Regulating the Free Market into Existence: A Beginner’s Guide to Municipal Trade Agreements

In this post, my plan is to keep things short(er) to the extent that I’m able (hopefully only 30% of my work here will be unnecessary verbiage). This entry is about interprovincial trade agreements that affect towns and cities. They affect what we can buy, or more accurately how we can buy it (if you’re interested in the specifics, look into the New West Partnership Trade Agreement, or NWPTA). Obviously, laws/agreements affecting municipalities’ purchasing are incredibly important, both politically and practically. For starters, “buying stuff” is a big part of what municipalities do; you can’t do a whole lot in terms of service delivery without building the right facilities, buying the right supplies, etc. With that said, purchasing is also perhaps one of the most unpopular government activities; think how much public angst is generated by an over-budget project, a controversial expenditure, or a failed program. Again, my self-absorption (self-absorption is a central mandate of this blog, after all), compels me to talk a little bit about a third way in which trade agreements are important: they affect my job! One of my first projects with the Town was to help prepare an updated purchasing policy. I went into this project thinking we had a relatively free hand in terms of what we could put into the policy, but by chance I attended a very timely and fortuitous seminar on trade agreements, which confirmed that, in fact, we did not. Without getting too much into the details, any expense over $75,000 or $200,000 (depending on what is being bought) falls under the rules of these trade agreements, and the required procedures for making the purchase are pretty much beyond our control or influence.

The intention is to “force” governments to purchase competitively; the purchasing process is supposed to be open and accessible to allow all businesses a fair shot at getting government contracts. The public interest at play here is obvious enough to render explanation unnecessary. Patronage, the hallmark of Canadian governments, historically speaking, is effectively curtailed, government accountability and transparency is increased, and overall spending costs go down.  At a more abstract/philosophical level, capitalism itself is preserved and enforced in the public sector, and the economy as a whole is, in a none-too-trivial way, more competitive.

Of course, none of these imperatives is objectionable, and on the face of it all are in fact incredibly laudable. However, perhaps there is a “darker side,” or at least some potential drawbacks, to this type of regime. At the very least, there are some interesting observations that can be made.

Firstly, these types of rules and agreements seem to be expanding constantly. Indeed, the NWPTA itself is an agreement between BC, Alberta, and Saskatchewan, but it replaced an earlier agreement in which BC wasn’t included. More momentously, Canada’s free trade agreement with the EU will affect municipal purchasing in Canada. This might only be notable for being a small, policy-level example of the expansion and integration of the international economy, but that in and of itself seems worth mentioning. It is also notable, though certainly not surprising in any way, that the direction of this integration is towards an increasingly liberalized, competitive economic environment. As an observer and participant in globalization, born as I was in this pivotal period of national subsidence, it is fascinating for me to see the formation of the “policy architecture” which makes globalization possible, and to see how such changes affect even the operations of a small government organization in Alberta. 

Another interesting result of these purchasing rules is to diminish local governments’ power to make procurement decisions which advance specific political aims. Of course, the choice of what is bought will always have a political dimension, but the choice of from whom it is bought now must, theoretically, be entirely apolitical. Essentially, governments are deprived of their powers of patronage. While the very word “patronage” rightfully bears very strong negative connotations, most people support it at least to some extent. Undoubtedly, many people think that workers and businesses within a country should receive some level of government preference relative to those beyond its borders, even if the use of foreigners makes more “economic sense”.  However, the opportunities for such “domestic favouritism” are decreasing; indeed, with the ratification of the free trade agreement with the EU, municipalities will not be able to favour domestic over European suppliers when making purchases.

To adopt a more local perspective, even as things stand presently the Town of Edson can’t simply buy from a local business because this would help bolster the local economy; instead, it must make unbiased, rational calculations about the merits of the products or services being provided, with no consideration to who is providing them.  This might be wholly uncontroversial to many, but there is also a reasonable case to be made that municipalities have a valid interest in (or perhaps even a responsibility to) promote local businesses, which after all pay municipal taxes, promote growth, broaden the range of products and services available to residents, and employ local people. Their continued existence is therefore not only important, but arguably a central imperative of local governments. Finally, for those who think that governmental power should be concentrated at the smallest possible level, the very fact that these trade agreements limit municipal discretion, even in a minor way, might be a red flag in and of itself.

Readers, what do you think? Should municipalities be allowed to bias their purchasing decisions in favour of local businesses, or is cost-effectiveness (and potentially quality) a more important consideration? Are there better ways to stimulate the local economy than simply “buying local”? Is “regulating” the free market into existence a contradiction in terms? Do you think these agreements, while attempting to promote efficiency in government, could be overly cumbersome or bureaucratic for governments trying to comply with them?