Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 7 - Evidence - Meeting of October 4, 2006
OTTAWA, Wednesday, October 4, 2006
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:10 p.m. to examine and report on issues dealing with interprovincial barriers to trade.
Senator Jerahmiel S. Grafstein (Chairman) in the chair.
[English]
The Chairman: Ladies and gentlemen, witnesses, fellow colleagues, I am delighted to tell you that today we are starting a very important, and perhaps one of the most important, studies that we have done in recent times: that is, a study on interprovincial trade barriers.
I would like to read the terms of reference. They are on our website, and I invite people who will be watching this committee from coast to coast to coast to examine our website because a lot of the supplemental material will not only be available by way of the witnesses that we hear but we will post it regularly on our website. This is an important subject as it affects business and the economy in every region of the country.
Interprovincial trade barriers exist. The extent to which interprovincial trade barriers are limiting the growth and profitability of the affected sectors, as well as the ability of businesses in the affected provinces jointly and with relevant states to form economic regions which will enhance prosperity is one of the areas that we will be exploring. We will explore measures that could be taken by federal and provincial governments to facilitate the elimination of such interprovincial trade barriers in order to enhance trade and develop a national economy.
Honourable senators — and I want to say this to our listening audience as well — our committee is called the Banking, Trade and Commerce Committee. It is one of the oldest committees in Parliament, established shortly after Confederation, and it is the oldest committee of the Senate. Its original mandate was to explore or to act as an overseer with respect to banking, trade and commerce.
Effectively, when we in this committee examined our original mandate, I think we reached a consensus that it contains a misnomer. We do not have a national economy. We have regional and local economies, but we do not have a national economy. If we are to compete in the world against those who want to take jobs away from Canada, the first thing we have to do is develop a national economy wherein Canadian workers and skilled artisans can go from coast to coast to coast freely with respect to labour mobility.
In the next few days we will hear some of the problems. I can assure the witnesses that we take this matter very seriously. It goes to the heart of our mandate, which is to develop in Canada a national economy. I think you will find as senators ask you questions, witnesses, that we are determined to examine this question.
I must say at the outset that I am dismayed that we have invited the provincial premiers or their ministers to come and give us the benefit of their advice and their problems, as well as the Council of Premiers, and they have chosen not to attend. To be fair, they have submitted to us written materials which we will read and pursue. However, it does not make us happy that such an important issue is being neglected by the provincial premiers. I say that the issue has been neglected, and I think many of my colleagues on both sides of the aisle will say that that is the case.
We are determined to look at this question to see if, in very short order, we can draw to the attention of the Canadian public and the Canadian government those areas of concern that can be addressed or should be addressed immediately.
I leave you with this one thought: The best definition of politics that I have heard came from President Harry Truman, when he was once asked: What is the role of the President of the United States? He said, "The role is very simple: to get the people to do the job they were hired to do in the first place.'' Many politicians and bureaucrats across the country are not doing the job that they were hired to do in the first place, which is to enhance their local economies and to ensure that we work together in a united way to increase the standard of living for all Canadians.
With that brief and rather political preamble, I am delighted to welcome our first witnesses from Industry Canada, who are responsible for these questions within the federal government. We have the Director of Statistics Canada, Mr. Michel Girard. As well, we have the Department of Industry representatives, Mr. Ron Parker, Visiting Senior Assistant Deputy Minister; and Mr. Philip Morrison, Senior Analyst of Internal Trade. These gentlemen are very knowledgeable about the topics we will be discussing.
We will start with Mr. Girard from Statistics Canada. Welcome, Mr. Girard.
Michel Girard, Director, Statistics Canada: Thank you, Mr. Chairman. I will be talking about interprovincial exports and imports. I would like to introduce the topic by saying that my division specializes in producing statistics on the structure of the Canadian economy as well as the provincial economies. The division produces gross domestic product statistics that are used in the context of the HST allocation, the sharing of the HST between the federal government and the provinces, as well as for the program of equalization payments, and of course to measure the health of the provincial economies.
In order to produce the GDP, it is important to have statistics on exports and imports. When one calculates the gross domestic product of a province, it is important to have statistics on exports between the province and foreign countries, as well as exports between the provinces. This is what I want to talk about this afternoon, in case these statistics are useful in your investigations.
