Trade Agreements

The U.S. government procures large quantities of goods and services through a unique acquisition process that attempts to satisfy the needs of individual agencies, promote fair competition, encourage participation from U.S. small businesses, and in some instances, limit the participation of foreign sources.

Two international free trade agreements help Canadians to compete in U.S. federal procurement markets:

• North American Free Trade Agreement (NAFTA)
• World Trade Organization (WTO) Government Procurement Agreement (GPA)

For information on Joint Defense Agreements, please contact Rich Malloy, Trade Commissioner (Defence), Canadian Embassy, Washington, D.C.

North American Free Trade Agreement (NAFTA)

The U.S. Federal Acquisition Regulations (FAR) discuss the NAFTA agreement in FAR Subpart 25.4.

NAFTA provides that, with some exceptions, offers for products of signatory countries are treated without any discriminatory provisions. In other words, an offer from a Canadian firm would receive equal consideration against an offer from a U.S. firm. A number of exceptions apply to this equal treatment. For example, FAR Subpart 25.4 identifies service contracts that are not subject to NAFTA and other trade agreements. It further exempts from NAFTA coverage those procurements that have been "set-aside" for U.S. small businesses and certain other procurements that support national security or defence.

The FAR identifies dollar thresholds for the application of NAFTA provisions. Current thresholds are:

Supply contracts: US$25,000 or more
Eligible service contracts: US$77,533 or more
Construction contracts: US$10,079,365 or more.

When the prime contract meets or exceeds these dollar thresholds, Canadian firms are allowed to compete on an equal footing with U.S. firms, unless an exception applies (such as a small-business set-aside).

Should you disagree with a U.S. contracting officer as to the applicability of NAFTA to a specific procurement, you can contact your nearest Canadian Trade Commissioner – In Canada or Abroad for further guidance. The right to protest is usually described in U.S. government documents that solicit bids or offers.

World Trade Organization (WTO) Government Procurement Agreement (GPA)

The WTO Government Procurement Agreement (GPA) is a legally binding agreement that allows companies to compete equally in foreign procurement markets. While not all WTO members are bound by this agreement, signatories to the WTO GPA are obliged to allow open access to domestic procurement at the federal level when contracts exceed dollar value thresholds.

The current U.S. dollar thresholds are:

Federal (Central) Government Entities
Goods & Services: US$ 191,000
Construction: US$ 7,358,000
Sub-federal (Sub-central) Government Entities
Goods & Services: US$ 522,000
Construction: US$ 7,358,000

Canada and the U.S. are both signatories to the WTO GPA, which gives Canadian companies free trade protections to participate in U.S. federal procurement markets, similar to NAFTA.

In addition, the WTO GPA allows Canadians to compete equally at the sub-federal level in some circumstances. In February 2010, Canada and the U.S. reached an agreement to open access to sub-federal procurement following the rules of the WTO GPA. In the U.S., 37 states are signatories to the WTO GPA as 'Sub-Central (Federal) Government Entities.' In these states, Canadians will now receive free trade protections under the guidelines of the WTO GPA when the prime contract value exceeds the applicable thresholds and no other declared exceptions apply.

This is significant because while most procurement funding may come from the federal government, in the majority of projects, the procuring entity will be at the state or municipal level. While these trade agreements do not apply to municipalities, open access to state level procurement is an important advantage offered by the WTO GPA and presents significant new opportunities.