Agreement on Internal Trade (AIT) – Strategis
– CF Procurement – 2005
Agreement on Internal Trade (AIT) — Agreement
[From: http://strategis.ic.gc.ca/epic/internet/inait-aci.nsf/en/Home ]
On July 18, 1994, First Ministers signed the Agreement on Internal Trade...which came into effect on July 1, 1995.
The Agreement [AIT] aims to reduce barriers to the movement of persons, goods, services and investments
AIT [substituted for "The Agreement" hereafter without further note] provides for: general rules which
prevent governments from erecting new trade barriers and which require the reduction of existing ones in areas
covered under AIT; specific obligations in 10 economic sectors – such as government purchasing,
labour mobility and investment – which cover a significant amount of economic activity in Canada; the
streamlining and harmonization of regulations and standards (e.g. transportation, consumer protection); a formal
dispute resolution mechanism that is accessible to individuals and businesses as well as governments; and commitments
to further liberalize trade through continuing negotiations and specified work programs.
[A summary of AIT is partially reproduced below. Sections not relevant to overall Defence procurement have been
omitted. A more complete summary is available.]
1. Reciprocal Non-Discrimination
Establishes equivalent treatment – by all governments – for all Canadian persons, goods, services and
- Governments cannot charge businesses from other provinces higher fees than
they charge their own
- Provinces cannot require products manufactured in another province to meet
higher safety standards than
those manufactured within the province.
2. Right of Entry and Exit
Prohibits governments from adopting or maintaining measures which prevent or restrict the movement of
persons, goods, services or investments across provincial or territorial boundaries.
- Governments are prohibited from putting in place new measures that restrict
investment by Canadians
outside their province or territory.
3. No Obstacles
Requires governments to ensure their policies and practices do not have the effect of creating obstacles to
- Governments must ensure that the tendering of contracts covered under the AIT
does not favour suppliers
of a particular province.
4. Legitimate Objectives
Recognizes that, in pursuing certain non-trade objectives, such as consumer and environmental protection, public
health and safety, it may be necessary for a government to deviate from the three preceding trade rules. In such
cases, governments will need to ensure that any legislation or regulations they introduce:
do not impair unduly the mobility of persons, goods, services or investments;
do not restrict trade, more than absolutely necessary; and
do not create a disguised restriction on trade.
- A province may prohibit the transportation of hazardous goods through its
territory in unsafe containers.
However, insisting on a particular container design
rather than a performance standard for the containers
may be more trade restrict-
ive than necessary and could be a disguised trade barrier (i.e. if the only
manufacturing that particular design is located in-province).
Provides the basis for eliminating trade barriers caused by differences in stand- ards and regulations across
- Governments are required to harmonize standards and related measures on a
range of issues including
labelling and direct selling.
Assures that information is fully accessible -; through publication and notifica- tion – to interested
businesses, individuals and governments. Ensures exposure of potentially unacceptable policies and practices to
- Governments must identify a place where businesses and individuals can get in-
formation about their
policies. All proceedings before dispute resolution panels
must be open to the public.
Each of the sectoral chapters in the Agreement outlines specific obligations in a particular economic sector.
Highlights of these chapters are included below...
Chapter Five Procurement
Chapter Six Investment
Chapter Seven Labour Mobility
Chapter Eight Consumer-Related Measures and Standards
Chapter Nine Agricultural and Food Products
Chapter Ten Alcoholic Beverages
Chapter Eleven Natural Resources Processing
Chapter Twelve Under Negotiations
Chapter Thirteen Communications
Chapter Fourteen Transportation
Chapter Fifteen Environmental Protection
Having succeeded in reaching consensus, governments face the challenge of turning principles into practice. The
institutional provisions establish the struct- ure for the effective operation of the AIT. The ministerial-level
Committee on In- ternal Trade oversees the implementation and operation of the Agreement. This committee determines
the areas and timetable of future negotiations on removing internal trade barriers. A secretariat, based in Winnipeg,
provides administrative and operational support to the Committee on Internal Trade and any working groups or
subcommittees that it establishes.
The AIT contains several other important provisions which recognize that the existing accord is not a final
product, but part of an ongoing process of constant improvement. Among the provisions are: trade enhancement
arrangements which give governments greater flexibility in entering into new agreements; a relation- ship to
international agreements clause which increases federal-provincial coop- er ation on global trade matters; and,
measures related to future negotiations not covered by the AIT.
The AIT recognizes certain exceptions for reasons of public interest.
The federal government may take any action necessary to protect national
to maintain international peace and security.
