Recommendation #3—Maintain and
Enhance Goods Market Access
-
Canada should seek greater access to U.S. federal transportation
projects and a permanent waiver on Buy America provisions. This could
be done through updating the Canada–U.S. Agreement on Government
Procurement.
-
The renegotiation of NAFTA would be a good opportunity to start the
process to reach a new Softwood Lumber Agreement that would provide
stable and predictable access to the U.S. market for Canada’s softwood
lumber exporters.
-
If changes are made to the auto sector’s rules of origin, Canada
should seek to maintain North American content rules rather than
country-specific rules.
-
The NAFTA negotiations could be the springboard from which Canada
undertakes reform of its supply management system.
Much of the commercial activity governed by NAFTA goes on day-to-day
without incident or notoriety. However, as close as the relationships
are among the three NAFTA countries (especially between Canada and the
U.S.), there are bound to be trade irritants. These ongoing
disagreements include government procurement and its associated Buy
America provisions in the U.S., softwood lumber, and dairy supply
management in Canada, as well as the auto sector (given the uncertainty
around future changes to the sector’s rules of origin).
Government Procurement: Securing Access to U.S.
Transportation Projects and Increasing Coverage at the State Level
The renegotiation of NAFTA would be a good opportunity to update the
Canada–U.S. Agreement on Government Procurement and negotiate permanent
waivers to the Buy America provisions that apply to federally funded
transportation projects.
Canada and the U.S. are both parties to the three-year-old Revised WTO
Government Procurement Agreement (GPA). For the 19 signatory parties,
the Revised WTO GPA opened domestic procurement markets to foreign
competition for a wide range of goods and services, including
construction services.11The WTO GPA is a multilateral free trade
agreement on government procurement signed by 18 parties, including
Canada, the United States, the European Union’s 28 member states, and
Japan. The aim of the agreement is to ensure “fair, transparent, and
non-discriminatory” competition for government procurement of goods,
services, and construction services. See World Trade Organization,
The GPA in Brief . In contrast with NAFTA’s Chapter 10, which
covers only federal government entities and a selection of federal
enterprises,22NAFTA Secretariat, Chapter Ten: Government
Procurement . the WTO GPA extends the coverage to sub-central
entities, including all provinces and territories (except Nunavut) in
Canada and 37 U.S. states.33World Trade Organization,
Agreement on Government Procurement: Coverage Schedules .
Although Mexico has not signed the WTO GPA, Mexico did sign the TPP,
which has the same obligations as the WTO GPA. What is more, in side
letters to the TPP, Canada, Mexico and the United States all agreed to
have TPP rules apply to government procurement under NAFTA.44Global
Affairs Canada, Trans-Pacific Partnership (TPP)—Side
Instruments Involving Canada . Therefore, it would make sense for
NAFTA 2.0 to incorporate the TPP government procurement commitments
directly in the main text.
There is also potential for Canada to negotiate further access to
government procurement in the United States through bilateral
negotiations. In 2010, Canada and the United States signed the
Canada–U.S. Agreement on Government Procurement. The agreement granted
Canada certain exemptions to the Buy American provisions that were
included in the 2009 American Recovery and Reinvestment Act in
exchange for the inclusion of Canadian provinces in the WTO
GPA.55The Canadian Trade Commissioner Service,
Canada–U.S. Agreement on Government Procurement . Another key
component of this bilateral agreement was a commitment by both parties
to “explore the scope for a long-term government procurement
agreement” that would extend market access beyond the commitments made
in the WTO GPA.66Ibid.
The renegotiation of NAFTA would be a good opportunity to revisit this
promise. In an upgraded Canada–U.S. Agreement on Government
Procurement, Canada’s goal should be to obtain a permanent waiver on the
Buy America requirements that prevent Canada from taking part in
projects funded by the U.S. Department of Transportation’s various
agencies. The waiver would also prevent future domestic content
restrictions from applying to Canada.77The U.S. Department of
Transportation agencies include the Federal Highway Administration,
Federal Transportation Administration, Federal Aviation
Administration, Federal Airport Authority, AMTRAK, and the Federal
Railroad Administration. Each of these agencies has a separate set of
Buy America requirements. (See “The Difference Between Buy America
and Buy American.”)88For more information on the various Buy
America provisions applying to federally funded transportation
projects, see Platzer and Mallett, Effects of Buy America on
Transportation Infrastructure and U.S. Manufacturing .
In 2015, the U.S. passed the Fixing America’s Surface
Transportation (FAST) Act , which authorizes over $300 billion in
funding for transportation projects through 2020.99U.S.
Department of Transportation, Fixing America’s Surface
Transportation Act. However, existing Buy America provisions would
limit Canada’s ability to participate in these projects. Given the
extensive supply chain links between Canada and the United States in the
iron, steel, and transportation equipment manufacturing sectors,
Canadian firms should be given access to these projects. From a U.S.
perspective, allowing Canadian firms to take part in transportation
projects could reduce their costs and completion time and lead to more
efficient use of public funds.1010According to a report from the
U.S. Congressional Research Service, Buy America may increase the cost
and completion time of transportation projects. See Platzer and
Mallett, Effects of Buy America on Transportation Infrastructure
and U.S. Manufacturing .
Within a revised agreement on government procurement, Canada and the
U.S. could also work together to open procurement markets further at the
state level.1111Global Affairs Canada, Canada–European
Union Comprehensive Economic and Trade Agreement . In the Revised WTO
GPA, all Canadian provinces and territories (except Nunavut) are
covered, whereas only 37 of the 52 American states have agreed to these
obligations. What is more, the comprehensiveness of the coverage varies
from one state to another. A revised Canada–U.S. Agreement on
Government procurement would be the right framework for Canada to
negotiate increased access to government procurement markets for the
remaining states not included in the Revised WTO GPA.
An additional goal for a revised Canada-U.S. Agreement would be to open
government procurement markets at the municipal level, as negotiated in
CETA. As such, CETA provides the most favorable access to government
procurement markets that both Canada and the EU have agreed to in a free
trade agreement.1212Under CETA, Canada opened its government
procurement markets at the municipal level, also covering school
boards. For the list of local entities covered in CETA, see Government
of Canada, Text of the Comprehensive Economic and Trade
Agreement—Annex 19-A .