Trade deal could mean end of procurement strategies, panellists say
6 March 2012
By Remo Zaccagna, Business Reporter
An impending trade deal with Europe could spell the end of procurement strategies like the one used to award the $25-billion shipbuilding contract to Irving Shipbuilding Inc. in Halifax.
Under the Comprehensive Economic and Trade Agreement (CETA), which is expected to be finalized sometime this year, Canada has agreed to prohibit municipalities and provinces from offering incentives or favouring local bidders on procurement contracts.
According to the draft agreement, that means any contracts above $340,000 for goods and services and $8.5 million for construction would be subject to a challenge if a European company thought it was being excluded.
It’s one of a number of red flags about the deal that were raised Tuesday at a forum at the Delta Halifax organized by the Nova Scotia Federation of Labour and the Canadian Auto Workers.
A three-member panel discussed the impact of the trade agreement on Canada and Nova Scotia.
One of the most troubling potential effects for panellist Scott Sinclair, a senior research fellow at the Canadian Centre for Policy Alternatives, is that the Irving shipbuilding contract may not have happened if the agreement was already in place.
In his view, the federal procurement strategy used to award the shipbuilding contracts should be a model for the future.
“It’s sensible for governments to factor in the economic spinoffs and training opportunities and benefits for small businesses in their community when they go and make major purchases,” Sinclair said.
“CETA could mean that that’s the last Canadian success story for an industrial strategy and government purchasing, and I think that’s wrong.”
But Fred Morley, the executive vice-president and chief economist for the Greater Halifax Partnership, said the agreement means “there will be winners and those that don’t win.”
Halifax is one of the places expected to benefit from the agreement, as liberalized trade will increase the flow of goods and services between Canada and Europe.
“As the increased trade flow occurs both ways, a lot of that movement will come through the port of Halifax. Some of it may indeed be moving through the airport, through the cargo aspects, and that kind of thing,” he said.
“And we know every ship that comes through the harbour creates four full-time jobs per year. Fisheries also stands to benefit because of reductions in tariffs and the ability to move more products at a better price into Europe.”
Jim Stanford, an economist with the CAW, agreed that fisheries and agriculture might benefit from the trade agreement, with about 300 jobs in each sector being created in Nova Scotia.
But that does not offset between 475 and 2,850 job losses in areas like manufacturing that he said will occur under CETA.
“It’s very hard for me to see how this agreement would result in anything but more lost jobs and a bigger trade deficit,” Stanford said.
“The reality is CETA will give a much bigger boost to European sales in Canada than the other way around.”
According to Industry Canada, Nova Scotia companies produced and shipped $459-million worth of goods to the European Union in 2010 — representing 11 per cent of the value of total provincial domestic exports — up from $425.5 million in 2009 but down from the 10-year high of $520.8 million in 2006.
Fish, wood and pulp and paper products represented 62 per cent of exports from Nova Scotia to the EU, with machinery, fruits and other goods next on the list.
Meanwhile, there was $4.6-billion worth of imports from the EU cleared in Nova Scotia in 2010. These imports were not necessarily bound for Nova Scotia customers but may have been intended for other domestic markets. This was about $1.8 billion more than in 2001.
Three-quarters of those imports were cars and trucks, with the rest machinery, oil, metal products and other goods.
Trade with the EU represented almost 57 per cent of the value of imports cleared through Nova Scotia international points of entry in 2010.
Stanford said the trade deficits with Europe, both provincial and federal, are expected to continue after CETA. As some European countries teeter on economic collapse, he warned, they may be vying to export their way out of the crisis.
“It would be unprecedented, after signing a free trade agreement, to suddenly improve our trade balance,” he said.
“In practice, the opposite has occurred. We’ve gone worse into deficit and lost more jobs with each free trade agreement that we signed.”
The federal and provincial governments need to be more involved and open with the public as negotiations come to a conclusion, Sinclair said.
“They have an obligation to go out to their community and do a better job of explaining what’s on the table in these negotiations and giving people a chance for input when it makes a difference before the agreement is signed, sealed and delivered and a fait-accompli,” he said.
“We need a lot more engagement from all sectors of the economy, a lot more understanding of this agreement and what it means for all of us. Labour groups, business groups, everyone needs to become more aware and more involved in this process and have their say and have their input into the final result.”