Observing the debate last night on London "opting-out" of the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union, I had to wonder if some of the councillors understand international trade negotiations and how trade agreements are implemented.

After debating the issue, city council voted 10-5 to opt-out of CETA. This notion of municipalities "opting-out" of CETA is being advanced by the Council of Canadians, which celebrated its success after the council vote.

During the debate, Paul Van Meerbergen, Joe Fontana and Harold Usher were the strongest voices against the motion to opt-out. Stephen Orser also spoke against the motion. Both Van Meerbergen and Orser said that this motion would send a signal to businesses that London isn't open to trade. Usher argued that the Federation of Canadian Municipalities, of which he is a director, needs the city's support to advocate for the agreement to respect its seven principles.

Several councillors clearly do not trust the federal government to negotiate a trade deal that would benefit London. They were quite concerned about the impact of a potential future agreement on municipal procurement policy. Sub-national (ie provincial and municipal procurement) is a relatively new topic in international trade agreements for Canada. Although Canada is a signatory to the WTO's plurilateral (which means not all of the members of the WTO are signatories) Agreement on Government Procurement (GPA), that agreement only applies to procurement by the federal government, not provinces or municipalities. The more recent Canada-US Procurement Agreement, which allowed Canadian firms to be exempted from US Buy American provisions, included:

• provincial and territorial procurement commitments under the WTO Agreement on Government Procurement (GPA) for all provinces and territories (except Nunavut) in exchange for U.S. sub-federal GPA commitments;
• temporary Canadian procurement commitments for construction projects for some provincial/territorial agencies not included in the GPA and a significant number of municipalities in exchange for the U.S. exempting Canada from the Buy American provisions of the Recovery Act for 7 programs of interest that receive funding from Recovery Act; and
• a commitment to explore the scope for a long term government procurement agreement between Canada and the U.S., within the next 12 months, to deepen on a reciprocal basis, procurement commitments beyond those in the WTO GPA and NAFTA.

London was included in the list of municipalities in Ontario that these temporary procurement commitments applied to (see Part B - Market Access).

The Canada-US Procurement Agreement also includes these general exceptions:

3. Subject to the requirement that such measures are not applied in a manner that would constitute a means of arbitrary or unjustifiable discrimination where the same conditions prevail or disguised restriction on international trade, nothing in this Appendix will be construed to prevent Provinces and Territories from imposing or enforcing measures inter alia:

• necessary to protect public morals, order or safety;
• necessary to protect human, animal or plant life or health;
• necessary to protect intellectual property; or
• relating to construction services of persons with disabilities, philanthropic institutions or prison labour.

It is also worth mentioning that the negotiated rules are reciprocal: if we agree to no longer discriminate against European companies in municipal procurement, then European municipalities will not discriminate against Canadian companies in their procurement decisions. The idea is to increase competition and thereby lower costs for government procurement. Increased market access to Europe could be very good for a London success story like construction company Ellis Don.

Now, regardless of whether you think an agreement between Canada and the European Union would be good or bad for Canada, Ontario or London, it is worth considering how international trade agreements actually function.

First, two or more national governments enter into negotiations with each other. Once they reach agreement, each national government is responsible for enacting or updating legislation to implement what was agreed. In federal states like Canada, to the extent that the agreement affects sub-national governments within the federation (provinces in Canada's case) or the municipalities within those provinces, the national government will need to negotiate with the provinces to implement the agreement. This is why provinces are involved in negotiating CETA.

Whether a municipality is "in" or "out" during negotiations means little. It is totally impractical to have individual municipalities involved in international trade negotiations -- just think how many cities at least the size of London there are in the European Union! (answer: there are roughly 100 such cities in Europe).

Regardless of what city council decided last night, the federal government and the provinces will continue negotiating a deal with their counterparts in the European Union. If they reach agreement and the federal government and provincial governments enact legislation and regulations to implement CETA, then London -- or any municipality in Canada, for that matter -- will not be able to opt-out of those federal or provincial laws and regulations.

At best, this "opting-out" decision is a negotiating tactic between the city and the Province of Ontario. At worst, it is just an roundabout attempt by the Council of Canadians to scupper the trade negotiations before an agreement is reached.