Share your views: Consultations on reciprocal procurement policies in Canada

From: Global Affairs Canada and Finance Canada

What is the focus of this consultation

To advance work on the Budget 2021 commitment to pursue reciprocal procurement policies (see Background), the Government of Canada is seeking stakeholders’ views on potential approaches to implement reciprocal procurement policies in Canada.

Who is the focus of this consultation

The consultation is open to all Canadians and everyone is invited to share their views. The Government of Canada invites any Canadian stakeholder with an interest in the development and implementation of reciprocal procurement policies in Canada to provide input as part of this consultation.

The Government of Canada would like to hear from:

• Canadian businesses, including Canadian small businesses
• Government of Canada contractors and service providers
• Industry associations and labour unions
• Academics and professional experts
• Other interested parties

It is important to have diverse Canadian views represented through this consultation process.

Background

In Budget 2021, the Government committed to pursue reciprocal procurement policies to ensure that goods and services are only procured from countries that grant Canadian businesses a similar level of access to their procurement markets. This will help ensure that Canada’s trading relationships are mutually beneficial, and that countries restricting Canadian access to their procurement markets do not unfairly benefit from Canada’s procurement system.

Canada’s free trade agreements (FTAs) and the World Trade Organization Agreement on Government Procurement (GPA) require that Canada allow the suppliers, goods and services of its trading partners to compete on a level playing field with Canadian suppliers, goods and services for certain procurement opportunities, as specified under each agreement. 

For more information on government procurement in international trade agreements visit: Government Procurement

With the exception of certain types of procurements that are reserved for Canadian suppliers, goods or services, Canada generally allows foreign suppliers, goods and services to compete for Canadian federal procurements on an equal footing, whether or not a trade agreement applies. As a result, Canada generally provides foreign suppliers, goods and services greater access to federal procurement opportunities than strictly required under its FTAs or the GPA.

While Canada’s approach to federal procurement is aligned with some of Canada’s trading partners (e.g., Australia, the United Kingdom), others operate a procurement system that places restrictions on foreign suppliers’ access to their procurement markets (e.g., the United States). In certain cases, some countries have moved to introduce new restrictions that further limit access to procurements for Canadian suppliers and goods. The United States, for example, recently introduced new “Buy America” domestic content requirements in its infrastructure stimulus package that will apply on a permanent basis to iron, steel, manufactured products and construction materials used in any infrastructure project undertaken with federal financial assistance. These new requirements are expected to negatively affect Canadian suppliers’ access to procurement opportunities in the United States.

To advance work on the Budget 2021 commitment, the Government of Canada is seeking stakeholders’ views on potential approaches to implement reciprocal procurement policies in Canada, in a manner that is consistent with Canada’s trade obligations^{Footnote 1}. Generally speaking, “reciprocal procurement policies” refers to policies that would reduce access to Canadian federal procurement opportunities for foreign suppliers, goods, and services from countries that do not provide a comparable level of access to Canadian suppliers. While this consultation explores a number of possible approaches for implementing reciprocal procurement policies in Canada, other approaches may also be considered. In this regard, the Government would welcome stakeholders’ views on additional approaches beyond those identified in this consultation.

Potential approaches

This consultation seeks feedback on potential approaches to implement reciprocal procurement policies in Canada, as set out below. The approaches identified below are not mutually exclusive, and could be combined. Other potential approaches may also be considered, based on the feedback received during consultations.

Applying reciprocity to federal procurements on the basis of Canada’s international trade obligations

One approach to implementing reciprocal procurement policies would be to limit access to federal procurement opportunities of suppliers, goods and services from Canada’s trade partners to what is strictly required by Canada’s government procurement obligations outlined in relevant FTAs or the GPA.

This approach would have different impacts on different countries, depending on whether or not they have government procurement obligations with Canada, and depending on the level of openness of these obligations. In this scenario, suppliers, goods and services from countries that have not opened their procurement markets to Canadian suppliers (either through an FTA or the GPA), or that are providing less access to their procurement markets than that which they enjoy in Canada (because of existing measures and/or the imposition of new measures in their markets), would have reduced access to Canadian federal procurement opportunities.

Different options could also be considered in implementing this approach, such as providing preferential access to Canadian suppliers, goods and services, as well as suppliers, goods and services from countries that have opened their procurement markets to Canada (e.g., awarding extra points in the bid evaluation process for bidders who meet prescribed content requirements) or preventing certain foreign suppliers, goods and services from competing altogether. Whether to limit access to federal procurement opportunities based on the origin of the supplier, the origin of the good or service, or both would also be a consideration.

