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### Viewing cable 09OTTAWA425, Prime Minister announces proposal to expand NAFTA's

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09OTTAWA425 | 2009-06-04 20:23 | 2011-04-28 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ottawa

`

    VZCZCXRO0935
    PP RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
    DE RUEHOT #0425/01 1552023
    ZNR UUUUU ZZH
    P 042023Z JUN 09 ZDK
    FM AMEMBASSY OTTAWA
    TO RUEHC/SECSTATE WASHDC PRIORITY 9498
    INFO RHEHAAA/WHITE HOUSE WASHDC
    RUEAIIA/CIA WASHDC
    RHEHNSC/NSC WASHDC
    RUCPDOC/USDOC WASHDC
    RUEATRS/DEPT OF TREASURY WASH DC
    RUEHME/AMEMBASSY MEXICO 1984
    RUCNCAN/ALL CANADIAN POSTS COLLECTIVE

` `

    UNCLAS SECTION 01 OF 02 OTTAWA 000425

    SENSITIVE
    SIPDIS

    STATE FOR E, EB/DCT, WHA/EX, WHA/CAN

    STATE PASS USTR (SULLIVAN)

    COMMERCE FOR ITA/MAC (WORD)

    TREASURY FOR IA (WEYER)

    E.O. 12958: N/A
    TAGS: ECON EFIN ETRD EINV EIND PREL PGOV CA
    SUBJECT: Prime Minister announces proposal to expand NAFTA's
    government procurement commitments to provinces

    Ref: Ottawa 393

    SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT ACCORDINGLY

    ¶1. (SBU) Summary:  Prime Minister Harper is receiving guarded
    support from Canada's provinces over his proposal to counter "Buy
    American" measures by expanding the NAFTA government procurement
    chapter.  The government hopes such an expansion will secure access
    for Canadian suppliers to the U.S. sub-federal procurement market.
    However, this strategy would require negotiation on two fronts:
    first, the provinces must be persuaded to drop their own
    protectionist barriers; and second, the United States and Mexico
    must then be persuaded to expand the NAFTA procurement chapter.
    Were this to happen, it would be a positive opening of Canadian
    markets but would not be a panacea for the disruptions caused by Buy
    America provisions. End Summary

    Harper's Response to "Buy American"
    -----------------------------------

    ¶2. (U) On June 3, Prime Minister Harper announced his intention to
    pursue an expansion of sub-federal government procurement
    commitments in the North American Free Trade Agreement (NAFTA).
    Growing Canadian concerns over potential business losses resulting
    from "Buy American" provisions in the American Recovery and
    Reinvestment Act of 2009 (ARRA) and other pending federal
    legislation (reftel) prompted Harper's announcement.

    ¶3. (U) Harper stated that while the WTO and NAFTA contain
    prohibitions against national preferences for federal level
    procurement, they do not apply to provinces and municipalities
    (i.e., sub-federal entities).  "I believe it would be interesting
    for all of our countries to look at dealing with that problem here
    in North America," stated Harper. "Obviously, at a time when we're
    trying to keep borders open internationally, I do think that the
    proliferation of domestic preferences in sub-national government
    procurement is really problematic. It is part of the creeping
    protectionism, not just in the United States, but elsewhere, that we
    must avoid to ensure a global recovery."

    ¶4. (U) While Canada has previously resisted formalizing
    provincial-level procurement access for foreign suppliers, recent
    actions in the context of the planned free trade talks with the
    European Union have help ease the way for Harper's proposal.  As a
    pre-condition for launching the FTA talks, the EU persuaded Canada
    to bring the provinces to the table for procurement talks. Canada's
    Minister of International Trade, Stockwell Day, indicated that the
    EU action "really opened the door" to the current federal-provincial
    dialogue on the NAFTA.

    Day as Provincial Consensus-Builder
    -----------------------------------

    ¶5. (SBU) Minister Day has been given the job of building consensus
    among provinces - with Quebec and Ontario already voicing a degree
    of support.  One of Day's challenges is to overcome provincial
    reluctance to give up buy-local provisions in their existing
    provincial regulations. The Canadian public also tends to be
    fiercely protective of social, health, and cultural matters - and an
    obvious foreign commercial presence in these areas might trigger a
    backlash against Harper's minority government.  While
    municipal-level procurement does not appear to be on the table at
    Qmunicipal-level procurement does not appear to be on the table at
    this stage, the results of the Federation of Canadian Municipalities
    (FCM) annual meeting on June 6 (reftel) will likely help shape
    federal and provincial thinking on the issue.  During the FCM
    meeting, more than 1000 municipalities will consider a slate of
    actions to counter "Buy American" restrictions.

    No pain, no gain
    ----------------

    ¶6. (SBU) Canadian trade watchers suggest that the domestic debate
    will hinge on comparing the costs and benefits of new procurement
    commitments against the current informal mechanisms governing
    provincial procurement.  According to Canadian trade lawyer, Simon
    Potter, while most provinces already allow U.S. companies to bid on

    OTTAWA 00000425  002 OF 002

    their contracts, it is a difficult process complicated by a
    patchwork of rules, exceptions and protectionist measures.
    Responding to the Prime Minister's announcement, Lawrence Herman,
    another Canadian trade lawyer, stated that "It will take a lot of
    effort to get the provinces to agree, but it's the only realistic
    way to solve the problem."

    ¶7. (SBU) Comment: Herman's hope that this will "solve the problem"
    raises a tactical issue for us and the Canadians: even were these
    negotiations to come to fruition, they would not be a a panacea for
    "buy national" provisions on both sides of the border. For one
    thing, the offers by states and provinces will be limited by
    geographical scope and by sector; for another, municipalities will
    not be covered at all. We suggest keeping in mind that this opening
    of Canadian markets will be a very positive step for U.S. exporters
    and investors but will not put to rest the arguments over "Buy
    America" and "Buy Canada" regulations. End comment.

`