Aboriginal peoples are not covered and existing aboriginal and treaty rights
The regulation of financial institutions is not covered as this issue is being
with in parallel negotiations
Measures relating to culture or cultural industries are exempt
Measures relating to a general framework of regional economic development
subject to a number of conditions, including:
° when the measure is used, it cannot be more trade restrictive than necessary
to achieve its goal;
° the measure does not unduly impair the access of persons, goods, or
services of another province or territory; and
° public scrutiny and evaluation of regional development programs on a
To ensure equal access to government procurement for all Canadian suppliers –
in a transparent and efficient
manner – in order to reduce purchasing costs and
to contribute to the development of a strong economy.
Governments are not permitted to discriminate against suppliers of another province or territory. This includes means
such as local price preferences, biased technical specifications, unfair registration requirements or unreasonable
Governments must make opportunities known to suppliers through the use of an electronic tendering system,
advertising in daily newspapers or the use of source lists. These must be accessible to all Canadian
All qualified Canadian suppliers have the right to bid on virtually all contracts tendered by most government
departments and agencies which exceed $25 000
for goods and $100 000 for services and construction.
An electronic tendering system has been developed to improve access to opport- unities for suppliers across
Suppliers can pursue bid protests at any point in the process.
Procurement by municipalities, municipal organizations, school boards and publicly-funded academic, health and social
services entities (MASH entities) [MASH = Municipalities, Academic institutions, Schools and Hospitals] is also
covered in all jurisdictions except British Columbia and the Yukon.
However, for covered MASH entities, the threshold levels are higher than for government departments: $100 000 for
goods and services, and $250 000 for construction.
MARCAN, is an initiative of the federal, provincial and
territorial governments under the Agreement on Internal Trade. It has been developed as a gateway site to procurement
opportunities within the Canadian public sector and is intended to help Canadian companies identify internet sites
that may publish tender notices.
What's Not Included?
A number of federal and provincial agencies and Crown corporations, as well as some professional services, are
currently excluded from the Agreement. Work is continuing to reduce the list of exceptions.
Federal Government Contact
235 Queen Street
Ottawa, Ont. K1A 0H5
Tel.: (613) 954-0430
Fax: (613) 954-0167
Chapter Six – Investment
To ensure that Canadian firms are able to make business decisions based on market conditions rather than on
discriminatory or investment-distorting government measures.
Provides for non-discriminatory treatment of Canadian businesses regardless of where the head office is located,
where the firm is incorporated or where the owners live.
Limits local presence or residency requirements as a condition of carrying on business or making an
Prohibits the use of local content, local purchasing, and local sourcing requirements except in limited cases for
regional development programs.
REGISTREX has been created to standardize corporate
registration and reporting requirements which should ease the compliance burden for firms conducting business in more
than one province or territory.
A Code of Conduct on Incentives prevents a government from "poaching": giving incentives to an enterprise
located in another province or territory that would directly result in the relocation of that operation to the
government's own territory. It also discourages the use of incentives which could be harmful to the economic
interests of other parts of Canada.
Measures adopted or maintained by the federal, provincial and territorial governments relating to Canadian investors
What's Not Included?
Does not apply to municipal governments or to measures relating to procurement by governments and Crown
Annex 608.3 — Code of Conduct on Incentives
To affirm that the principles of the Agreement apply to incentives and to minimize the adverse effects of incentives,
offered by one province or territory, on the economic interests of other provinces or territories.
A government is prohibited from offering incentives that:
entice a business to relocate in that province or territory; or
allow a business to undercut competitors in another province or territory in
a contract issued in Canada.
Governments are to refrain from providing incentives that would sustain uneconomic operations or increase capacity
beyond what is warranted by market conditions. Report on incentives are prepared annually.
Incentives such as: grants, preferential loans, debt guarantees and equity injections, [t]ax breaks for specific
enterprises, and any form of income or price support.
What's Not Included?
General investment promotion activities, such as the provision of market information.
Incentives given to prevent the relocation of an existing operation outside Canada.
Federal Government Contact
235 Queen Street
Ottawa, Ont. K1A 0H5
Tel.: (613) 954-5133
Fax: (613) 954-0167
Chapter Seven – Labour Mobility [omitted]
Chapter Eight – Consumer-Related Measures and Standards [omitted]
Chapter Nine – Agricultural and Food Products [omitted]
Chapter Ten – Alcoholic Beverages [omitted]
Chapter Eleven – Natural Resources Processing [omitted]
Chapter Thirteen – Communications [omitted]
Chapter Fourteen – Transportation [omitted]
Chapter Fifteen – Environmental Protection
To ensure that environmental measures do not become unnecessary barriers to internal trade, while permitting
governments the flexibility to establish their own environmental priorities and levels of protection.
Governments are restricted from applying environmental measures that discrim- inate against Canadians or create
unnecessary barriers to the free flow of goods, services, investment or people across provincial boundaries.
