On July 1, while most Ottawa residents were focused on celebrating Canada's 150th birthday, the Canadian Free Trade Agreement (CFTA) quietly came into force. The higher profile Comprehensive Economic & Trade Agreement between Canada and the European Union, CETA followed on a provisional basis on Sept. 21.
These agreements are important for anyone in Ottawa who does business with government. They mark an important change in the area of government procurement and present local businesses with significant opportunity and risk.
What is CFTA?
CFTA is the successor to the 1995 Agreement on Internal Trade, which removed interprovincial trade barriers in Canada on a select group of industries. CFTA goes much further than its predecessor, although many free trade advocates complain that the number of trade barriers within Canada remains unacceptable.
Trade barriers are often hidden, either purposely or unintentionally. For example, specifications in an invitation to tender may require a license from a provincial association that favours local companies or persons. CFTA contains provisions that allow a company or person to challenge such trade barriers. Challenges are intended to be resolved quickly; first through consultation, then through a dispute settlement mechanism.
Of particular interest to Ottawa companies, the federal government, provinces and territories must now provide open and non-discriminatory access to their procurement contracts, regardless of where in Canada the company resides. Even contracts involving municipalities and a range of government-funded sectors, such as education and health, have opened up. IT, defence, construction and professional consulting contracts are now more accessible across the country.
Ottawa companies that do procurement with the Canadian government, which is the largest buyer of goods and services in the country, have developed strong expertise in serving the needs of federal departments and agencies. Local firms can now deploy that expertise throughout Canada to potential customers that were previously difficult or impossible to access.
European opportunities through CETA
Pressure for a new and expanded interprovincial trade deal came amid the push for a Canadian-European trade deal. CETA also opens up the market for selling goods and services to government. Canadian companies can now do business with European governments, and European companies can do business with Canadian government, all on an equal footing.
As with the CFTA, there are dispute settlement mechanisms to resolve issues of discrimination. In addition, European procurement opportunities are made available electronically, similar to the way in which they are done in Canada.
The European market, with its many wealthy governments and more than half a billion consumers, presents tremendous opportunities for Ottawa businesses.
There are 28 EU member countries under the agreement, and many sub-national governments within those countries. However, the opening of our markets also presents risk, as large and sophisticated European companies themselves eye the Canadian marketplace. The National Capital Region will likely be one of their first targets for expansion, as the federal government is a rich source of potential business.
CETA is broad and comprehensive, covering all goods except for a small list of exceptions (such as for national security reasons). In services, CETA provides European and Canadian companies with access to each other's government contracts in many sectors, especially IT and consulting services. Among others, this includes management, marketing, human resources and engineering consulting.
CETA was ratified in September after being delayed by a dispute over cheese and pharmaceuticals. Like CFTA, the initial plan had been for CETA to come into force on July 1. It is hoped that Ottawa businesses took advantage of the delay to explore opportunities and get ready for more competition.
The Canadian government, through Global Affairs Canada, has established various programs to help Canadian businesses access the European market. Such programs are a good way for Ottawa companies to look for business opportunities and potential strategic partners.
Alliances with European companies may be a good way for Ottawa companies to take advantage of local expertise, overcome language barriers and possibly gain a powerful ally to do even more business with governments back here in Canada.
Clever and ambitious Ottawa companies will use both CETA and CFTA to transform their businesses and expand their customer base throughout Canada and Europe. For those companies that have little interest looking abroad, they now face the prospect of new and powerful competition in their backyard.