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WTO strikes deal to open government purchasing

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The Doha round of global free trade talks is dead, but Canada and dozens of countries are forging ahead with a deal to open up government purchases, worth as much $100-billion a year.

More than a decade in the making, the landmark World Trade Organization agreement opens access to potentially lucrative contracts for Canadian suppliers of transportation infrastructure, telecommunications and financial services, particularly at the subnational government level.

In exchange, Canada will allow foreign companies to bid on billions of dollars worth of purchases by Crown corporations and provincial governments.

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"Concluding this negotiation for a new agreement is proof of the value of the multilateral trading system, and that the WTO is an effective vehicle to combat protectionism," International Trade Minister Ed Fast said in a statement issued in Geneva, where he's attending the first WTO ministerial meeting since 2010.

The 42 countries are expected to sign the deal by next April.

"This shows the WTO still has a heartbeat and a pulse," said trade lawyer Lawrence Herman of Cassels Brock in Toronto.

So far, the deal covers less than a third of the 153 WTO members. And for now, some of the largest emerging markets remain outside its scope, including all four BRIC countries – Brazil, Russia, India and China.

China's procurement market alone is estimated to be worth $100-billion. But it hasn't yet offered enough of that market to get in on the deal, although the United States indicated that may happen next year.

The United States, for example, is urging China to include state-owned enterprises, to add more subnational entities, and to lower the threshold for the size of covered contracts.

The deal provides a framework that paves the way for many more countries to join, said John Weekes, a former top trade negotiator and Canada's former WTO ambassador.

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"The hope is that this is the first step to getting the BRICs in," Mr. Weekes explained.

The deal will make is easier for companies such as Montreal-based SNC Lavalin to compete for government contracts outside North America, Mr. Weekes added.

The WTO's flagship project – the Doha round – has "rolled over and is lying dead in the water," but the organization is still doing important work, he insisted. The WTO is becoming more active as a watchdog against protectionism, it's involved in a project to better understand integrated global supply chains, and countries continue to join, according to Mr. Weekes.

Under the procurement deal, countries agree to a common set of rules, and then strike separate "annexes" with individual countries, outlining specific purchases that are open to bidding by Canadian companies, and vice versa.

"Market access countries grant is dependent on what you get," Mr. Herman said.

Government procurement in most countries accounts for between 15 per cent and 20 per cent of gross domestic product, the WTO said. It's worth 17 per cent of GDP, or almost €2.1-trillion ($2.7-trillion) in the European Union and about 30 per cent of output, or $348-billion in 2008, in India.

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Also in Geneva on Wednesday, Canada and a clutch of other WTO countries signed a pledge against protectionism, committing to not "raising new barriers to trade in goods and services, imposing new export restrictions, or implementing WTO-inconsistent measures in all areas, including those that stimulate exports." The United States, Japan, Chile, South Korea and the European Union also signed the pledge.

Earlier this week, China slapped anti-dumping duties of up to 21.5 per cent on U.S. cars in a tit-for-tat series of trade actions by both countries in recent months.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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