Governments are to harmonize environmental measures that may directly affect interprovincial mobility and trade.
This will reduce the compliance and regulatory burden on firms as well as lower the cost of doing business in Canada.
Govern- ments must not, through such measures, lower the levels of environmental protection.
Governments will not relax environmental measures to attract business.
The Canadian Council of Ministers of the Environment will:
harmonize environmental measures;
provide a forum for consultation;
administer the dispute settlement provisions of this chapter;
notify governments of proposed environmental measures; and
prepare an annual report on this chapter.
Environmental measures adopted or maintained by federal, provincial and territorial governments that may affect the
movement of people or interprovincial trade in goods, services or investments.
What's Not Included?
Measures that do not meet this standard are to be listed by July 1, 1997. Each gov- ernment is to develop a work
plan to eliminate such measures by January 1, 2000.
Environmental measures that have no trade-related implications are not covered under this chapter.
Federal Government Contact
22nd floor, 10 Wellington Street
Hull, Que. K1A 0H3
Tel.: (819) 953-1416
Fax: (819) 997-0709
Dispute Resolution Procedures
The Agreement on Internal Trade has been designed to maximize cooperation and minimize conflict. However, dispute
resolution procedures have been put in place to address the differences that will inevitably arise among governments,
as well as those between governments and individuals.
The Agreement on Internal Trade offers a range of opportunities to resolve conflicts and lays out the various steps
governments or individuals must follow to pursue a complaint. Each sectoral chapter contains its own dispute
settlement mechanism. When a dispute arises, the procedures written into the sectoral chapters are to be used first.
If those processes fail to resolve the problem, the formal dispute resolution procedures in Chapter Seventeen come
Sectoral Chapter Procedures
The steps identified in the specific sectoral chapters entail consultations and, in some cases, reference of an issue
to a quasi-judicial panel and/or a body of ministers. The dispute resolution procedures contained in these chapters
recognize that sectoral officials, experts and ministers are best acquainted and best placed to deal with issues in
their respective areas of direct responsibility.
Chapter Seventeen Procedures
Chapter Seventeen sets out a broad array of options to governments in conflict. They are followed when the dispute
resolution procedures in the appropriate sectoral chapter do not solve the problem or when there are no sector
dispute settlement procedures specified.
Chapter Seventeen procedures include: a consultation stage where an additional, broader trade perspective may be
brought to bear on issues; a stage where the assistance of the Committee on Internal Trade is sought; and, finally,
if an issue remains unresolved, the striking of an independent panel of experts to examine the issue and make
recommendations for its resolution. Panel proceedings are public.
Once a panel report has been issued, the governments involved are expected to take action to comply with the
report's recommendations. If a government does not act to implement the panel's findings or recommendations
within 60 days, the panel report is to be made public. Such governments are also expected to report to the annual
meeting of the Committee on Internal Trade on progress (or lack of progress) in complying with the panel
Compliance / Enforcement
If, after a year, a government has failed to change or remove a measure that a panel has ruled is inconsistent with
the Agreement, the complaining party may take retaliatory action — but only after discussions with the Committee on
Internal Trade. Any retaliatory measure must be in the same sector (or another sector covered by the AIT) and must
have an equivalent economic impact to the inconsistent measure maintained by the other government.
In the case of grievances by businesses or individuals, a complainant must first use any dispute resolution procedures
outlined in the pertinent sectoral chapter
to attempt to resolve the problem.
Only after these options are exhausted may a complainant turn to those set out to protect private parties under
Chapter Seventeen. The individual or business may request that either the provincial or federal government, whichever
has a "substantial connection" with the complainant, pursue their case.
If a government is not prepared to act on behalf of a complainant, the person or company may initiate the
person-to-government procedures. The first step is to submit the complaint to an independent "screener"
– an impartial individual who will assess the merits of the grievance. If the complaint is not frivolous, the
private party may then follow steps similar to the government-to-government process. These include consultations and
ultimate recourse to a dispute settlement panel.
At the end of the process – if approved by the panel – a vindicated complainant will recover costs
directly related to pursuing the complaint. A panel report would be released to the public if a government failed to
bring a measure into conformity with the AIT. The Committee on Internal Trade would annually review progress in
bringing measures into conformity with the ... recommendations of the panel.
For a government to be able to act on behalf of a person (i.e, individual, business or company), there must be a
"substantial connection" between them. A "sub- stantial connection" is most often found between
individuals and/or businesses and their provincial government. Generally, the test for this is if the person resides
in the province, and both the person and the province have experienced some form of economic injury.
The Government of Canada may act on behalf of individuals or business only when they have suffered some economic
injury because they are federally-con- stituted or because they operate under federal regulatory authority. The federal
government may not pursue cases on behalf of private party complainants in other circumstances.