Trade ministers gathered in Toronto Friday to congratulate each other for pledging to lower internal trade barriers that have irritated businesses for decades.
Every province and territory, as well as the federal government, has signed on to the Canadian Free Trade Agreement (CFTA), a new deal to co-ordinate trade across interprovincial borders and replace limited rules put in place two decades ago that are no longer up to the job.
It’s significant in three ways:
- It creates a formal and binding process for cutting the myriad of trade barriers that currently exist.
- It catches up to what provinces and territories offered Europeans in the Canada-EU trade deal, opening up, not just the same access to government contracts, but better access.
- It improves the dispute resolution system currently in place between jurisdictions, making it faster and simpler to start and doubling potential fines payable if jurisdictions can’t justify regulations.
“This sends a very clear message that Canada is open,” Economic Development Minister Navdeep Bains said as he thanked the eight provincial trade ministers in attendance for their work. “This is really about Canada strengthening our home field advantage.”
Regulatory duplications and discrepancies — from energy efficiency standards that don’t match to packaging rules that force manufacturers to make different-sized containers for different provinces — will now be referred to an appointed reconciliation table for sorting out.
Streamlining, with an opt-out clause
Nothing’s been fixed yet.
But Ontario’s Economic Development Minister Brad Duguid, who chaired the two-year negotiation, said Canada is the first country to take this approach to streamline regulations. Officials promised progress within one to two years.
“This puts everybody’s collective feet to the fire,” Duguid said.
There’s a catch — any government that doesn’t like the national compromise that’s reached can opt out, raising the possibility that inconsistencies may persist.
“Without the off-ramp, we wouldn’t be able to deliver,” Duguid said. “There’s no way that you would be able to have a regulatory process that doesn’t respect the sovereign rights of each of the provinces.”
Numerous examples were offered Friday of things the new reconciliation table will eventually tackle.
“Tell me how you can justify regulations that would be different in every province when it comes to the number of hours that a truck driver can drive?” Duguid said.
Another: standards for ethanol are different across provinces, forcing refineries to create unique blends depending on where the gas will be pumped, at considerable cost.
Both Duguid and his federal counterpart Bains point to economic studies, including work done by the Bank of Canada, that suggest reducing internal trade barriers could boost Canada’s economy by billions.
“It is really difficult to point to one example [of something in the deal] and say ‘because of this you have a job,'” Duguid said. But “we know that by making Canada more competitive, reducing the cost of doing business here is going to increase investment in Canada and going to increase jobs.”
But it took competition from beyond Canada’s borders to make jurisdictions get serious about the regulatory walls they’d constructed around themselves.
EU deal added urgency
Provinces sat with the federal government at the table when the European Union trade agreement was put together.
They knew what access they had offered foreign companies to government contracts in that deal. They had to act quickly, now the Comprehensive Economic and Trade Agreement (CETA) is set for provisional application.
Both deals will kick in July 1.
“Our number one priority was to make sure Canadian companies were not disadvantaged,” Duguid said. “That was just not on for any of us.”
CFTA provides Canadians with better access than Europeans in two ways:
- While CETA opens up large (usually six-figure) government contracts to foreigners, the interprovincial trade deal offers access to smaller procurement deals, such as goods valued above $25,000.
- Some Crown corporations, including energy utilities, are open to Canadian companies only.
Duguid said more progress is possible on procurement. But overall, results “are well above where I would have anticipated that we would be able to go,” he said. “There was a collective ambition to be bold.”
Provincial exemptions make up one-third of the 300-plus page deal now, but with pressure, Duguid believes some could lift.
(For example, Alberta has protected a four-year deal it struck at last July’s premiers meeting to award infrastructure contracts to bidders that provide local economic benefits, as it rebuilds after recent floods and forest fires.)
“The beauty of this system is that every one of those exemptions are transparent,” he said. “We will continue to improve this agreement as we go.”
The value of the exemptions is outweighed by new market access, Bains said.
Next up: alcohol
The 1995 Agreement on Internal Trade covered only 11 sectors and didn’t adequately cover trade in services. CFTA now covers the entire economy.
Two aspects of the previous deal — environmental protection clauses and 2009 measures on labour mobility — were mirrored in the new deal because governments feel they’re working well.
Four working groups will be formed to:
- Report back within a year on options for liberalizing alcohol distribution and sales.
- Report back within six months on how financial services might be covered (although work towards a national securities regulator will continue to be overseen by finance ministers.)
- Boost trade in the fish sector.
- Develop options within six to 12 months to develop the food sector in the territories.
Trying to make free trade the new default in interprovincial relations doesn’t mean governments can’t regulate in the future.
Duguid described how, if autonomous vehicles take off, regulations will be needed, but governments now can ensure they’re standardardized.
A future trade in legal cannabis could also be managed better through co-ordination.
Duguid joked that after 150 years of acrimonious alcohol regulation, Canada could get marijuana right from the start.
But future challenges will be someone else’s: Duguid handed off leadership of CFTA to his New Brunswick colleague, Roger Melanson, joking that he’ll “have a lot of fun” tackling the alcohol file next.
Getting this far took an exhausting 21 rounds of talks. “They stop heavyweight fights now at 12 rounds,” Duguid said.
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