TPP deal could disappoint some
Trade pact liberalizes market for procurement — but not all the way
Gary Horlick, a Washington- based international trade lawyer, says that while the Trans- Pacific Partnership trade deal is generally good news for infrastructure builders, they may be disappointed that the deal doesn’t throw open the crossborder market for infrastructure procurement.
“With things like procurement, no government is willing to let go of that,” Horlick said. “All international procurement agreements are piecemeal. One party says, ‘ I’ll open up this piece if you open up that piece.’ But no one says, ‘ I’ll open up all my procurement if you open up all yours.’”
This seems to be the case with the TPP, which liberalizes the market for international government procurement, but not all the way. The text of the TPP has yet to be publicly released, but the deal apparently allows governments to keep some limits on procurement in place. For example, the government of Canada says it has preserved its ability to promote environmental sustainability and to provide preferences to Aboriginal businesses.
But limitations on trade in procurement might be the rare disappointment for infrastructure builders in the proposed TPP, which would create a massive trading block of 12 Pacific Rim nations, including Canada, the U. S., Mexico, Japan and Vietnam.
Horlick spoke Tuesday at the Conference on Public- Private Partnerships in Toronto. The conference is an annual event organized by the Canadian Council of Public- Private Partnership, which promotes the use of PPP in infrastructure development.
Horlick’s primary message is that member countries will likely ratify the agreement, despite what you might hear from lobbyists in Washington or politicians currently running for U. S. president.
The 12 nations included in the deal make up at least 40 per cent of global gross domestic product. Simple game theory tells you that countries can’t risk not joining the deal, Horlick said.
“God help you if you’re left out,” he said. “There’s a small industry in Washington that goes around saying, ‘ Oh, it’s in trouble, hire me to pass it.’ But it will pass. There will be a huge amount of smoke and mirrors and noise because there always is. But it will happen.”
Each of the 12 nations that signed the deal must ratify it before they can join the trading block. But Horlick explained there is a provision in the agreement that makes the deal operative once six countries representing 85 per cent of the trading block’s GDP sign on. If the U. S. and Japan ratify, that basically satisfies the GDP requirement, and all that would be needed would be to get four smaller nations on board.
One of the more interesting aspects of the TPP is that it will apparently tighten rules on investorstate trade disputes. This could result in fewer of the investortrade disputes that have emerged under the North American Free Trade Agreement.
“The TPP makes it harder to sue governments than NAFTA. There are more protections against frivolous cases,” he said.
Horlick’s experience has shown him that international trade deals always result in expansion of business between countries. This often takes place in business sectors that were not foreseen by the people who negotiated the deals.
He expects one of those sleeper areas to be the infrastructure associated with border crossings and cross- border transportation links — obviously a pleasing message to an audience made up of people who build infrastructure projects.
“There are going to be needs for infrastructure that no one is projecting today,” Horlick said. “Businesses and entrepreneurs — people like you — will see opportunities that the negotiators didn’t see.”
Public- private partnerships are ways to develop public needs with private sector investment. Proponents claim PPPs can deliver infrastructure more quickly and efficiently. Yet others, such as Ontario’s auditor general Bonnie Lysyk, have questioned whether they provide good returns for taxpayers.
In another presentation Tuesday, pollster Nik Nanos went over some research that explained some of the reasons Canadians might oppose PPP projects. Canadians say they want more transparency about PPP projects and their true cost, Nanos found. He also learned that Canadians are concerned about the presence of foreign companies in the PPP space.
It’s not that Canadians don’t want any foreign involvement in projects, he explained. It’s just that Canadians want to see a local company in the mix to make sure the project is a “shining beacon” that delivers on promises to the community. The key takeaway, Nanos said, is that having a mix of foreign, local and domestic companies is a critical factor in gaining public acceptance for PPPs.