Eliminating Procurement Exceptions
The governments of Alberta and Manitoba announced throughout 2019 that they will remove all remaining procurement exceptions under the Canadian Free Trade Agreement (CFTA). This represents a continuation of trade exception removals by Alberta (as highlighted in Alberta Eliminates CFTA Exceptions to Increase Competition) and removal of the only procurement exception for Manitoba (preference for Manitoba companies in procurement for representational purposes).
This follows on the heels of the July 2019 Summer Meeting, where the provincial and territorial Premiers agreed to revise the CFTA with the goals of:
- an "immediate amendment" to the CFTA to allow all governments to unilaterally remove or narrow interprovincial trade exceptions; and
- a review of their own CFTA exceptions by the end of 2019.
On January 15, 2020, the Internal Trade Secretariat published a news release that federal, provincial and territorial governments have committed to reviewing their own Party-specific exceptions and have signed the First Protocol of Amendment on December 10, 2019 (the "Protocol"). The Protocol only permits parties to unilaterally remove trade exceptions. Amendments, including narrowing exceptions, will only take legal effect if there are no objections from all of the parties. Further, amendments cannot broaden any exceptions for existing or future measures. As readers of our procurement bulletins will note, there is a certain degree of irony surrounding the federal government's execution of a Protocol intended to prevent parties from narrowing the application of the trade agreements, in light of the amendments to the Canadian International Trade Tribunal Procurement Inquiry Regulations, quietly passed without public consultation in 2019. The amendments, if taken at face value, enable the federal government to invoke a national security exception for any procurement without having to validate the reasons for doing so, and remove itself from oversight by very same Trade Tribunal it established four decades ago to monitor its trade agreement compliance (thus doing indirectly what it seems to agree it cannot do directly). Please see our previous bulletin titled Because We Said So: Removing the CITT from the Review of Canada’s ‘National Security Exception’.
Existing and Future Exceptions, Not Related to Procurement
Alberta and Manitoba have also removed exceptions for existing measures or exceptions for future measures. Although not applicable to procurement, they are trade-related measures.
Exceptions for existing measures are general measures applicable to goods or services (excluding those for the purpose of government procurement), which a party maintains despite the CFTA requirements that would otherwise prohibit:
- non-discrimination: no less favourable treatment than the best treatment is granted to parties;
- right of entry and exit: the free movement of goods across provincial or territorial boundaries;
- market access: the number and type of players and transactions; and
- performance requirements: prevention of conditions that could result in preferential treatment.
Exceptions for future measures are similar to the general measures, but are prospective - a party may reserve the right to adopt or maintain any measures in an identified sector within an exception.
On October 4, 2019, Manitoba announced it would remove an additional five exceptions for existing measures and future measures:
- restrictions on eligibility for forage leases on Crown land to residents of Manitoba;
- preference for Manitoba residents in the allocation, sale and lease of cottage lots, development in provincial parks and other Crown land;
- the monopoly on marketing of wholesale trade in fish through the Freshwater Fish Corporation;
- limitations on market access for services and investment in oil and gas pipelines; and
- limitations on market access for services and investment in forestry and logging products, forest resource processing, services incidental to agriculture, hunting and forestry, manufacture of paper and paper products on a fee or contract basis.
Manitoba also narrowed its exception in the energy sector by removing preference for transferring or granting surplus Manitoba Hydro property to Manitoba residents.
Following these removals, only two exceptions for future measures and eight exceptions for existing measures (related to agriculture products and incidental services, land surveyors, legal advisory and representation services, energy, fisheries, forestry, hunting, and alcohol) remain.
In addition to the exceptions previously removed, Alberta announced that it would remove eight existing and future measures exceptions and narrow two exceptions pertaining to alcohol and forestry, but retain authority over four market access exceptions.
Eliminated existing and future measures exceptions:
- limitations on the sale of controlled lands - Foreign Ownership of Land Regulations;
- permit restrictions for guiding and outfitting for wildlife hunting;
- phasing out of protectionist policies for power purchase agreements by January 1, 2021;
- protectionist policies in the renewable energy sector; and
Narrowed alcohol and forestry exceptions:
For the alcohol sector, Alberta will no longer restrict employment numbers. For the forestry sector, the types of legal entities and employment in the sector will no longer be limited.
Retained market access exceptions:
Alberta will maintain authority over these four market access exceptions:
- alcohol: adopting or maintaining limits over the number of service providers, transactions, operations, and the type of legal entities;
- forestry: adopting or maintaining limits over the number of service providers, transactions, and operations;
- mineral resources and energy: adopting or maintaining measures pertaining to licensing, certification, registration, leasing, or other disposition rights; exploration and development rights; and management or conservation rights; and
- hazardous materials: adopting or maintaining measures related to the management and disposal of hazardous materials.
The Future: More Trade Barriers to be Eliminated?
Manitoba plans to continue its review of eliminating additional exceptions for existing and future measures.
Alberta announced that it will review whether to unilaterally recognize professional and licensed credentials from across Canada to promote an even more open labour market.
It will be interesting to see when and to what extent the remaining provincial and territorial governments eliminate their CFTA exceptions in all categories.
New Trade Agreement Thresholds for Federal Procurements
The new trade agreement thresholds for 2020 are as follows:
* Provision of airport or other terminal facilities to air carriers; provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable; provision of maritime or inland port or other terminal facilities to carriers by sea or inland waterway; provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of drinking water and treatment of wastewater, or the supply of drinking water to such networks; provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of electricity, or the supply of electricity to such networks; or provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas or heat, or the supply of gas or heat to such networks.
** Once ratified by all three member countries, the CUSMA will supersede the NAFTA. As the CUSMA chapter on government procurement applies only as between the United States and Mexico, the WTO thresholds will apply as between Canada and the United States and Canada and Mexico. Mexico ratified the CUSMA on December 12, 2019, and the US ratified the deal on January 29. Canada is expected to proceed with the ratification process following the resumption of Parliament on January 27, 2020.