Thank you very much.
I would like to begin by talking about the Canada-United States Agreement on Government Procurement. In response to the economic crisis, the U.S. government launched a stimulus plan covering public infrastructure spending for all levels of government under the title American Recovery and Reinvestment Act of 2009.
The Buy American provisions require that all iron and steel products, and all manufactured products used in construction and infrastructure projects and funded under the American Recovery and Reinvestment Act of 2009 be produced in the United States.
The US government uses specific programs to manage the allocation of funds under the American Recovery and Reinvestment Act of 2009.
The situation before the agreement: at the federal level, Canada and the United States have government procurement obligations under the World Trade Organization agreement on government procurement and the North American Free Trade Agreement; at the sub-federal level, provinces, territories, and municipalities have never taken on international obligations for government procurement.
Prior to the recovery act, Canada and the United States enjoyed relatively open trade in government procurement at the sub-federal level, despite the lack of formal commitments. However, the new “Buy American” provisions of the recovery act upset this balance between the two countries in the area of government procurement.
In its response, Canada sought to address the immediate impacts of the recovery act as well as long-standing trade irritants in government procurement. An initial Canadian proposal was developed with provinces and territories and delivered to the United States on August 20, 2009. The United States presented a counter-proposal to Canada during the first round of negotiations, held in Washington, D.C., on October 1, 2009. After several more rounds of negotiations and technical discussions, an agreement in principle was reached on February 3, 2010.
The agreement reached on government procurement contains three elements. In terms of the first element, using the WTO agreement on government procurement, the GPA, Canada is providing permanent access to certain procurement by all provinces and territories except Nunavut in exchange for guaranteed access to procurement by 37 U.S. states, as per the undertakings by the U.S. in the World Trade Organization agreement on government procurement.
The second element is temporary commitments expiring September 30, 2011, in which Canada provides access to construction projects for certain provincial and territorial agencies excluded from the Canadian GPA commitments and for specific municipalities in exchange for exemptions from the Buy American provisions for U.S. infrastructure projects in seven programs of interest that receive funding under the recovery act.
The third and final element is a commitment to explore within 12 months the scope of a possible permanent agreement between Canada and the United States on government procurement that goes beyond the World Trade Organization agreement on government procurement and the NAFTA.
The agreement has multiple benefits for Canada, provinces and territories. Canadian businesses now enjoy guaranteed access to sub-federal government procurement by 37 U.S. states, in accordance with U.S. undertakings in the World Trade Organization agreement on government procurement. Canadian businesses are eligible to participate in a number of infrastructure projects and programs funded by the recovery act. Canada has greater bargaining power to negotiate for access to the sub-federal procurement by other GPA parties. This could lead to greater market access for Canadian suppliers.
In addition, if new programs that include Buy American provisions are adopted, the commitments made by Canada under the WTO Agreement on Government Procurement (GPA) would protect Canada's right to access the markets of the 37 U.S. states subject to the GPA.
Current negotiations would give Canada access to a fast-track consultation process should similar Buy American provisions apply to future funding programs.
Securing the U.S. government's commitment to finding a long-term solution to the government procurement problems that goes beyond current undertakings could facilitate procedures should new Buy American provisions be introduced.
The Canada-United States Agreement on Government Procurement came into force on February 16, 2010. The Canadian government is using its American network to inform the American administrations and companies involved in procurement and distribution that Canadian companies are now eligible to bid on contracts. Our embassy in Washington and our Canadian consulates in the United States are conducting this information campaign. In addition, we are working with sector and trade associations to get our message out.
I would like to turn to the actual agreement between the Government of Canada and the Government of the United States of America on government procurement to explain the structure and to highlight some of the key elements. I believe everyone has a copy of the agreement.
The agreement is divided into three parts and three appendices attached to the main component. The first part, or part A, is the mutual exchange concerning the sub-federal commitments between Canada and the U.S. within the WTO agreement on government procurement and how to give effect to these commitments. An important concession for Canada that Canada was able to obtain is to ensure that provinces will benefit from the revised text or the revised procedures of the GPA, which are more modern, and obtain a moratorium on certain elements of the text to allow the provinces to align their procurement regimes. That moratorium is good for a period of 12 months.
The second part of the agreement deals with a temporary agreement on enhanced coverage. This is where it describes how this will come into effect. The temporary agreement, part B, remains in force until September 30, 2011.
Part C is where we find the commitment within the 12 months of entering into force of the agreement to enter into discussions to explore an agreement that would expand, on a reciprocal basis, commitments with respect to government procurement beyond those that already exist. It is also here that, in recognition of the important trade relationships between the parties and the value of reciprocal market access in government procurement, a party, either the U.S. or Canada, can request expedited consultations on any matter related to government procurement and the other party agrees to promptly engage in such consultations no later than 10 days after the request has been made.
I turn your attention to appendix A, which is the action that Canada had to take in order to give effect to the sub-federal procurement within the agreement on government procurement. It is clear that Canada changes its sub-central market to add provinces and territories that will apply to the United States and are subject to negotiation of mutual acceptable commitments, including thresholds, with other parties.
The appendix is then followed by the actual annexes that will appear now in the agreement on government procurement. It lists the goods and services construction thresholds using special drawing rights. The threshold of 355,000 special drawing rights applies to goods and services, which converts to $604,500 Canadian. The construction services threshold is at five million special drawing rights, which converts to $8.5 million Canadian.
This is followed then by the list of entities by the provinces that are covered by the agreement. It should be noted that Nova Scotia, Ontario, and Quebec have specific exclusions under their lists.
Following the listing by Yukon are the general notes applicable to provincial procurement. These are the exclusions that do not apply, so the procurements of these things do not apply to the agreement.
Annex 4 also had to be amended to provide a listing of what services would be applicable by the provinces. It should be noted that all the services listed are not applicable to the provinces. Only those beginning at 8674, urban planning and landscape architectural services, and those following are applicable.
Annex 5 is the construction services annex, and it is followed by the general notes, which also apply to the provinces. This is where you find the general exceptions for all of the Canadian coverage under the agreement.
The next important annex is appendix B, which is what the U.S. had to submit to the WTO committee on government procurement to advise that it would remove the exclusion of access to sub-federal procurement to Canada and to list the programs under the Recovery and Reinvestment Act that the U.S. is going to give an exemption to Canada and Canada only for the seven programs. You will find that in attachments A and B of the U.S. section.
Appendix C, finally, is a temporary arrangement on enhanced access. This one sits outside the WTO agreement on government procurement, and it expires on September 30, 2011.
It's separated in two parts. Part A has the core principles because the rules and procedural rules of the agreement on government procurement do not apply to this appendix. What we have here is a rules lite approach, followed by part B, which is at the end of it, which depicts what the market access consists of. Again, the temporary offer is for construction contracts only at above $8.5 million. There are general exclusions that are not applicable to the temporary offer. This is followed by each province and lists the entities that are covered or subject to the temporary offer that expires.
Thank you for your attention, and I'd like to open the floor for questions.