As Canada and the European Union kick off their latest round of trade talks, European officials are still fuming over Quebec's decision to lock international bidders out of a $1.2-billion contract to supply subway cars in Montreal.
Earlier this month, Quebec Premier Jean Charest announced the contract would go to a consortium led by Montreal-based aerospace firm Bombardier, without allowing foreign firms to bid. The cars will be assembled at a Bombardier plant in La Pocatiere, a town northeast of Quebec City where Charest's Liberals are vying to retain a seat in an upcoming byelection.
The Charest government has introduced legislation to fend off legal challenges under global-trade law.
But European officials say the deal sends the wrong signal on the issue that comes closest to being a deal breaker for the EU in its trade negotiations with Canada: the ability for European companies to bid on lucrative provincial and municipal contracts across Canada.
A senior European source, speaking on condition of anonymity, said Quebec's protectionist behaviour has threatened to undermine the positive atmosphere of the negotiations.
In a recent study, the Conference Board of Canada estimated the potential gains of a trade deal for both sides are considerably larger than expected, when sales of services are taken into account.
"We're arguing that both sides need to keep a longer-term picture in mind and not get sidetracked by issues that tend to get more air play," said Danielle Goldfarb, associate director of the think-tank's international trade and investment centre.
But a coalition of Canadian unions argues it would be foolish for Canada's provinces and territories to liberalize procurement contracts at a time when such contracts could still be needed to stimulate the flagging economic recovery.
Teresa Healy, a senior researcher with the Canadian Labour Congress, said opening the procurement market could create pressure on local governments to privatize public-service providers, such as water utilities.
The government, that champion of narrow special interests, is not my friend. Unions, those champions of privilege, are not my friend. But when government and unions join in an alliance, along with some corporations, against the vast body of ordinary Canadians...