If you look at slide number 2 in the package, you will see the total imports and exports of each province to and from all other provinces. You will notice that Alberta and Ontario are the only two provinces that have a trade surplus. All the other provinces have a negative surplus. In Ontario, most of the exports come from financial services, while in Alberta most exports come from trading oil and gas.
Overall in Canada, the east-west trade basically reflects transactions related to the financial sector, to business and computer services, to energy products, and also to wholesale trade and transportation services. Many of the east-west transactions are services and not necessarily commodities in terms of goods.
If you look at slide number 3, you will see a comparison. The red line in the graph shows the interprovincial trade flows, about $275 billion in 2005. It has doubled since 1992. As a comparison, total exports of the country, all the provinces together, equal $490 billion and the imports equal $440 billion. What is interesting in this graph is that during the period 2000-03, when there was a decline in foreign exports and imports, trade in Canada between the provinces continued to grow.
With regard to slide number 4, I would like to take a minute to tell you the statistics that we measure. I would like you to assume that we produce some furniture in the province of Quebec, a commodity. I would like you to assume that this product has been bought by a wholesaler in Ontario, transported by a Manitoba firm to Alberta, and sold in Alberta by a retailer. What we measure at Statistics Canada is the Alberta transaction with all of these provinces. The first transaction that we would record is the value of the furniture between Alberta and Quebec. The second transaction that we would record is a transaction between Ontario and Alberta, and that transaction would reflect wholesale activity. Eventually, our statistics would show a transaction between Manitoba and Alberta for the transportation services. You and I in Alberta would buy the good, the furniture, that would include the three transactions together, but we try to record or separate all these costs when we produce the provincial economic accounts.
I will skip the next two slides because I want to respect the time that was given to me. However, as a statistician from Statistics Canada, I cannot go to a committee like this one without warning you about data source and quality. If you have any questions after my presentation, I will be glad to answer.
It is important for you to understand that it is difficult to get statistics on trade. These statistics are not calculated in isolation, one after the other. They are done in a bigger context of the system of national accounts, and the data are manipulated quite a bit before they are released. There is a certain amount of quality behind those numbers.
If you go to slide number 8, I will go into a little more detail and give you the kind of statistics that we can produce for this committee. You will see that, for example, in the middle of the graph, Ontario exports $36.8 billion of goods and services to Quebec. Quebec exports $30.8 billion to Ontario. Just as an order of magnitude, you will see in the square below that Alberta exports $12.7 billion to Ontario.
I took three provinces to show you what kind of statistics we can produce for you. In the case of Newfoundland, for example, on the first chart, you will see the evolution of the export, interprovincial export-imports in each of the provinces. In this case, it is Newfoundland and Labrador. You will see that it is evolving quite a bit. You will see, in the middle of the page, who are the major trading partners. When Newfoundland exports, it exports mainly to Ontario and, to some extent, to New Brunswick and Nova Scotia. In the case of imports, Newfoundland is importing primarily from Ontario and, to some extent, from Quebec, Nova Scotia and New Brunswick.
The new economy here of Newfoundland is that they now export petroleum. That is why it is so big in this graph. Most of the exports from that province reflect exports of crude mineral oils, but they also export meat, metal ores, communications, et cetera. On the import side, they import all kinds of services, such as business and computer services, wholesaling services, and so forth.
Just to give you another flavour, if you go to Ontario on page 15, you will see that Ontario is exporting a lot to the Province of Quebec. That is not surprising because the two provinces are very close, but Ontario also exports quite a bit to Alberta and British Columbia. They are exporting financial services, such as business and computer services. Motor vehicles are only the fourth biggest item in that province.
Finally, if you go to page 19, for British Columbia, you will see that British Columbia is, of course, dealing again with the province that is close nearby, Alberta, but also quite a bit with Ontario and Quebec. The exports there are transportation services and business and computer services. When they import, they also import quite a bit from Ontario, and again it is financial services.
As you can see, the exchange of services between the provinces is quite important, and much more than the goods.
Ron Parker, Visiting Senior Assistant Deputy Minister, Industry Canada: Thank you, honourable senators, for the opportunity to meet with you and discuss progress in eliminating trade barriers under the Agreement on Internal Trade, which was signed by all governments of Canada — federal, provincial and territorial. We appreciate your looking at this important issue.
