Not buying it

The Globe and Mail reports that the Cons plan to invoke the "national security" exemption in the Agreement on Internal Trade in order to improve their ability to dictate the regional content of any contracts:

The Conservative government has used an extraordinary “national security” clause to take control of $8-billion in recently announced military spending, allowing it to dole out contracts to the West, Quebec and the Atlantic.

The federal government lost the power to steer contract work to specific parts of the country with the 1994 signing of the Agreement on Internal Trade with the provinces. But as part of the continuing purchase of new planes and helicopters, the government has decided to invoke a national-security exception (NSE), which effectively removes these contracts from reach of the agreement.

A federal official said the net result is that Ottawa will be able to impose regional quotas on the economic benefits of the contracts...

Leah Clark, a director-general at Industry Canada, confirmed in an interview that the government is likely to impose quotas in the distribution of the benefits in Canada.

“It is not usually our practice to specify minimums for regions,” she said, adding that the “the use of the NSE allows us to talk about minimums.”

It sounded more than a bit sketchy that national security is being used as the excuse for regional patronage which has nothing at all to do with national security. But on a quick review of the Agreement on Internal Trade itself, the action is even more indefensible than it appears at first glance.

The national security exemption reads as follows:

Article 1804: National Security
Nothing in this Agreement shall be construed to:
(a) require the Federal Government to provide, or allow access to, information the disclosure of which it determines to be contrary to national security; or
(b) prevent the Federal Government from taking any action that it considers necessary to protect national security interests or, pursuant to its international obligations, for the maintenance of international peace and security.

Frankly, I'm not sure how the Cons could defend a position that a decision based on regional development could be classified under this provision. Clause (a) refers plainly to information alone, not to any right to opt out of any contracting obligations entirely. Clause (b) could conceivably be stretched to apply to contracting, but then only if there's a genuine "national security interest" at stake - and by implication, only to the extent that such a national security interest is indeed at issue.

There is one other provision which could be invoked (Annex 502.2A). But this annex would have the effect of entirely removing a given government entity from the application of the Chapter Five procurement rules under the AIT. And if that provision is being applied to Industry Canada generally, then the problems go much further than merely the military procurement at issue: Industry Canada would be excluded from any future obligation of fair procurement, and all based on what's at best a questionable classification for the moment.

It gets worse, though, as contrary to the Globe and Mail's suggestion the Agreement on Internal Trade plainly allows for regionally-oriented measures under appropriate circumstances:

Article 508: Regional and Economic Development
Exceptional Circumstances
1. A Party may, under exceptional circumstances, exclude a procurement from the application of this Chapter for regional and economic development purposes, provided that:
(a) the exclusion of the procurement does not operate to impair unduly the access of persons, goods, services or investments of another Party;
(b) the exclusion of the procurement is not more trade restrictive than necessary to achieve its specific objective;
(c) notice of all such excluded procurements is provided by one or more of the methods specified in Article 506(2) and the notice provides details of the exceptional circumstances; and
(d) the Party seeks to minimize the discriminatory effects of the exclusion on suppliers of the other Parties.

In sum, even if there's no problem at all with the Cons' apparent goal of ensuring some regional parity in the benefits of their contracting, that could have been accomplished while still allowing for a transparent process. But instead of ensuring that any regional provisions in a contract satisfy the seemingly reasonable requirements of Article 508, the Cons have chosen a route based on factors utterly unrelated to regional development as their basis for insulating huge expenditures from any review.

Needless to say, the mere invocation of the words "national security" without a rational basis shouldn't be permitted to undermine either the public's right to scrutinize government expenditures, or the rights of contractors across the country under an agreement which the federal government signed to ensure fairness in contracting. And while the likely regional squabbling over the contracts at issue may itself punish the Cons for their poor decision to date, Canadians will need to keep the Cons under careful scrutiny to ensure that this decision isn't being used to hide even wider swaths of procurement from the public eye.