What can free trade agreements do for your business abroad?
Free trade agreements (FTAs) are formal arrangements that make it easier for countries to engage in trade — and give exporters streamlined or preferential access to market opportunities. Here are some key facts about FTAs for Canadian exporters.
Free trade agreements (FTAs) are treaties between two or more countries that reduce or eliminate barriers to trade, including lowering or waving tariff and non-tarrif barriers. Canada has 11 international trade agreements containing obligations on government procurement, some of which involve multiple countries, and all of which make it easier to access procurement markets.
FTAs on government procurement
Many FTAs cover government procurement, including procedural rules and obligations as well as market access commitments. Governments must follow these procedural rules throughout the procurement process. These specify the information that must be in an RFP, what’s required for sole-source contracts and other information.
Market access commitments determine what is covered by these rules and by countries’ obligations to offer non-discriminatory access to their procurement opportunities, based on four criteria:
- the procurement must be undertaken by an entity covered in the agreement,
- the procurement must be at or above a certain value,
- the type of good or service must be covered under the agreement,
- and the procurement must not be subject to an exclusion.
FTA chapters on government procurement are based on the following core obligations:
- Non-discrimination — which ensures Canadian goods, services and suppliers are treated no less favourably than goods, services and suppliers of the procuring country
- Transparency — ensuring clear rules and procedures are in place
- Fairness — procurement rules which treat all bidders equally.
- Accountability — with the obligation to put in place challenge mechanisms so bidders can address any failed obligations
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Canada’s FTAs at a glance
Canada’s free trade agreements with government procurement obligations span the globe, giving Canadian exporters the opportunity to reach a large number of markets. They include:
The gold standard of government procurement agreements is the Word Trade Organization Agreement on Government Procurement (GPA). The GPA covers 21 parties including Canada, all 27 member states of the EU, Japan, Korea, the UK and the U.S., representing $1.7 trillion in procurement markets annually. There are some notable exceptions in government procurement under this agreement, including
Although the CUSMA has a chapter on government procurement, it only applies between Mexico and the United States. Canada relies on the WTO Agreement on Government Procurement (GPA) for access to the U.S. government procurement market. Canada relies on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership for access to the Mexican government procurement market.
The Canada-EU Comprehensive Economic and Trade Agreement (CETA) government procurement chapter provides Canadian companies with guaranteed access to procurement opportunities at all levels of government throughout the EU — one of the world’s largest trading bloc and Canada’s second largest trading partner.
The CETA government procurement chapter covers the Council of the EU, the European Commission, the European External Action Service and essentially all central and regional contracting authorities of EU member states. It eliminates 99% of tariff lines and covers the procurement of all goods with the exception of sales to certain law enforcement entities. It also covers a range of services, including all construction services. For more, read the European Union government procurement guide for Canadian businesses.
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) aligns Canada with 10 countries in the Asia-Pacific region: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The agreement’s government procurement chapter is largely based on the GPA’s rules surrounding non-discrimination, transparency and procedural fairness. It also includes new provisions to ensure integrity in procurement processes and to facilitate the participation of small- and medium-sized enterprises in procurement opportunities.
South Korea is the world’s 11th largest economy, with a population of 50 million and per capita GDP of almost $35,000. The Canada-Korea Free Trade Agreement (CKFTA)’s government procurement chapter covers Korean central government entities and sub-national and other entities, and uses the procedural rules of the GPA as a base.
While Canada and South Korea also have obligations under the GPA, the GPA thresholds for goods and services procured by Korean central government entities are higher, compared to the CKFTA (($238 000 vs $100 000), making the CKFTA more advantageous for this type of procurement For more information, read the CKFTA’s chapter on government procurement.
An emerging market for Canada, Ukraine is showing promising growth in its demand for agriculture, manufactured goods, and aerospace components. Signed in 2017, the Canada-Ukraine Free Trade Agreement (CUFTA) includes the same procedural rules as the GPA. Canada has broader access to procurement opportunities with Ukraine’s provinces, municipalities and state/communal enterprises under the GPA.
Central and South America
Canada has several bilateral agreements with countries in Central and South America, including government procurement chapters which give guaranteed access to central-level government procurement and some state-owned enterprises. All goods are covered under these agreements except those for some law enforcement entities. Certain services and all construction services are covered as well. Specific agreements in these regions include:
Canadian companies looking to expand into countries that have free trade agreements with Canada can use Canada’s Global Bid Opportunity Finder (GBOF) Tool. This online portal consolidates procurement opportunities from numerous government tendering sources, with 5,000 new opportunities added daily. Register for your free account.
CCC can help you navigate FTAs
With decades of direct experience, we can help you understand the strategic importance of FTAs to your exporting business. If you have an overseas business opportunity and want to know if an FTA applies to it, contact our team today.
This post was last updated on November 20, 2022.
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