The agreement marked its tenth anniversary in 2005. I am pleased to say that we are currently experiencing a renewed spirit of cooperation among all parties signatory to the agreement.
A strong economic union promotes prosperity, as you mentioned. It permits Canadians to live and work across the country and find the best possible jobs. It fosters competition, which increases consumer choices, lowers input costs to business and enhances productivity. It also improves the investment climate in Canada.
Many of the issues covered by the Agreement on Internal Trade fall either partially or entirely within provincial jurisdiction. Making progress in improving internal trade requires that provinces and territories agree to disciplines that ensure that interprovincial trade is not restricted. They shoulder the difficult work of making the system work. For the federal government, our role is to encourage and facilitate progress in any way we can, and in continuing to respect our own AIT obligations. The federal mandate generally enters where trade crosses provincial borders.
Most estimates of the economic costs of internal trade barriers are in the .2 to .3 per cent range of GDP, or $2 billion to $3 billion approximately. However, estimates vary considerably depending on the definition of a trade barrier, the scope of each study and the method used. As we just heard, the data are somewhat difficult to come by and to analyze.
The 2006 budget document, "Restoring Fiscal Balance in Canada,'' emphasized the need to make further progress on the mobility of skilled labour between the provinces, including foreign trained workers, the inclusion of an energy chapter under the AIT, and greater regulatory harmonization across all jurisdictions.
The federal government has a history of leadership in strengthening the economic union, starting from the Macdonald commission in 1986 which proposed a code of economic conduct between all governments and set the groundwork for first ministers to create a ministerial level committee to negotiate the reduction of internal trade barriers. This led to the signing of the AIT which came into effect in 1995. The establishment of the 1995 AIT marked a significant achievement in helping to remove interprovincial trade barriers, prevent the erection of new barriers and harmonize interprovincial standards.
Implementation of the agreement resulted in provisions requiring non-discrimination in federal and provincial government contracting; the elimination of local residency requirements; a code of conduct prohibiting incentives for relocation of enterprises; a commitment to have occupational qualifications recognized across the country, and a harmonization of some trucking regulations. Further progress was achieved post-1995, including the extension of procurement to cover municipalities, academic institutions, social service agencies and hospitals; the establishment of a federal-provincial Internet-based tendering system available to all; and cooperative enforcement of consumer protection legislation.
We have experienced an increased momentum on internal trade with the Council of the Federation placing it as a priority for their discussions and the establishment of a renewed work plan in 2004. This momentum resulted in two productive Committee on Internal Trade meetings in 2004 and 2005: the inclusion of Crown procurement under the AIT and a commitment to complete work on labour mobility for professionals.
As well, further progress on the internal trade front came through the recent agreement between two western provinces. On April 28, 2006, Alberta and British Columbia signed a comprehensive bilateral trade agreement. These two provinces agreed to mutually recognize their regulations and standards of the same investment rules, streamline transportation regulations and recognize the occupational classifications of workers in other provinces. Their agreement also provides for a strong dispute resolution mechanism, including the rewarding of monetary penalties should one of the other provinces fail to comply with the panel ruling. Both Alberta and British Columbia proposed that their agreement be incorporated into the Agreement on Internal Trade and invited other provinces, other parties to the AIT to join them. The AIT specifically permits such trade enhancing arrangements. Also, on June 2, 2006, Quebec and Ontario signed a construction labour mobility agreement. This agreement will significantly enhance the mobility of workers between the two provinces.
All that being said, barriers remain. We continue to work with the provinces and territories on these issues. To this end, the Committee on Internal Trade of Federal, Provincial and Territorial Ministers met in Halifax on September 7. The meeting was co-chaired by Premier Doer. Agreement was reached on an action plan to make further progress on the trade front. A key component of this plan is a strategy to improve labour mobility. By April 2009, Canadians will be able to work anywhere in Canada without restrictions on labour mobility. This will include establishing mutual recognition for recognizing foreign credentials of professionals in Canada. Ministers also agreed to move quickly to finalize the AIT chapter on energy, and ministers of agriculture will report back by December 2006 with an action plan for the completion of the review of that chapter. The AIT dispute resolution process was streamlined and strengthened and parties will report back within a year on additional measures to enhance enforcement of AIT panel decisions. Jurisdictions will continue to work to develop measures to mitigate the impact of regulations. Finally, the ministers agreed to consider elements of the Alberta-B.C. agreement that might be imported into the agreement on internal trade. We will have another meeting in January 2007 of the ministers on the Committee on Internal Trade.
