#09OTTAWA425 #cablegate Prime Minister announces proposal to expand NAFTA’s government procurement commitments to provinces 09OTTAWA425

Viewing cable 09OTTAWA425, Prime Minister announces proposal to expand NAFTA’s government procurement commitments to provinces

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Reference ID Created Released Classification Origin
09OTTAWA425 2009-06-04 20:23 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ottawa
VZCZCXRO0935
PP RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
DE RUEHOT #0425/01 1552023
ZNR UUUUU ZZH
P 042023Z JUN 09 ZDK
FM AMEMBASSY OTTAWA
TO RUEHC/SECSTATE WASHDC PRIORITY 9498
INFO RHEHAAA/WHITE HOUSE WASHDC
RUEAIIA/CIA WASHDC
RHEHNSC/NSC WASHDC
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHME/AMEMBASSY MEXICO 1984
RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
 
UNCLAS SECTION 01 OF 02 OTTAWA 000425

SENSITIVE
SIPDIS

STATE FOR E, EB/DCT, WHA/EX, WHA/CAN

STATE PASS USTR (SULLIVAN)

COMMERCE FOR ITA/MAC (WORD)

TREASURY FOR IA (WEYER)

E.O. 12958: N/A
TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA
SUBJECT: Prime Minister announces proposal to expand NAFTA’s
government procurement commitments to provinces

Ref: Ottawa 393

SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT ACCORDINGLY

1. (SBU) Summary: Prime Minister Harper is receiving guarded
support from Canada’s provinces over his proposal to counter “Buy
American” measures by expanding the NAFTA government procurement
chapter. The government hopes such an expansion will secure access
for Canadian suppliers to the U.S. sub-federal procurement market.
However, this strategy would require negotiation on two fronts:
first, the provinces must be persuaded to drop their own
protectionist barriers; and second, the United States and Mexico
must then be persuaded to expand the NAFTA procurement chapter.
Were this to happen, it would be a positive opening of Canadian
markets but would not be a panacea for the disruptions caused by Buy
America provisions. End Summary

Harper’s Response to “Buy American”
———————————–

2. (U) On June 3, Prime Minister Harper announced his intention to
pursue an expansion of sub-federal government procurement
commitments in the North American Free Trade Agreement (NAFTA).
Growing Canadian concerns over potential business losses resulting
from “Buy American” provisions in the American Recovery and
Reinvestment Act of 2009 (ARRA) and other pending federal
legislation (reftel) prompted Harper’s announcement.

3. (U) Harper stated that while the WTO and NAFTA contain
prohibitions against national preferences for federal level
procurement, they do not apply to provinces and municipalities
(i.e., sub-federal entities). “I believe it would be interesting
for all of our countries to look at dealing with that problem here
in North America,” stated Harper. “Obviously, at a time when we’re
trying to keep borders open internationally, I do think that the
proliferation of domestic preferences in sub-national government
procurement is really problematic. It is part of the creeping
protectionism, not just in the United States, but elsewhere, that we
must avoid to ensure a global recovery.”

4. (U) While Canada has previously resisted formalizing
provincial-level procurement access for foreign suppliers, recent
actions in the context of the planned free trade talks with the
European Union have help ease the way for Harper’s proposal. As a
pre-condition for launching the FTA talks, the EU persuaded Canada
to bring the provinces to the table for procurement talks. Canada’s
Minister of International Trade, Stockwell Day, indicated that the
EU action “really opened the door” to the current federal-provincial
dialogue on the NAFTA.

Day as Provincial Consensus-Builder
———————————–

5. (SBU) Minister Day has been given the job of building consensus
among provinces – with Quebec and Ontario already voicing a degree
of support. One of Day’s challenges is to overcome provincial
reluctance to give up buy-local provisions in their existing
provincial regulations. The Canadian public also tends to be
fiercely protective of social, health, and cultural matters – and an
obvious foreign commercial presence in these areas might trigger a
backlash against Harper’s minority government. While
municipal-level procurement does not appear to be on the table at
Qmunicipal-level procurement does not appear to be on the table at
this stage, the results of the Federation of Canadian Municipalities
(FCM) annual meeting on June 6 (reftel) will likely help shape
federal and provincial thinking on the issue. During the FCM
meeting, more than 1000 municipalities will consider a slate of
actions to counter “Buy American” restrictions.

No pain, no gain
—————-

6. (SBU) Canadian trade watchers suggest that the domestic debate
will hinge on comparing the costs and benefits of new procurement
commitments against the current informal mechanisms governing
provincial procurement. According to Canadian trade lawyer, Simon
Potter, while most provinces already allow U.S. companies to bid on

OTTAWA 00000425 002 OF 002

their contracts, it is a difficult process complicated by a
patchwork of rules, exceptions and protectionist measures.
Responding to the Prime Minister’s announcement, Lawrence Herman,
another Canadian trade lawyer, stated that “It will take a lot of
effort to get the provinces to agree, but it’s the only realistic
way to solve the problem.”

7. (SBU) Comment: Herman’s hope that this will “solve the problem”
raises a tactical issue for us and the Canadians: even were these
negotiations to come to fruition, they would not be a a panacea for
“buy national” provisions on both sides of the border. For one
thing, the offers by states and provinces will be limited by
geographical scope and by sector; for another, municipalities will
not be covered at all. We suggest keeping in mind that this opening
of Canadian markets will be a very positive step for U.S. exporters
and investors but will not put to rest the arguments over “Buy
America” and “Buy Canada” regulations. End comment.

 

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