State-owned enterprises and designated monopolies chapter summary
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State-owned enterprises (SOEs) are commercial entities that are owned or controlled through ownership interests by governments. They are different from entities that operate on a cost-recovery or not-for-profit basis (for example, public transportation systems). Some SOEs deliver public services, but many others operate in competition with private companies and are motivated by profit.
SOEs may receive various forms of commercial advantage from government, such as regulatory or financial preferences. These advantages can have trade-distorting effects and can give these entities an unfair advantage when they compete with private companies in the market. Governmental conduct can also affect international trade when the state grants an exclusive right to buy or sell a good or service. The Canada-United States-Mexico Agreement (CUSMA) seeks to ensure a level playing field between these entities and the private sector, while at the same time preserving the ability of Crown corporations to provide public services.
The modernized chapter expands upon the disciplines in the original NAFTA by obligating both SOEs and designated monopolies to operate in accordance with commercial considerations and non-discrimination. It also introduces new elements to the agreement that build upon the framework of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and establish rules on non-commercial assistance and the promotion of transparency. By promoting fair competition and preventing market distortion by governments, the SOE and designated monopolies chapter will help to ensure a level playing field in the North American market.
Technical summary of negotiated outcomes: SOE and designated monopolies
- Expands upon the disciplines of the original NAFTA by obligating both SOEs and designated monopolies to act in accordance with commercial considerations. This rule will only apply to an SOE when it is engaged in commercial activities.
- Preserves the right of SOEs to forgo commercial considerations when fulfilling a public service mandate and maintains exceptions to the rules for economic emergencies.
- Builds upon the original NAFTA by obligating both SOEs and designated monopolies to buy and sell goods and services in a non-discriminatory manner. This rule will only apply to an SOE when it is engaged in commercial activities.
- Requires that Parties not cause harm to another CUSMA country through the use of non-commercial assistance provided to its SOEs. This rule does not apply to services supplied within a party’s domestic market.
- Requires CUSMA parties to disclose certain information regarding their SOEs and designated monopolies. These transparency rules are designed to encourage good corporate governance.
- Includes exemptions from the rules, such as for SOEs with annual revenue below a certain dollar threshold and country-specific exclusions.
- Includes exemptions from certain rules for any SOE or designated monopoly that is owned or controlled by a provincial, territorial or local government.
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