Free Trade Deal With Europe a Serious Cause for Concern for Canadian Space Industry

Prime Minister Justin Trudeau, European Commission President Jean-Claude Juncker and European Council President Donald Tusk sign the Comprehensive Economic and Trade Agreement (CETA) during the European Union-Canada Leaders’ Summit in Brussels, Belgium. Credit: Government of Canada.
Free trade agreements are by their very nature a means of increasing trade between two or more countries. In the case of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), the deal Prime Minister Trudeau signed in Brussels on October 30th could have a significant negative effect on Canada’s domestic space industry. Industry sources SpaceRef Canada spoke to are very concerned, with one saying the deal appeared lopsided.

A One Way Deal (It seems)

The problem is that suppliers in the European Union (EU) will have access to the Canadian civil space tendering process for goods and services, while there is little to no reciprocal access for Canadian companies. EU suppliers will be limited to goods and services related to satellite communications, earth observation and global navigation satellite systems.

And it’s important to point out that Canada is entering an agreement with 28 nations that make up the EU, including countries like Germany, France, and Italy, all with strong space sectors and suppliers eager to expand foreign market share.

Global Affairs Canada told SpaceRef Canada that “Canadian suppliers can bid on contracts put out by EU Member State space entities that are covered under the CETA Government Procurement Chapter.”

However if you examine the list of Ministries and agencies under the market access schedule for the EU, there is no mention of the German Aerospace Center (DLR), Germany’s national space agency, nor the French national space agency, the Centre national d’études spatiales (CNES), nor the Agenzia Spaziale Italiana (ASI), Italy’s space agency, the three largest space agencies in the EU which account for over 2/3 of all EU space expenditures. Since they are not listed this presumably means Canadian suppliers don’t have the ability to bid on their respective tenders.

With respect to Italy, the ASI operates under the Ministry of Education, University and Research which is on the market access schedule but it’s unclear if Canadian suppliers would have access since ASI itself is not listed.

In going through the market access schedule for the EU, SpaceRef Canada could find no EU member state national space agency listed other than the very small Sweden National Space Board which is not a national space agency, but an agency under the Ministry of Education and Research.

There is a minimum threshold in goods and services contract value that must be reached before an EU supplier can bid on a Canadian contract. That threshold, SDR 130,000, is defined using Special Drawing Rights (SDR), a weighted average of various convertible currencies, and in this case, a negotiated rate which is adjusted every two years for currently fluctuations. The current rate would mean SDR 130,000 is equivalent to $221,400 according to a spokesperson at Global Affairs Canada.

As an example, if Canada decided to move forward with a follow-on to the current RADARSAT Constellation Mission (RCM) and build additional satellites for the constellation, an EU supplier would be able to bid on it. The caveat being in this example, if the satellites have a military component, Canada could invoke a national security exception that would rule out an EU supplier bid. However, RCM as it stands now has Department of National Defence funding, but was tendered under the civil space program. So if a follow-on program was initiated, RCM2 would be fair game for EU suppliers.

The RCM example and other similar questions are being asked by industry to Global Affairs.

The Liberal government supposedly “gets it” according to multiple sources with respect to the importance of Canada’s space program and through the new Innovation Agenda is expected to make meaningful moves to encourage innovation, including in the space sector. However, while the government may make moves to grow the civil space program, allowing access to foreign suppliers could undermine their own efforts.

The Clause

The details regarding access to Canada’s civil space program is found in Annex 19-AMarket access schedule of Canada subsection 19-1Central government entities and Note 1 of Notes to Canada’s Annex 19-1.

1. For the Canadian Space Agency (CSA), the procurement of covered goods and services is limited to those related to satellite communications, earth observation and global navigation satellite systems. This commitment is in effect for a five-year period following the entry into force of this Agreement. The calculation of the five-year period includes the period of provisional application, if any. Before the end of the five-year period, Canada may notify the European Union that it is removing the temporary commitment. The notification takes effect at the end of the five-year period. If Canada does not provide such notification, the temporary commitment will become permanent.

This asymmetrical clause was added by Canada to limit access to the civil space program. But if Canadian suppliers are shut-out on bidding for the principal EU member states contracts, why even include Canada’s civil space program in the trade agreement?

