Europe seeks access to lucrative Canadian contracts (but what does it really mean to Canadian business?)

Posted on July 27, 2010


Meetings in Brussels between the EU and Canada this month ran longer than expected as negotiators considered allowing European bids for public works contracts in Canada worth an estimated $100 billion a year . . . European industry wants access to Canada’s regional and local public works contracts, from provincial energy infrastructure to municipal water works and hospital equipment.

from Public contract prospects spur EU-Canada trade talk by Juliane von Reppert-Bismarck, (July 26th, 2010)

As was the case with the Buy American exemption negotiations this past fall, local public works contracts at the provincial and municipal level are once again being dangled as an inducement to further Canadian Trade policy. This time of course, it is the European Union that is on the other side of the negotiating table.

The stakes according to reports, is that the two sides estimate that “a deal would within seven years generate additional annual income of about 11 billion euros ($14.2 billion) for the EU and 8 billion euros for Canada.”

From the Canadian perspective an agreement with the EU would help to offset a dependence on what was referred to as a “shrinking demand” for Canadian products in the United States, while opening up new avenues of revenue in the EU in key industry sectors such as auto parts, insurance, beef, grain and pork.

There are of course the pre-requisite obstacles to overcome such as the EU’s concern that with Canada being part of the North American Free Trade Agreement, a corridor for “cheap non-Canadian foods and goods” could flood the European market and put local producers out of business.

Canadian opposition centers on concerns that “opening up public procurement contracts such as for municipal water works to private providers, or extending EU drug patents, would erode key social services.”

All this being said, what does it mean to Canadian-based suppliers who either have contracts or are pursuing public works contracts at the provincial and municipal levels?

Even more interesting, and as we discovered during the Buy American experience, having access versus generating tangible revenue is clearly not one in the same. Specifically provincial and municipal decision-makers indicated that their first inclination is to always deal with a local versus foreign supplier.

This of course sounds good for Canadian business however, with municipalities such as Ottawa lamenting the steady decline in RFP response from the indigenous supply base, have Canadian suppliers already abandoned the public sector arena in favor of the potentially more lucrative private sector markets?

After all, let’s consider the recent announcement by the federal government’s procurement ombudsman Shahid Minto, that the Fed’s policies back in 2005 had “unwittingly” helped to create monopolies. Or the recent report that it can take up to 20 months at a cost of $86,124 (in Canada the time and money is equal to US estimates if not more), for a supplier to win their first government contract. These two factors alone may very well indicate that the only corridor in a Canadian/EU trade agreement is the direct, unchallenged path between EU suppliers and our government contracts.

We will be following this story as it develops over the next few months leading into the next scheduled meeting between Canadian and EU officials in October. Focusing on getting the definitive answers to some of the questions that we raised earlier, as well as examining the contractual differences that exist when a government does business with a foreign versus domestic supplier, this could very well turn out to be 2010 version of the Buy American story.

NOTE: This post originally appeared in the Contracting Intelligence Blog.