Chapter 6 - Impact of the trade agreements on buying

North American Free Trade Agreement (NAFTA)
World Trade Organization - Agreement on Government Procurement (WTO-AGP)
Agreement on Internal Trade (AIT)

Canada's trade agreements with foreign countries call for the breakdown of trade barriers. Canada also has a trade agreement with the provinces with a similar objective.

You must decide whether or not the requisition you have received is subject to a particular agreement, or a combination of agreements. To determine coverage under these agreements, you must review the requisition value, the client, the type of good or service, and any possible exemptions or exclusions. Some departments have more exemptions or exclusions than others.

North American Free Trade Agreement (NAFTA)

This agreement was set up between Canada, the USA and Mexico to achieve greater competition in government procurement and to eliminate preference given to domestic products or suppliers.

If all of the following four NAFTA factors are met, your client's requirement is subject to NAFTA; If any one of them is not met, it is not subject to NAFTA:

• The requirement has a value in Canadian dollars as follows:
  • goods $27,300 or more (for Canada and US) and $76,600 (for Canada and Mexico)
  • services $76,600 or more
• Certain departments are not subject to the agreement. You must determine the coverage for your client by consulting the relevant annexes of the agreement itself. For example, the National Film Board and the Canadian Space Agency are exempt.

• Certain types of goods and services are not subject to NAFTA. The various goods and services that are subject to NAFTA are explained in the agreement.

• Certain requirements are exempt. You must determine whether your client's requirement is exempt. For example, procurements for the set aside program for Aboriginal businesses, and those subject to any of the Aboriginal land claim agreements, are exempt.

There are general exceptions like procurements related to national security, products made by disabled persons, philanthropic institutions or prison labour, and measures necessary to protect public morals, order or safety. There are also other, more specific exceptions which can be identified by consulting the agreement.

This is a multi country agreement set up to foster greater international competition for government procurement. It covers both goods and services.

Coverage and exemptions are similar to NAFTA. To determine whether the WTO-AGP is applicable to your client's requirement, you must consult the agreement.

Generally, if all of the following four criteria are met, the requirement is subject to WTO-AGP. If any one of the criteria is not met, the procurement is not:

• The value of the requisition.
  Goods and services worth $221,300 or more. Obviously, if your client's requirement is estimated to cost less than $221,300, it is not subject to the agreement, but may be subject to NAFTA or the Agreement on Internal Trade.
• Coverage by client department.
  Most federal government departments and agencies are covered under WTO-AGP . Exceptions are, for example, the House of Commons, the Prime Minister's Office, the Canadian Space Agency, the National Film Board. Crown corporations are not covered by WTO-AGP.
• Coverage by type of requirement.
  Like NAFTA, there are general exceptions like procurements related to national security, products made by disabled persons, philanthropic institutions or prison labour, and measures necessary to protect public morals, order or safety. There are also other, more specific exceptions which can be identified by consulting the agreement.
• Coverage by requirement itself
  Certain requirements are exempt

This is a comprehensive agreement on internal trade in Canada which aims to reduce barriers to trade among the provinces.

The agreement creates a framework that ensures equal access to procurement for all Canadian suppliers, resulting in a reduction in purchasing costs.

If all of the following four AIT criteria are met, the procurement is subject to AIT. If any one of the criteria is not met, the procurement is not subject to AIT.

• Value
  A purchase is subject to AIT if the requisition value is:
  - $25,000 or greater for goods;
  - $100,000 or greater where the largest portion of the purchase is for services.
  - $100,000 or greater for construction.
• Client
  Most departments, agencies, commissions and many Crown corporations are subject to AIT. For government organizations that are not subject to AIT, consult Chapter 5 (Procurement) of the agreement.
• Type of requirement
  All requirements for the purchase, lease, rental or conditional sale of goods, services or construction are covered. There are certains exceptions for specified services or circumstances. Again, consult Chapter 5 of the agreement.
• Requirement
  Determine that the requirement is not exempt by consulting Chapter 5 of the agreement.

Under all three trade agreements, vendors have the right to challenge a procurement decision. They may do so by addressing a complaint to the Canadian International Trade Tribunal.