Canada - U.S. Agreement on Government Procurement

On February 12, 2010, Canada and the United States signed an agreement that will allow Canadian companies to participate in U.S. infrastructure projects financed under the American Recovery and Reinvestment Act. This information sheet has been prepared in order to provide an overview of the recent Canada-U.S. Agreement on Government Procurement which dealt with the Buy American requirements of the American Recovery and Reinvestment Act (Recovery Act).

Overview of the Recovery Act

The American Recovery and Reinvestment Act of 2009 (“Recovery Act”) seeks to provide a significant stimulus to the U.S. economy, which has been going through a major downturn. Of concern to Canada has been the provision in the legislation that imposes a requirement that “all iron, steel and manufactured goods” used in the construction and repair of “public works and public buildings” funded by the Recovery Act be produced in the United States. Despite the requirement that the Buy American provisions be applied consistently with the United States’ international obligations, Canada remained concerned about the potential negative impact given the lack of international obligations at the sub-federal level between Canada and the United States and the fact much of the Recovery Act infrastructure spending is by way of transfers from the federal government to state and local governments. Prior to the Canada-U.S. Agreement on Government Procurement, Canada and the United States had government procurement commitments to each other at the federal level through NAFTA and WTO Government Procurement Agreement (GPA) meaning Canadian suppliers had access to federal-level procurement under this agreement. The new Agreement means that Canadian suppliers can now access many sub-federal programs, either on a permanent or temporary basis. The Canada-U.S. Agreement on Government Procurement provides the opportunity for U.S. sub-federal governments and contractors to continue to work with Canadian suppliers or renew those relationships.

Overview of the Canada-U.S. Agreement on Government Procurement

The Governments of Canada and the United States initiated negotiations and succeeded in reaching an Agreement on Government Procurement, which came into effect on February 16, 2010. This Agreement has three major components:

• U.S. suppliers will now have guaranteed access to Canada's sub-federal markets for all provinces and territories, except Nunavut, in accordance with Canadian undertakings under the GPA in exchange for Canadian access to U.S. sub-federal markets under the U.S.' GPA commitments;
• U.S. exemptions for Canada from the Buy American provisions of the Recovery Actfor seven (7) programs of interest, in exchange for temporary Canadian procurement commitments for construction projects for many provincial/territorial agencies not included in the WTO GPA including for Canadian municipalities; and
• A commitment by both governments to explore the scope for a long term government procurement agreement between Canada and the U.S., within the next 12 months, to deepen, on a reciprocal basis, procurement commitments beyond those in the WTO GPA and NAFTA.

The Agreement also includes a process for expedited consultation on future concerns related to procurement issues, such as new legislation. The Agreement does not change pre-existing rights of Canadian companies to participate in U.S. federal government procurement, established under the NAFTA and WTO GPA, or of American companies to participate in Canadian federal procurement.

The Canada-U.S. Agreement pertaining to Recovery Act exemptions and its provisions apply to all 50 U.S. states and all U.S. municipalities. The Agreement also covers, on a permanent basis, the 37 U.S. states subject to the WTO GPA in accordance with their respective undertakings.

GPA Commitments

The 37 states subject to the WTO GPA are:

Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Iowa, Kansa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, New York, Nebraska, New Hampshire, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin, and Wyoming.

These commitments extend to the procurement of goods, services and infrastructure construction projects (including non-Recovery Act). Consistent with WTO GPA general rules, the commitment applies to procurement by U.S. states above certain thresholds which are:

• For goods and services, US$552,000.
• For construction projects, US$7,777,000.

Additional information can be on the WTO Government Procurement website.

Recovery Act Buy American Exemptions

The temporary part of the Agreement exempts Canadian companies from the Buy American requirements for many infrastructure projects funded under the Recovery Act. The seven programs covered under the Agreement are:

• 1. U.S. Department of Agriculture, Rural Utilities Services, Water and Waste Disposal Programs
• 2. U.S. Department of Agriculture, Rural Housing Service, Community Facilities Program
• 3. U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Energy Efficiency and Conservation Block Grants
• 4. U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, State Energy Program
• 5. U. S. Department of Housing and Urban Development, Office of Community Planning and Planning and Development, Community Development Block Grants Recovery (CDBG-R)
• 6. U. S. Department of Housing and Urban Development, Office of Public and Indian Housing, Public Housing Capital Fund
• 7. U.S. Environmental Protection Agency, Clean Water and Drinking Water State Revolving Funds, for projects funded by reallocated ARRA funds where the contracts are signed after February 17, 2010

The exemption applies to infrastructure projects above the WTO GPA threshold (US$7,804,000).

Additional Information

The best overall source of information on the Recovery Act funds is the Recovery.gov website. This site indicates when funds are transferred to states and other recipients. For funds already "awarded", the Recovery.gov/transparency Web site should be consulted. Their "reporting" mechanism also shows contracts completed.

The site Recovery.gov/Accountability provides information on funding allocated (sent) by sending agency, as well as by recipient.

More information on the Canada- U.S. Agreement on Government Procurement is available on the USTR Web site or by reading the full text of the agreement.