Trade secrets

There will probably be considerable media interest in the how the Finance and Administration Committee deals with the behaviour of citizens witnessing council antics from the public gallery, but there is a matter on the agenda that should be of far greater concern to Londoners. That item deals with the behaviour of our federal government behind closed doors. It is the report on CETA, the Comprehensive Economic Trade Agreement between Canada and the European Union, an agreement that that could have serious repercussions for our local economy and our city’s ability to use our residents’ tax dollars in the public interest.

CETA is just the latest in series of trade agreements, that have been foisted upon Canadian citizens, without their consent or knowledge, in order maximize profits for international corporations. This time, they’re including municipalities in their net.

I say “without their knowledge or consent” because if you ask the average person what CETA is, you will get a blank stare. Very few will know what it is. When did you last see an article in the London Free Press about CETA? And where has the CBC been? In the last three election campaigns, municipal, provincial or federal, did you see any reference to CETA in campaign literature? How often did you hear the acronym at all-candidates debates? Was a question about CETA included in our council’s questionnaire to candidates in the provincial and federal elections?

While I served on the Board of Control I raised the subject of trade agreements, in particular TILMA. At that time it probably helped that no one really knew what I was talking about; it meant that we requested a report back from our director of intergovernmental relations, Grant Hopcroft. It took the better part of a year to get a briefing report, by which point we were onto the Agreement on Internal Trade and shortly thereafter the “Buy America initiative”.  But we did continue to get yearly updates at which the mantra was invariably “Down with protectionism”.

But it is that protectionism, more than anything else locally, that has made us aware of our vulnerability. Right here in London. Good middle-class jobs leaving the city as Obama attempted to reverse the impact of deregulation of financial institutions in the US leaving us in London attempting to compete with a $75M incentive to Caterpillar to abandon its 70 year old Electromotive Diesel plant and history.

How will CETA affect municipalities?

That’s hard to say, since we don’t know what’s actually in the potential agreement. We don’t know because we aren’t at the table; we’re hoping the province will look after us since we are, after all, creatures of the provincial government.

What we do know is that, in this trade agreement, we are not immune. In fact, municipal contracts and municipal utilities are of particular interest.

Only a few months ago, leaked documents indicated that, although the Harper government was requesting exemptions for some agricultural products (dairy and eggs), it was not requesting that municipalities or access to management of our utilities, including water, be excluded from the deal.

Apparently, there were 200 pages of proposed exemptions. Water wasn’t one of them.

It would have been easy enough to include; after all, the EU was excluding its water from the deal. Why not tit-for-tat? The concern is specifically that, should London contract out management of its water and/or wastewater system, it would be very difficult to bring back in house. Attempts to do so could become subject to investor rights challenges by private water firms which could claim that the city was denying a corporation’s right to make a profit.

This is not a small thing. Only last year, the private company that had operated the Lake Huron and Elgin Area water treatment plants serving 500,000 London-area residents for the past decade-- pleaded guilty to violating Ontario’s Safe Drinking Water Act. American Water Canada Corp. was charged — along with the Elgin Area water board — with five counts relating to the maintenance and operation of equipment at one of its two local facilities. The company pleaded guilty to one charge of failing to ensure water treatment equipment was operational; specifically equipment related to filtration and was fined $15,000. 

The company had been awarded the contract again with a one-vote majority after city officials had recommended bringing it back in house. (One of our city councillors, Bud Polhill, cast that vote). At present, we are free to do that; under CETA it would likely be much more difficult. In January, the contract was been awarded to Ontario Clean Water Agency, a crown corporation, for the next five years to the tune of S35M.

The main change for municipalities in the proposed agreement, or what we know about it, is the matter of procurement. Most of the money that the City of London receives is from its property tax base, from people who are physically located here. The primary duty of the city is to ensure the safety and security of the persons living within its jurisdiction, both the hard services like water, wastewater, garbage collection, utilities and road,  as well as the “soft” services—libraries, public transit, policing, social services, recreational programmes, etc.

London spends just under$800M per year, nearly $500,000 of which comes from the property tax base. While much of that is spent on full time employees of the corporation, from planners to garbage collectors, a significant proportion is spent on contracts for things like blue box recycling, telecommunications or vehicles and fuel. It is precisely these items, the ones that go out to tender, that will be affected.

Most of the time, procurement is no problem. Anything over $100K has to be publicly tendered and anyone can bid on it. In the interest of the property taxpayer, to keep increases at a minimum, the lowest bid that meets the criteria wins. I rarely witnessed anything different and, in fact, council’s procurement policy specified that the bottom-line was what counted, although, of course, there is always the possibility that the criteria specified would influence the outcome. This was more the case with expressions of interest—coming forward with a proposal—rather than a tender.

But shortly before I left council, questions were raised by myself and others about including the triple bottom line in making awards. In short, trying to get the best deal for the taxpayer based on the social and environmental impact in addition the dollar price tag. This is now council policy. The importance of this change cannot be overstated since procurement is one of the few tools that councils have available to ensure that when they spend, they also invest in the local community. I recall all too well that during the period of federal and provincial stimulus funding, former councillor David Winninger speaking against prioritizing an initiative because although the product purchased (cameras) could be beneficial, the actual money spent would leave the community.

