the integrated nature of the Canadian and US economies.”

Paragraph 77

Sentence two of this paragraph states that:

“Although under questioning by the committee, the Minister admitted that, contrary to what was stated in the 3 March 2010 Speech from the Throne, Canadian companies did not gain permanent access to state and local government procurement in the US, he argued that Canadian firms did gain a partial exemption to the US domestic content requirements under the Recover Act in exchange for formal recognition of the pre-existing Canadian municipal procurement policies, including exemptions and carve-outs.”

The Minister did argue that “Canadian firms did gain a partial exemption to the US domestic content requirements under the Recovery Act in exchange for formal recognition of the pre existing Canadian municipal procurement policies, including exemptions and carve outs” however, the Minister at no point of the questioning before committee, admitted that “contrary to what was stated in the 3 March 2010 Speech from the Throne, Canadian companies did not gain permanent access to state and local government procurement in the US”. One must only look at the transcript for the committee meeting to verify this.

Paragraph 87

Sentence one, as written is somewhat misleading. This sentence should read:

“Generally speaking, of the witnesses that were opposed to the AGP, the arguments most commonly produced were that:”

Paragraph 91

This sentence should remain as it was in the draft to include as sentence two:

“However, we do support the principle and direction of this agreement. The Canada-US AGP provides Canadian businesses with improved access to sub-national procurement markets in the US and makes some progress in removing a longstanding barrier to trade between Canada and the US, allowing for further integration of our two economies. Furthermore, we are compelled by the argument that Canada’s improved access to the US market comes at very little cost. Minister Van Loan and several other witnesses stated that sub-national procurement markets in Canada were already largely open before the AGP entered into force; in effect, the provinces and territories agreed to little more than to continue operating in the same way they had before.”