4.4 Agreement on Internal Trade (AIT)

 This agreement governs trade between Canadian provinces, and is designed to remove barriers to the movements of people, goods and services within the country. It was consistent with the free trade visions of the late 80s and early 90s, and was inspired by the view that provincial governments were exercising excessively interventionist policies that needed to be curtailed (Doern and MacDonald, 1999). It came into effect in 1995, with some revisions enacted over time (the latest approved in 2007). A general principle of the AIT, similar to GATT Article III, is reciprocal non-discrimination,

Subject to Article 404, each Party shall accord to goods of any other Party treatment no less favourable than the best treatment it accords to:

(a) its own like, directly competitive or substitutable goods; and

(b) like, directly competitive or substitutable goods of any other Party or non-Party (Article 401.1, AIT).

The agricultural and food goods provisions are concerned primarily with establishing common standards and removing technical barriers to trade, including requirements that provinces not use sanitary and phytosanitary provisions as disguised trade restrictions. The barriers negotiated included such technical matters as provincial regulation of margarine colouring, grading of potatoes, standards for imitation dairy products, and bulk shipment of fruits and vegetables (Doern and MacDonald, 1999).

There are a number of exceptions/exemptions to the AIT under which local/sustainable food procurement might fall.  First, the aforementioned Article 404 (Legitimate Objectives) states (AIT, undated):

Where it is established that a measure is inconsistent with Article 401, 402 or 403, that

measure is still permissible under this Agreement where it can be demonstrated that:

(a) the purpose of the measure is to achieve a legitimate objective;

(b) the measure does not operate to impair unduly the access of persons, goods, services

or investments of a Party that meet that legitimate objective;

(c) the measure is not more trade restrictive than necessary to achieve that legitimate

objective; and

(d) the measure does not create a disguised restriction on trade. (Article 404, AIT)
If local/sustainable development is properly framed to meet provincial environmental and regional development objectives, then it may qualify under this provision.

Second, the procurement provisions of the AIT are about the processes of tendering contracts and who is eligible to win the bids.  They are designed to reduce the possibility that governments will favour bidders from their province, including using local content rules to favour local suppliers.  Local/sustainable requirement technical provisions in the tender and subsequent contracts can, however, be constructed so they are not discriminatory to the bidders.   Note that it is permissible to establish Canadian content rules, as long as they are consistent with Canada’s international obligations (Article 504). Also important is the procurement exemption for regional development (Article 508) and environmental purposes (Annex 502.4) (Carter-Whitney, 2008; Shrybman, 2009).
Third, any good being resold to the public is not covered by the AIT (Article 507).  Since the food purchased by food service companies is typically resold to the public, it would appear to be exempt.

Fourth, NGOs are typically exempt, unless the state has delegated them legal authority to conduct specified activities (Article 102). Thus, most of the work currently conducted by NGOs to promote local/sustainable procurement would not appear to be explicitly covered.  Certain components of the MASH sector may be covered, but even so, are typically exempt for contracts under $100,000 (Annex 502.4). For both NGOs and exempt MASH entities, governments are encouraged to ensure compliance with the spirit of the agreement, but it is not mandatory.

Shrybman (2009), a legal analyst and lawyer, has argued that it is feasible for municipalities to craft local food procurement provisions that are entirely consistent with the spirit of the AIT and its contract dollar value thresholds.  Presumably, local/sustainable procurement measures could be similarly consistent.  And, ultimately, if Article III of the GATT is not applicable, as discussed above, then local/sustainable products would not be considered “like” with conventional foods from other jurisdictions.