That’s probably the biggest concern, next to exempting water, about the impact of CETA. Municipalities won’t be able to favour their home-grown business nor use their purchasing power strategically. Doing so could leave you vulnerable to challenges and appeals which are expensive and time-consuming.

Of course, not all purchasing is subject to tendering nor would it be covered by CETA. The thresholds are $340K for goods and services and $8.5M for construction. Concerns about these have been dismissed because, hey, how many of those are you going to have?

Well, as the 10^th largest city, quite a few actually. $8.5 M doesn’t last long when you’re doing a road widening, creating an overpass, or replacing a bridge. It’s peanuts when you’re talking about building light rail or buying more buses.

The current council has grandiose plans of $700M or more including building a new city hall with a performing arts centre. $8.5 M would hardly constitute a down payment.

Something that council was very keen on while I was on council was a 311 service whereby contacts from the community go to a one-stop shopping. It’s much more than a call centre. Fortunately, while I was on council a tentative agreement had been made with the union to accommodate the new technology and keep it in house. Were the current council to deal with the same issue, it would be leaning toward contracting out. The contract would probably come in on the order several million $. It could end up in another country.

So what are the municipalities doing about it, especially their federal organization the Federation of Canadian Municipalities (FCM)? 

Not much, as far as I can gather. Although the FCM started out in strong defense of its membership, it quickly backed off. At heart, FCM is a relatively conservative organization. It is also dependent on the goodwill of the federal government for funding; it’s reluctant to take a strong stand. It prefers to “get along” rather than challenge the hand that feeds it.

Never was that clearer than when FCM held its annual meeting in Halifax last summer. The Union of BC Municipalities called on the FCM to seek a “clear, permanent exemption” for municipalities” from the CETA. But the FCM Board ruled the motion ineligible for debate. A two-thirds majority was needed to overturn that decision. The vote, while supported by a majority, fell short of that.

The late Jack Layton, former president of FCM and then leader of the opposition, told the assembled delegates that while Canada was a trading nation, “municipalities should never allow their rights to manage local services to be given away.” Unfortunately, Jack is no longer with us.

For a while, David Miller was president of FCM. He too would have stood tall in the defense of municipal autonomy. But David Miller is no longer a player in municipal politics.

So instead of a “clear, permanent exemption” from CETA, we have FCM’s statement of 7 principles, asking for provincial governments to look after the interests of the municipalities and indicating some areas of concern. The statement was weak enough for anyone to endorse, especially the federal government which is desperate to make a deal to find markets for its agricultural products.

FCM has developed a set of seven weak ‘principles’ for them to support CETA. Those principles are:

1.       reasonable procurement thresholds (meaning they’re willing to compromise local procurement policies that promote local goods, services and employment);

2.       streamlined administration (they want it to be easy for municipal procurement policies to be free-trade compliant);

3.       progressive enforcement (they’re asking for verbal warnings before financial penalties are imposed on them for non-compliance);

4.       Canadian content for strategic industries (they want CETA to recognize that minimum Canadian-content rules should be allowed within reason);

5.       dispute resolution (they want to be able to defend themselves in NAFTA-like dispute resolution tribunals);

6.       consultation and communication (they want to be kept informed during the CETA talks so that the deal responds to municipal concerns);

7.       reciprocity (they want European municipal procurement spending opened as well).

Once that became the position of FCM, the provincial body, the Association of Municipalities (AMO), quickly followed suit. So basically, there is very little opposition to CETA. Most councillors don’t understand it or its implications. Those that oppose it are quickly marginalized as being protectionist, non-visionary, afraid to think big.

We can see what’s been happening across the province; municipalities are endorsing resolutions but they simply affirm what FCM has determined. 

A few months ago, even Toronto’s robust progressives on council found their resolution to request exemption from CETA being sidelined by the weaker FCM position.  It took a concerted effort at council in mid-February to replace that recommendation with a request that the City of Toronto be fully exempted from CETA. It was an important step forward. Even Mayor Rob Ford voted in favour of the exemption.

In London, we weren’t quite so independent. Although a local Stop CETA group was allowed to make a delegation and present its case to FAC, the committee referred it to Grant Hopcroft for a report and recommendation. He, being on the board of AMO, recommended supporting the FCM resolution which they and the rest of council did unanimously. It didn’t help that all of this happened last October days before a provincial election when the public’s attention was diverted and several members absent from council.

FCM and AMO are not taking this issue seriously. If you look at their websites, you don’t find a single article critical of CETA. AMO provides only one outside view, from the C. D. Howe Institute, a conservative “think tank”. Nothing from the Council of Canadians, nothing from the Centre for Policy Alternatives, nothing from the Columbia Institute which commissioned an independent legal opinion.

There are important issues at stake. Less than a year ago, our mayor invited Edmonton-based EPCOR to make an offer on London Hydro in concert with a couple of other utilities, namely water and waste water. EPCOR was clear that its primary interest was in managing our water. Under CETA, we would have had to open that up to European Corporations as well. Fortunately, that was headed off by public outcry. But the exploration of public private partnerships in a “shared utility model” continues as the current council grapples with ways to fund it dreams of 401 interchanges, expressways, city halls and urban beaches.

Monday, at the request of FCM representative Joni Baechler, an update will be provided. It seems that many of the delegates to FCM are less sanguine about CETA than their organization and want to re-visit the issue. Let’s hope that this time around our council takes some time to inform itself about CETA.