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Tear Down These Walls: Dismantling Canada’s Internal Trade Barriers

Tear down these walls

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The Report

Executive Summary

In July 2017, Canada will celebrate the 150th anniversary of Confederation. The Fathers of Confederation envisioned a united Canada, one which realizes the promise contained in section 121of the Constitution Act, 1867: “All Articles of the Growth, Produce or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.” Almost 150 years after our country was formed, far too many unnecessary regulatory and legislative differences exist among Canada’s jurisdictions. These differences create “walls” that prevent the free flow of people, goods, services and investments between provinces/territories. They also increase costs for Canadian businesses, many of which are struggling to expand and compete in a fiercely competitive global marketplace.

The Standing Senate Committee on Banking, Trade and Commerce undertook an examination of Canada’s internal trade barriers with a view to identifying the actions that our federal and provincial/territorial governments must take – on a priority basis – to tear down the walls created by internal trade barriers. 

The committee notes that the federal and provincial/territorial governments have made significant progress in liberalizing international trade since the Agreement on Internal Trade was signed in 1994, going from having free trade agreements with only two countries – the United States and Mexico – to having free trade agreements in force with 15 countries and having concluded an additional 36 agreements. The committee was angered to hear that some of the recently negotiated international trade agreements would make it easier for international businesses to trade with Canada than it currently is for Canadian businesses in one province/territory to trade with other provinces/territories. It is baffling that, during a period of such progress in relation to international trade, internal trade-related progress has been so slow. Federal and provincial/territorial governments must take urgent action to correct this deplorable situation.

The Committee on Internal Trade – which oversees the implementation and operation of the Agreement on Internal Trade – had led Canadians to believe that, by March 2016, a renewedagreement would exist. Sadly, it is now June, and no announcement has been made. Nor have Canadians received any information about a new deadline for the completion of negotiations. The committee believes that continued delay must not be an option.

Governments’ first priority must be finalizing the negotiations for a renewed – and effective – Agreement on Internal Trade. In light of Canada’s upcoming 150th anniversary, it would be entirely appropriate to celebrate this momentous occasion by announcing a renewed Agreement on Internal Trade – a future-oriented agreement – that would help to lay the groundwork for growth and prosperity throughout Canada. The committee is convinced that such an agreement must include a negative list approach, mutual recognition, regulatory harmonization, an effective dispute-resolution mechanism, improved consideration of trade in services and a permanent federal co-chair for the Committee on Internal Trade.

The committee cannot underscore enough how critical it is for the country’s governments to do what is in the best interests of Canada, and complete the negotiations for the renewed agreement as soon as possible. An announcement about success in this regard is long overdue given the agreement’s importance in helping to ensure that the vision of the Fathers of Confederation is realized. In fact, if our federal and provincial/territorial governments fail to conclude a renewed Agreement on Internal Trade by July 1st, 2017, or if a renewed agreement does not contain the types of provisions that will ensure a prosperous future, the federal government must act expeditiously and make a reference to the Supreme Court of Canada with respect to the applicability of section 121 of the Constitution Act, 1867. While the committee feels that this course of action would be necessary, it would much prefer the political course of action; a timely and effective renewed agreement.

Quite apart from a renewed Agreement on Internal Trade – which is the best option, provided it contains the types of provisions found in Canada’s international trade agreements – or a reference to the Supreme Court of Canada, certain federal actions must be taken now – today – to help tear down the walls caused by internal trade barriers. The federal government must demonstrate leadership in efforts to eliminate internal trade barriers. It should help to ensure the labour mobility that businesses and people need by consulting with professional regulatory bodies that have been successful in reducing barriers to labour mobility. It needs to identify funding for the collection of internal trade data and associated research. It must continue with its efforts for a national securities regulator, which has been a goal for more than half a century. Finally, it should consider the creation of a national corridor that would establish a transportation and communication network from coast to coast to coast.

Having studied a range of issues in relation to Canada’s internal trade barriers, the committee is persuaded that the actions needed to make progress are clear. The time to act is now, and Canada’s governments must do so without further delay.

Recommendations

Recommendation 1

That the federal and provincial/territorial governments urgently work towards concluding the negotiations for a renewed Agreement on Internal Trade. The agreement should be finalized by July 1st, 2017, and should contain the following six characteristics:

  • a negative list approach;
  • mutual recognition;
  • a formal mechanism to facilitate regulatory harmonization;
  • a binding investor-state dispute-resolution mechanism with enforceable prescribed remedies;
  • improved consideration of trade in services; and
  • the federal government as a permanent co-chair of the Committee on Internal Trade.

Recommendation 2

That, if a renewed Agreement on Internal Trade is not concluded by July 1st, 2017 or if the renewed agreement is inadequate, the federal government pursue – through the Governor in Council – a reference of section 121 of the Constitution Act, 1867 to the Supreme Court of Canada.

Any such reference should focus on two questions: whether sections 91 and 92 must be read in the context of section 121; and whether section 121 applies to internal trade in services.

Recommendation 3

That the federal government work actively with provincial/territorial governments to ensure that laws, regulations, rules and policies do not unnecessarily restrict the free movement of people, goods, services and investment in Canada.

To that end, the Prime Minister of Canada and the federal Minister of Innovation, Science and Economic Development should make the removal of internal trade barriers a key priority.

Recommendation 4

That the federal government consult with professional regulatory bodies, including Engineers Canada, to identify ways in which it could assist these bodies in adopting mutual recognition. The transferability of education credentials and professional certifications among provinces/territories should be one focus.

Recommendation 5

That the federal government increase the funding allocated to two entities: the Internal Trade Secretariat, for the purposes of research, as well as the preparation and publication of regular progress reports, on internal trade barriers in Canada; and Statistics Canada, for the purposes of expanding and improving data related to internal trade.

Recommendation 6

That the federal government conclude an agreement with provincial/territorial governments that wish to participate in a securities regulation regime that includes a number of jurisdictions.

The existing passport system in relation to securities regulation should continue to exist for provincial/territorial governments that do not wish to participate in the proposed securities regulation regime at this time.

Recommendation 7

That the federal government support the creation of a “national corridor” that would allow the transportation of goods and services to tidewater through pipelines, railways, fibre optic cables, transmission lines and any other appropriate means.

Contact information

General Information:
613-990-0088 or 1-800-267-7362

Email: BANC@sen.parl.gc.ca

Mailing Address:
Senate Committee on Banking, Trade and Commerce
The Senate of Canada
Ottawa, Ontario
Canada, K1A 0A4