In closing, I want to underscore that the federal government is actively engaged in the process to accelerate progress and to seize the momentum of recent provincial initiatives. The interest of this committee is certainly welcome and important, and we are pleased to be here today.
Philip Morrison, Senior Analyst, Internal Trade, Industry Canada: That was the opening presentation from Industry Canada. We will be happy to answer any questions.
The Chairman: Thank you for the cogent information.
Senator Goldstein: I have a number of questions. The first one goes back to the slide presentation. I want to ensure that I understand how the statistics are determined.
On the slide at page 4, that deals with the manufacture of furniture in Quebec, its wholesale to Ontario and its movement to Alberta. I understand that when preparing statistics to describe such a transaction, or to quantify it, there is an export of the value of the commodity in Quebec and an import of the value of the commodity in Ontario. I would assume that the dollar value of the commodity and the dollar value of the purchase by the wholesaler is the same?
Mr. Girard: Our concept of the production of a wholesaler is whatever he sells less what he spends when he purchased the goods. For example, if he sold the furniture at $100 and the cost of acquiring the furniture was $90, then the production of the wholesaler in Ontario is $10, which is the value that would be exported.
Senator Goldstein: Therefore, the export value of the furniture from Quebec would be $90, in your example?
Mr. Girard: Yes.
Senator Goldstein: Let us move on to transportation by the Manitoba firm that charged $10. Would that $10 value be ascribed to Manitoba only?
Mr. Girard: Yes.
Senator Goldstein: You are talking about a net value, in a sense, like our GST?
Mr. Girard: Yes.
Senator Goldstein: Mr. Parker, could you give us more detail on the process of establishing mutual recognition for recognizing foreign credentials of professionals across Canada? My understanding, by way of example, is that provincial Bar associations have some reluctance to admit foreign professionals for a variety of reasons. Although I do not want to go into them, some are competitive and some are more legitimate, perhaps.
What process is being undertaken in order to level the playing field so that we can encourage the immigration of professionals by recognizing their foreign credentials? What would be the uptake to the extent that we require particular training for them to meet Canadian professional standards? The education that professionals receive in foreign countries might not be at the same level as that which professionals educated in Canada might receive. What kind of mechanism is being adopted to encourage professionals to work anywhere in Canada?
Mr. Parker: I do not have information on the mechanics for specific professions. I believe that officials involved in labour market mobility have begun to meet and to discuss the issues around information sharing. The structures and role of the foreign credential recognition agency is in its early stages of design. I do not think they have worked on the specific cases of particular professions.
Senator Goldstein: Are you aware of the extent to which each province is cooperating in that process? Are there any wide disparities?
Mr. Morrison: Human Resources and Skills Development Canada is the lead federal department. They have a forum of a federal-provincial-territorial working group and various ADM committees. They will get together and work towards this goal and involve the occupations from each province to meet this deadline.
Senator Goldstein: Thank you very much.
Senator Tkachuk: I want to go to the last presenter. On page 3, we talked about Alberta and B.C. signing a comprehensive trade agreement. We in Saskatchewan are very disappointed that the present government there repelled the advances of both B.C. and Alberta to participate in their pursuit of freer trade and increased mobility. I think it will prove to be very successful for those two provinces. I hope that either a change of government or a change of mind will get Saskatchewan to the table as well.
When you state the things that they accomplished in their agreement, which I thought were significant, I got the impression that they are leaving lots on the table. I am not sure how far it will go, but in future meetings they are discussing a situation whereby certification of a particular occupation in one province will be covered by the other province. Does that extend to professional groups as well? That is, a teacher certified in Alberta will be certified in British Columbia, or a doctor or a lawyer?
Mr. Parker: That is the notion. There is a list of professions that are excluded to which they have committed to reconciling occupational standards. If that process is not completed, by 2009, then the default will be towards mutual recognition of the occupation. They have a fair bit of work to do in terms of undertaking the reviews and bringing those excluded occupations into alignment with one another. There will be the ability for the professions to move across the provinces seamlessly.
