INTERESTED BY INTERNATIONAL PUBLIC PROCUREMENTS?

January 19th, 2015

THE AGREEMENT BETWEEN CANADA AND THE EUROPEAN UNION WILL INCREASE ACCESS TO NEW MARKETS

DIDIER CULAT | Quebec City

International public procurements are excellent opportunities for businesses seeking new markets for their products. The Free Trade Agreement between Canada and the European Union (CETA) establishes new rules and access for Canadian businesses to a public procurement market having an annual value of CA$ 2.7 trillion. However, these rules and access apply only to those public procurement markets that are greater than the thresholds established with the World Trade Organization (WTO).

In fact, Canadian businesses can already participate in public tenders called by Member States of the WTO according to rules providing for open, transparent and non discriminatory procurement as established in the GATT Agreements resulting from the 1979 Tokyo Round of negotiations. Since then, the rules have been modified several times and the last modification came into force in April 2014.

As such, all public procurement in Canada for goods or services (with the exception of construction) greater than 130,000 special drawing rights (SDR) must comply with the rules of the WTO. For the construction field, the obligation of the WTO commences as of 5,000,000 SDRs.

An SDR is a virtual currency developed in 1969 by the International Monetary Fund in order to create an international exchange rate often used by countries concluding agreements amongst themselves. This establishes an exchange rate that has the advantage of being more stable than the fluctuations seen in domestic currencies. As of the date of writing, 1 SDR equals CA$ 1.5456. As a result, Canada’s obligations toward WTO for goods and services start at CA$ 200,900 and at CA$ 7,700,000 for the construction field. Click here for Canada’s obligations to the WTO in SDRs and in Canadian dollars.

The WTO agreements also allow Member States to conclude bilateral agreements that extend the principles established in the WTO agreements such as those concerning public procurement established in the Tokyo Round. In this context, Canada, the United States and Mexico established new public procurement rules under the North American Free Trade Agreement (NAFTA) when it was implemented in 1994. By virtue of NAFTA all purchases by the Canadian federal government for goods greater than CA$ 25,200, for services greater than CA$ 80,400 and for construction services greater than CA$ 10,400,000 are subject to the rules provided in NAFTA.

So, the CETA perhaps missed a good opportunity to grant a better access to public procurement markets by omitting to improve the applicable thresholds as Canada had previously accomplished with the United States and Mexico in NAFTA.

It is however significant to note that the Free Trade Agreement between Canada and the European Union increases the number of government entities that are subject to the public procurement rules, including the European Commission, the European Parliament, the European Council, the 28 governments of the Member States of the European Union, thousands of regional and local public administrations such as hospitals, schools, universities, social service providers and a vast number of government businesses in the provision of public services. Click here for a list of entities of the European Union subject to this agreement.

In addition, Canada and the European Union undertook to put in place an electronic gateway within five years following the implementation of the CETA in order to publish notices of procurement. As such, any business interested in participating in public procurement markets should stay tuned to the electronic gateway in order to seize the new opportunities that this agreement gives access to.

The CETA provides several exceptions which should be reviewed in order to avoid litigious or disappointing situations.

The Free Trade Agreement between Canada and the European Union was signed on September 26, 2014 and requires the approval of the European Council and the European Parliament. Implementation legislation must also be passed by the Parliament of Canada and each Canadian province. At this stage, it is uncertain whether approval of the Member States of the European Union is required and the issue will likely be debated when the CETA comes before the European Council for approval.

Our specialists at BCF will be pleased to advise you concerning the opportunities offered by the public procurement markets with the implementation of the CETA.

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