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Agreement on Internal Trade (AIT)  –  Strategis  –  CF Procurement  –  2005 Agreement on Internal Trade (AIT) — Agreement Summary [From: http://strategis.ic.gc.ca/epic/internet/inait-aci.nsf/en/Home ] On July 18, 1994, First Ministers signed the Agreement on Internal Trade...which came into effect on July 1, 1995.  The Agreement [AIT] aims to reduce barriers to the movement of persons, goods, services and investments within Canada. AIT [substituted for “The Agreement” hereafter without further note] provides for: general rules which prevent governments from erecting new trade barriers and which require the reduction of existing ones in areas covered under AIT; specific obligations in 10 economic sectors  –  such as government purchasing, labour mobility and investment – which cover a significant amount of economic activity in Canada; the streamlining and harmonization of regulations and standards (e.g. transportation, consumer protection); a formal dispute resolution mechanism that is accessible to individuals and businesses as well as governments; and commitments to further liberalize trade through continuing negotiations and specified work programs. [A summary of AIT is partially reproduced below. Sections not relevant to overall Defence procurement  have been omitted.  A more complete summary is available.] General Rules 1. Reciprocal Non-Discrimination Establishes equivalent treatment – by all governments – for all Canadian persons, goods, services and investments. Examples: - Governments cannot charge businesses from other provinces higher fees than   they charge their own businesses. - Provinces cannot require products manufactured in another province to meet   higher safety standards than those manufactured within the province. 2. Right of Entry and Exit Prohibits governments from adopting or maintaining measures which prevent or restrict the movement of persons, goods, services or investments across provincial or territorial boundaries. Example: - Governments are prohibited from putting in place new measures that restrict   investment by Canadians outside their province or territory. 3. No Obstacles Requires governments to ensure their policies and practices do not have the effect of creating obstacles to trade. Example: - Governments must ensure that the tendering of contracts covered under the AIT   does not favour suppliers of a particular province. 4. Legitimate Objectives Recognizes that, in pursuing certain non-trade objectives, such as consumer and environmental protection, public health and safety, it may be necessary for a government to deviate from the three preceding trade rules. In such cases, governments will need to ensure that any legislation or regulations they introduce: • do not impair unduly the mobility of persons, goods, services or investments; • do not restrict trade, more than absolutely necessary; and • do not create a disguised restriction on trade. Example: - A province may prohibit the transportation of hazardous goods through its   territory in unsafe containers. However, insisting on a particular container design   rather than a performance standard for the containers may be more trade restrict-   ive than necessary and could be a disguised trade barrier (i.e. if the only firm   manufacturing that particular design is located in-province). 5. Reconciliation Provides the basis for eliminating trade barriers caused by differences in stand- ards and regulations across Canada. Example: - Governments are required to harmonize standards and related measures on a   range of issues including labelling and direct selling. 6. Transparency Assures that information is fully accessible -; through publication and notifica- tion – to interested  businesses, individuals and governments. Ensures exposure of potentially unacceptable policies and practices to public scrutiny. Example: - Governments must identify a place where businesses and individuals can get in-   formation about their policies. All proceedings before dispute resolution panels   must be open to the public. Sectoral Chapters Each of the sectoral chapters in the Agreement outlines specific obligations in a particular economic sector. Highlights of these chapters are included below...   • Chapter Five Procurement   • Chapter Six Investment   • Chapter Seven Labour Mobility   • Chapter Eight Consumer-Related Measures and Standards   • Chapter Nine Agricultural and Food Products   • Chapter Ten Alcoholic Beverages   • Chapter Eleven Natural Resources Processing   • Chapter Twelve Under Negotiations   • Chapter Thirteen Communications   • Chapter Fourteen Transportation   • Chapter Fifteen Environmental Protection Institutional Provisions Having succeeded in reaching consensus, governments face the challenge of turning principles into practice. The institutional provisions establish the struct- ure for the effective operation of the AIT. The ministerial-level Committee on In- ternal Trade oversees the implementation and operation of the Agreement. This committee determines the areas and timetable of future negotiations on removing internal trade barriers. A secretariat, based in Winnipeg, provides administrative and operational support to the Committee on Internal Trade and any working groups or subcommittees that it establishes. Other Provisions The AIT contains several other important provisions which recognize that the existing accord is not a final product, but part of an ongoing process of constant improvement. Among the provisions are: trade enhancement arrangements which give governments greater flexibility in entering into new agreements; a relation- ship to international agreements clause which increases federal-provincial coop- er ation on global trade matters; and, measures related to future negotiations not covered by the AIT. Exceptions The AIT recognizes certain exceptions for reasons of public interest.   • The federal government may take any action necessary to protect national     security or to maintain international peace and security.   • Aboriginal peoples are not covered and existing aboriginal and treaty rights     are not affected   • The regulation of financial institutions is not covered as this issue is being     dealt with in parallel negotiations   • Measures relating to culture or cultural industries are exempt   • Measures relating to a general framework of regional economic development     are exempt, subject to a number of conditions, including:       ° when the measure is used, it cannot be more trade restrictive than necessary          to achieve its goal;       ° the measure does not unduly impair the access of persons, goods, or          services of another province or territory; and       ° public scrutiny and evaluation of regional development programs on a          regular basis Chapter Five–Procurement Purpose To ensure equal access to government procurement for all Canadian suppliers – in a transparent and efficient manner – in order to reduce purchasing costs and to contribute to the development of a strong economy. Obligations Governments are not permitted to discriminate against suppliers of another province or territory. This includes means such as local price preferences, biased technical specifications, unfair registration requirements or unreasonable time constraints. Governments must make opportunities known to suppliers through the use of an electronic tendering system, advertising in daily newspapers or the use of source lists. These must be accessible to all Canadian suppliers. What’s Covered? All qualified Canadian suppliers have the right to bid on virtually all contracts tendered  by most government departments and agencies which exceed $25 000 for goods and $100 000 for services and construction. An electronic tendering system has been developed to improve access to opport- unities for suppliers across Canada. Suppliers can pursue bid protests at any point in the process. Procurement by municipalities, municipal organizations, school boards and publicly-funded academic, health and social services entities (MASH entities) [MASH = Municipalities, Academic institutions, Schools and Hospitals] is also covered in all jurisdictions except British Columbia and the Yukon. However, for covered MASH entities, the threshold levels are higher than for government departments: $100 000 for goods and services, and $250 000 for construction. MARCAN, is an initiative of the federal, provincial and territorial governments under the Agreement on Internal Trade. It has been developed as a gateway site to procurement opportunities within the Canadian public sector and is intended to help Canadian companies identify internet sites that may publish tender notices. What’s Not Included? A number of federal and provincial agencies and Crown corporations, as well as some professional services, are currently excluded from the Agreement. Work is continuing to reduce the list of exceptions. Federal Government Contact Roman Staranczak Industry Canada 235 Queen Street Ottawa, Ont. K1A 0H5 Tel.: (613) 954-0430 Fax: (613) 954-0167 Chapter Six – Investment Purpose To ensure that Canadian firms are able to make business decisions based on market conditions rather than on discriminatory or investment-distorting government measures. Obligations Provides for non-discriminatory treatment of Canadian businesses regardless of where the head office is located, where the firm is incorporated or where the owners live. Limits local presence or residency requirements as a condition of carrying on business or making an investment. Prohibits the use of local content, local purchasing, and local sourcing requirements except in limited cases for regional development programs. REGISTREX has been created to standardize corporate registration and reporting requirements which should ease the compliance burden for firms conducting business in more than one province or territory. A Code of Conduct on Incentives prevents a government from “poaching”: giving incentives to an enterprise located in another province or territory that would directly result in the relocation of that operation to the government’s own territory. It also discourages the use of incentives which could be harmful to the economic interests of other parts of Canada. What’s Covered? Measures adopted or maintained by the federal, provincial and territorial governments relating to Canadian investors and enterprises. What’s Not Included? Does not apply to municipal governments or to measures relating to procurement by governments and Crown corporations. Annex 608.3 — Code of Conduct on Incentives Purpose To affirm that the principles of the Agreement apply to incentives and to minimize the adverse effects of incentives, offered by one province or territory, on the economic interests of other provinces or territories. Obligations A government is prohibited from offering incentives that:   • entice a business to relocate in that province or territory; or   • allow a business to undercut competitors in another province or territory in     obtaining a contract issued in Canada. Governments are to refrain from providing incentives that would sustain uneconomic operations or increase capacity beyond what is warranted by market conditions. Report on incentives are prepared annually. What’s Covered? Incentives such as: grants, preferential loans, debt guarantees and equity injections, [t]ax breaks for specific enterprises, and any form of income or price support. What’s Not Included? General investment promotion activities, such as the provision of market information. Incentives given to prevent the relocation of an existing operation outside Canada. Federal Government Contact Philip Morrison Industry Canada 235 Queen Street Ottawa, Ont. K1A 0H5 Tel.: (613) 954-5133 Fax: (613) 954-0167 Chapter Seven       –     Labour Mobility [omitted] Chapter Eight        –    Consumer-Related Measures and Standards [omitted] Chapter Nine         –    Agricultural and Food Products [omitted] Chapter Ten           –    Alcoholic Beverages [omitted] Chapter Eleven       –    Natural Resources Processing [omitted] Chapter Thirteen   –   Communications [omitted] Chapter Fourteen   –   Transportation [omitted] Chapter Fifteen       –   Environmental Protection Purpose To ensure that environmental measures do not become unnecessary barriers to internal trade, while permitting governments the flexibility to establish their own environmental priorities and levels of protection. Obligations Governments are restricted from applying environmental measures that discrim- inate against Canadians or create unnecessary barriers to the free flow of goods, services, investment or people across provincial boundaries. Governments