Placing conditions on foreign suppliers’ participation in federally-funded infrastructure projects undertaken by provinces and territories

A meaningful amount of Canada’s infrastructure spending is undertaken at the sub-federal level (i.e., by provinces, territories, municipalities and other local governments). Consistent with Canada’s trade obligations, the Government could place conditions on federal financial assistance provided to provinces and territories for infrastructure projects that are excluded from Canada’s international trade obligations (e.g., urban rail and urban transportation equipment and highway projects are excluded from Canada’s GPA obligations). 

Such conditions could take the form of reciprocal domestic (Canadian) content requirements, whereby foreign content would only be considered alongside Canadian content if that foreign content originates from a country that provides reciprocal access to infrastructure projects for Canadian suppliers, goods, and services.

Creating a federal set-aside program for Canadian small businesses

With the exception of the Canada–European Union Comprehensive Economic and Trade Agreement (CETA) and the Canada–United Kingdom Trade Continuity Agreement (TCA), all of Canada’s FTAs and the GPA allow for procurements to be excluded from the obligations of the applicable trade agreements if they have been set aside for Canadian small businesses.

As a complement to other actions, Canada could also therefore consider establishing a small business set-aside program that is consistent with its trade obligations. This would mean that foreign suppliers (with the exception of suppliers from the European Union and the United Kingdom) would generally not be able to compete for procurement opportunities that have been set aside for Canadian small businesses. This would require determining the value and scope of contracts to which the program would apply. Consideration would also need to be given as to whether, in certain instances, Canadian content requirements would also be applied to procurements once they are set-aside.

Other jurisdictions amongst Canada’s trading partners have adopted small business set-aside programs. For instance, the U.S. federal government automatically reserves any procurement with a value of US$250,000 or less for U.S. small and minority-owned businesses if the “rule of two” is met (i.e., there are at least two U.S. small businesses that are competitive in terms of market prices, quality and delivery, and which may want to bid on the contract). Procurement opportunities with a value greater than US$250,000 may also be set aside for U.S. small businesses if it is expected that the rule of two will be met.

Administrative factors

A number of administrative factors would also need to be considered in the development of reciprocal procurement policies in Canada, including:

1. Determination of applicable rules to identify the origin of suppliers, goods, and services used in the procurement: Any policy which limits participation in procurement opportunities based on the origin of suppliers, goods or services would need to be accompanied by rules on how to determine the origin of suppliers, goods or services.
2. Adoption of a waiver system: A waiver system may be implemented to allow for reciprocal procurement requirements to be waived in certain situations, such as when no domestic goods or services are available.

Questions to guide your submission

The Government invites interested stakeholders to submit their views on the potential approaches and administrative factors outlined above, including views on any anticipated economic, administrative, or other impacts – positive or negative. Although three potential approaches have been identified, the Government would also welcome stakeholders’ views on other approaches that could be considered.

Here are some general questions to guide your submission:

1. Do you have a place of business in Canada? If so, please provide the following information:
   1. Is your head office also located in Canada?
   2. In what type of sector do you operate/what type of goods or services do you provide?
   3. Do you consider yourself to be a Canadian or foreign small business?
   4. Have you previously tendered a contract/sub-contract in Canada related to urban rail and urban transportation equipment or highway projects? Were you required to provide information on domestic content on that project?
2. Do you generally support the implementation of reciprocal procurement policies in Canada? Please explain why or why not and provide views on any of the specific approaches outlined above or other approaches.
3. Would reciprocal procurement policies in Canada have an impact on your company’s overall competitiveness (e.g., access to procurement opportunities, administrative costs to prepare bids, pricing of bids, tracking origin and sourcing of goods)? Can you elaborate?
4. Do you have views regarding what types of Canadian federal contracts (in terms of scope, value or other) should be reserved for Canadian small businesses if Canada were to establish a small business set-aside program?
5. Do you have views on what factors should be considered if Canada were to establish a waiver program to allow for reciprocal procurement requirements to be waived in certain situations?
6. Do you have any other comments related to the implementation of reciprocal procurement policies in Canada, or additional approaches you think should be considered by the federal government?

Contact us

Reciprocal Procurement Consultations
Government Procurement, Trade and Environment Division
Global Affairs Canada
111 Sussex Drive
Ottawa ON, K1A 0G2
Email: RPconsultationAR@international.gc.ca