Senator Tkachuk: Are those same features under consideration in the national negotiations?
Mr. Parker: Indeed, the ministers at the September meeting agreed to move to implement fully those aspects of the agreement on internal trade that also embodies mutual recognition, and to put in train the work that we are talking about across the human resources labour ministers' forum that will be necessary to put that into place.
Senator Tkachuk: I have other questions but I will wait to the next round.
Senator Moore: Thank you for being here. Mr. Girard, you mentioned in your presentation that it is difficult to get statistics on trade between provinces. What are the sources and why is that? How can that be fixed so that we can better present the plan and promote it?
Mr. Girard: The major problem is to obtain the information from the respondent. The information we are looking for is this: We are asking, for example, a wholesaler to tell us where he is getting his goods and where is he trading them. It is not easy for the wholesaler to know the final destination of a commodity. A company such as Canadian Tire has over 100,000 types of goods. It is not easy for this firm to respond to a Statistics Canada survey. In the collection of the data, it is difficult to get that information.
Senator Moore: Mr. Parker, on page 3 of your brief, you said that "Both British Columbia and Alberta proposed that their agreement be incorporated under the AIT and invited others to join them.'' I take it that has not happened, in view of what you said on page 4, namely, that the ministers will consider elements of the Alberta-B.C. agreement in May. What is the status of that possibility?
Mr. Parker: The agreement by British Columbia and Alberta will be incorporated into the agreement on internal trade when it comes into force. At the last meeting, the ministers agreed to adopt it into the AIT framework through the trade enhancement measures. However, the Alberta-B.C. agreement, I think, comes into force on April 1, 2007. There is then a two-year period in which they will work towards reconciling some of the outstanding exceptions. Provinces and other parties to the agreement have the opportunity to sign on prospectively.
Senator Moore: When you mentioned in your remarks about the recognition, you say this will include establishing a process of mutual recognition for recognizing the foreign credentials of professionals in Canada. Do you mean foreign as in not from that province, or foreign from another country?
Mr. Parker: In this context, it would be from outside the country as well. Through the labour mobility side of things, the objective on labour mobility is to have recognition of the occupational standards and classifications across Canada. The ministers have agreed to aim for 2009 to have that fully implemented. This process refers to the work to be done on recognizing credentials from outside of Canada.
Senator Moore: When you say that "Agreement was reached on an ambitious action plan to make significant process on internal trade,'' what are some of the key elements of that "ambitious action plan?''
Mr. Morrison: When one looks at labour mobility, there is also the aspect of a foreigner when he moves to Ontario, and Ontario recognizes his credentials, will his credentials be recognized when he moves to another province? That issue must be addressed as part of the whole labour mobility issue. Once you have moved from England and you are in Ontario, Ontario recognizes you. When you move to another province, will your credentials be recognized also?
Senator Moore: That is one of the areas that will be dealt with in this recognition process?
Mr. Morrison: Yes.
Senator Moore: What are a couple of the highlights of this plan that you think would be most beneficial in reducing the internal barriers?
Mr. Parker: Certainly, labour mobility is extremely important.
Senator Moore: Is that the biggest issue?
Mr. Parker: Yes. We do not have formal ways of estimating it, but in our judgment it would be among the most important. Another aspect of the work plan was to improve the dispute resolution process and to strengthen it. As well, the ministers agreed to work towards incorporating chapters into the AIT relating to energy and agriculture. These have been in-train for quite a long time, and that will also represent real progress.
Senator Moore: Do you think those things will be included? You are more hopeful than not at this juncture?
Mr. Parker: The ministers have asked that officials work to get them into a form that they will then be able to bring them into the AIT.
Senator Moore: Thank you.
The Chairman: We welcome Senator Nancy Ruth to our committee. I believe it is the first time she has been here. We are delighted to have you here.
Senator Nancy Ruth: My questions are about labour mobility. Is the construction worker exchange between Quebec and Ontario the only deal that is going on, or are Quebec and Ontario anticipating more labour exchanges?
Mr. Morrison: In June, Quebec and Ontario signed to resolve the dispute they had between those two provinces. Certainly, all the provinces will be looking at the requests made by the committee on internal trade ministers for a 2009 deadline for recognitions of qualifications across the country. As part of that work plan, all the parties to the agreement on internal trade, the provinces and territories, will work towards that commitment of 2009.