are to harmonize environmental measures that may directly affect interprovincial mobility and trade. This will reduce the compliance and regulatory burden on firms as well as lower the cost of doing business in Canada. Govern- ments must not, through such measures, lower the levels of environmental protection. Governments will not relax environmental measures to attract business. The Canadian Council of Ministers of the Environment will:   • harmonize environmental measures;   • provide a forum for consultation;   • administer the dispute settlement provisions of this chapter;   • notify governments of proposed environmental measures; and   • prepare an annual report on this chapter. What’s Covered? Environmental measures adopted or maintained by federal, provincial and territorial governments that may affect the movement of people or interprovincial trade in goods, services or investments. What’s Not Included? Measures that do not meet this standard are to be listed by July 1, 1997. Each gov- ernment is to develop a work plan to eliminate such measures by January 1, 2000. Environmental measures that have no trade-related implications are not covered under this chapter. Federal Government Contact Ellen Burrak Environment Canada 22nd floor, 10 Wellington Street Hull, Que. K1A 0H3 Tel.: (819) 953-1416 Fax: (819) 997-0709 Dispute Resolution Procedures The Agreement on Internal Trade has been designed to maximize cooperation and minimize conflict. However, dispute resolution procedures have been put in place to address the differences that will inevitably arise among governments, as well as those between governments and individuals. The Agreement on Internal Trade offers a range of opportunities to resolve conflicts and lays out the various steps governments or individuals must follow to pursue a complaint. Each sectoral chapter contains its own dispute settlement mechanism. When a dispute arises, the procedures written into the sectoral chapters are to be used first. If those processes fail to resolve the problem, the formal dispute resolution procedures in Chapter Seventeen come into play. Government-to-Government Disputes Sectoral Chapter Procedures The steps identified in the specific sectoral chapters entail consultations and, in some cases, reference of an issue to a quasi-judicial panel and/or a body of ministers. The dispute resolution procedures contained in these chapters recognize that sectoral officials, experts and ministers are best acquainted and best placed to deal with issues in their respective areas of direct responsibility. Chapter Seventeen Procedures Chapter Seventeen sets out a broad array of options to governments in conflict. They are followed when the dispute resolution procedures in the appropriate sectoral chapter do not solve the problem or when there are no sector dispute settlement procedures specified. Chapter Seventeen procedures include: a consultation stage where an additional, broader trade perspective may be brought to bear on issues; a stage where the assistance of the Committee on Internal Trade is sought; and, finally, if an issue remains unresolved, the striking of an independent panel of experts to examine the issue and make recommendations for its resolution. Panel proceedings are public. Once a panel report has been issued, the governments involved are expected to take action to comply with the report’s recommendations. If a government does not act to implement the panel's findings or recommendations within 60 days, the panel report is to be made public. Such governments are also expected to report to the annual meeting of the Committee on Internal Trade on progress (or lack of progress) in complying with the panel report. Compliance / Enforcement If, after a year, a government has failed to change or remove a measure that a panel has ruled is inconsistent with the Agreement, the complaining party may take retaliatory action — but only after discussions with the Committee on Internal Trade. Any retaliatory measure must be in the same sector (or another sector covered by the AIT) and must have an equivalent economic impact to the inconsistent measure maintained by the other government. Person-to-Government Disputes In the case of grievances by businesses or individuals, a complainant must first use any dispute resolution procedures outlined in the pertinent sectoral chapter to attempt to resolve the problem. Only after these options are exhausted may a complainant turn to those set out to protect private parties under Chapter Seventeen. The individual or business may request that either the provincial or federal government, whichever has a “substantial connection” with the complainant, pursue their case. If a government is not prepared to act on behalf of a complainant, the person or company may initiate the person-to-government procedures. The first step is to submit the complaint to an independent “screener” – an impartial individual who will assess the merits of the grievance. If the complaint is not frivolous, the private party may then follow steps similar to the government-to-government process. These include consultations and ultimate recourse to a dispute settlement panel. At the end of the process –  if approved by the panel  – a vindicated complainant will recover costs directly related to pursuing the complaint. A panel report would be released to the public if a government failed to bring a measure into conformity with the AIT. The Committee on Internal Trade would annually review progress in bringing measures into conformity with the ... recommendations of the panel. Substantial Connection For a government to be able to act on behalf of a person (i.e, individual, business or company), there must be a “substantial connection” between them. A “sub- stantial connection” is most often found between individuals and/or businesses and their provincial government. Generally, the test for this is if the person resides in the province, and both the person and the province have experienced some form of economic injury. The Government of Canada may act on behalf of individuals or business only when they have suffered some economic injury because they are federally-con- stituted or because they operate under federal regulatory authority. The federal government may not pursue cases on behalf of private party complainants in other circumstances.