PPPs can raise international free trade issues. According to a website maintained by Cornell University (http://government.cce.cornell.edu/doc/reports/freetrade), state and local governments are concerned about losing some of their authority because federal law preempts state and local law where there is a conflict. Furthermore, under free trade agreement regulations, foreign investors "have a right to bring nations into international arbitration to defend government measures that affect their investments (property) negatively" (Gerbasi and Warner, n.d.). Literature addressing this concern in particular was found from the Canadian Council for Public-Private Partnerships. The Council, an organization that supports PPPs, published the "Public-Private Partnerships and Trade Agreements: Guidance for Municipalities" in 2003 to provide general guidance and information on the subject. It should be noted that there may be trade principles and treaties that bar discrimination against foreign investors, and such discrimination could be quite disruptive to many sectors of the economy.
An example of the potential conflict of trade agreements related to highway PPPs comes from the Highway 407 ETR in Toronto, Canada. As part of the political campaign in 2003, the liberal party promised to reduce tolls on this privately operated facility. The government brought the case to court and arbitration several times, but the court always ruled in favor of the concessionaire, who had contractual rights to set and increase toll rates. In addition, the dispute between the government and the concessionaire for 407 ETR escalated over time with several other issues, and included an attempt by the concessionaire to compel the Registrar of Motor Vehicles to deny vehicle plates and permits to drivers with outstanding toll payments. Both parties reached a settlement on all their issues in spring 2006. However, during the dispute period, the government of Spain threatened to veto a trade agreement if the government of Ontario continued interfering with the 407 ETR concessionaire's right to control tolls (Redlin 2004; TollRoadNews, various articles).
Of all our state DOT survey respondents (including U.S. DOTs and their Canadian counterparts), about 29% considered trade agreement implications to be "not important," all of which came from U.S. respondents. Over half of the respondents considered this concern to be "somewhat important," including all five Canadian agencies.