According to the spokesperson at Global Affairs Canada who responded to SpaceRef Canada queries “the reason Canada did not negotiate reciprocal access is due to the unique way in which the EU space sector is structured and operates.”

They then provided the following funding numbers, keeping in mind that CETA has been in negotiations for several years, and these were the funding amounts at the time.

“According to 2011 data provided by the CSA, total European space funding (7.6 billion euros) was divided in the following way:”

a) 3,316M euros (43.6%): European Space Agency (ESA – not covered by CETA)
b) 3,313M euros (43.6%): EU Member States (National Programs)
c) 977M euros (12.8%): European Union (EU)

“Given that the (European Space Agency) ESA is an international organization outside of the EU, its procurement is not covered by CETA. Furthermore, since many EU Member States’ national space programs include defence-related procurement (which is not covered by CETA), a significant portion of the European funding for space activities will not be subject to the CETA Government Procurement Chapter. When Canada explained to EU negotiators our concerns about the lack of clarity/precision regarding what entities are precisely covered and the benefits that Canadian suppliers in the space industry would receive from the CETA Government Procurement Chapter, the EU agreed to Canada’s conditions as stipulated in Annex 19-1.‎”

While the clause will limit EU supplier access to the areas outlined, for Canadian suppliers there is still serious cause for concern and there still exists a lack of clarity as to what benefits, if any, Canadian suppliers in the space industry will have.

It should be noted that Canada does have very limited access to ESA optional programs as a cooperating member. However, for Canadian suppliers to participate in these programs Canada has to contribute to their budgets.

The CSA told SpaceRef Canada that “since the 2008 ESA Council Meeting, Canada has contributed to the following programs. The funding indicated next to each program has already been allocated towards Canadian organizations.  ESA operates on the principle that the proportion of contracts under a particular programme awarded to companies from Canada is in proportion to the funding that Canada has contributed to the programme.”

  • Advanced Research in Telecommunications Systems (ARTES): 13.8 Million euros
  • Earth Observation Envelope Program (EOEP): 14.0 Million euros
  • Global Monitoring for Environment and Security (GMES) Space Component: 6.4 Million euros
  • Earth Watch: 1.9 Million euros
  • European GNSS Evolution Program: 650K euros
  • General Support Technology Program (GSTP): 3.5 Million euros
  • Aurora (inc. ExoMars): 4.5 Million euros
  • ELIPS: 5.5 Million euros
  • European Transportation and Human Exploration Preparatory Activities Program: 3.5 Million euros

The CSA recently increased its contribution to ESA with an additional 30 million euros to ESA’s Advanced Research in Telecommunications Systems (ARTES) program.

So in essence, while Canada can participate in a limited way in some ESA programs, it’s pay to play.

It’s not a Surprise

The ramifications on the Canadian space industry should not come as surprise. Negotiations concluded in mid-2014 and Prime Minister Harper signed the agreement on September 26, 2014 setting the current stage.

Around the same time, the CSA Audit and Evaluation Directorate was tasked to create a report evaluating the international market access in relation to the European Space Agency. That report, “Evaluation of the International Market Access Program (Comprising the European Space Agency Contribution Program) of the Canadian Space Agency“, was released in July 2015.

The reports first recommendation was as follows: “The CSA should communicate the implications of the Canada-EU Free Trade Agreement to the Canadian space industry and encourage the industry to prepare in order to be better able to compete with European firms.”

According to SpaceRef Canada sources, some within industry, have known about the issue for a couple of years, and have for at least the last year, been asking questions and seeking answers to what market access Canadian suppliers will have and still don’t have a clear answer.

The agreement could still be scrapped and still must be ratified by the EU parliament and the 28 member nations of the EU. However, once the EU parliament approves the agreement, which may only take months to happen, much of the agreement will take effect provisionally, pending ratification by EU members.

The agreement will certainly provide benefits to both parties, however for the Canadian space industry, the agreement as it stands now, appears to be one sided.

About Marc Boucher

Boucher is an entrepreneur, writer, editor & publisher. He is the founder of SpaceQ Media Inc. and CEO and co-founder of SpaceRef Interactive LLC. Boucher has 20+ years working in various roles in the space industry and a total of 30 years as a technology entrepreneur including creating Maple Square, Canada's first internet directory and search engine.

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