Senator Nancy Ruth: I wanted to ask, too, in the federal civil service there are 60,000 jobs limited to those who live within the region here. Does your department or the Council of the Federation have any comment on this restriction?
Mr. Morrison: The Public Service Commission has announced that it is moving towards a national area of selection as opposed to a geographic one. They announced that by December 2007, I believe, they will open all jobs to the public across the country. They have made a commitment there.
Mr. Parker: Just to note, they opened up the officer level competitions to a national coverage for those competitions back in December of last year. They intend to evaluate the outcomes of that kind of approach, so the move to the December 2007 objective is still subject to a review of how that process is going.
The Chairman: Perhaps I might ask a few questions and then we will go to a second round. I have three questions and I will direct them to each of you. I want to know about statistics, I want to talk about the constitutional framework and then I want to talk about the cost to the GDP as a result of trade barriers.
First, Mr. Girard, could you give us any other recent studies to indicate comparison numbers with respect to the interprovincial information? I understand some of it is very old. I know the MacDonald commission did some studies, and I know that some of the data has been brought up to date. Perhaps you could give us an aide-mémoire of the statistics that would allow our committee to take a deeper probe into this number.
With respect to your chart on page 3, this seems to me to be an indictment of the lack of progress with respect to reducing interprovincial trade barriers. If you take a look at your chart — and tell me if I am reading this correctly — you see that interprovincial import-exports have gone up from $150 billion in 1992 to about $275 billion in 2005. If you look at just the interprovincial imports, not even the exports, it has gone up at a much faster and higher magnitude. Does that statistic, taking it out of isolation, indicate to you that we have not been productive when it comes to our own economy?
Mr. Girard: In fact, I cannot say anything about productivity here. What we measure here is the structure. It is a fact. This is whatever happened. This is how we do business. Of course there was a lot of restructuring of business over those years, so it is possible that it reflects that, but it reflects many things.
The Chairman: I know that these are statistics, but there appears to be a faster growth of external international imports coming into the country. Obviously that is very good for international exports; I do not quarrel with that. However, when you compare imports to internal import-exports, it seems that the action within provinces is much less than it is with respect to external trade.
Mr. Girard: I could not say anything about that.
The Chairman: Could you obtain for us any statistics or any help along these lines so that we can come to a quantifiable analysis of this problem? All senators have a sense that this process is not going well. It has started, but it is not progressing as fast as it should. Even the testimony we have received from Mr. Parker and Mr. Morrison indicated that although there is an agreement, it is three years out. For labour mobility you would think that that could be done very quickly if it were in the national interest, but that is not happening. If you could give us any statistics, it would be helpful.
With respect to the other gentlemen from the department, I was very curious about your analysis because this was not put in a constitutional framework. Tell me if I am correct or not. Our committee will study this very quickly. It is not very complicated. In the United States, the Constitution provides for an inter-commerce clause that allows Congress and federal institutions to intervene where the states are impeding interstate commerce. It is my understanding — and I have not looked at this carefully, but we intend to do so — that we have the same regime in Canada. The provinces cannot impede interprovincial trade, and interprovincial trade is really a federal matter. Also, we have a disallowance provision that says if there are provincial statutes that intervene or impede or damage, in effect, federal powers, then the federal government has the ability to disallow those statutes.
I know, and we all know, that the federal appetite for disallowing provincial statutes is not very great. The reason for that I will not get into. It is historic. However, some untutored constitutional experts suggest that that power has lapsed because of disuse. That obviously is nonsense, but I want to go on the record to say that we will explore that a little bit more effectively. However, I would be very interested to know why this department — I am not being partisan here; there has not been any change from previous governments — has not taken a much more aggressive stand in looking at barriers to interprovincial trade, as opposed to waiting for the provinces to coax them to come along as a coalition of the willing to move much more expeditiously when it deals with questions of labour mobility that go to the heart of the Charter.
Mr. Parker: The model of the agreement on internal trade is one that is fundamentally based on a consensus approach. Since before that time and after that time, the federal government and governments in general have opted to work on a consensus basis rather than focusing on the constitutional issues and to try and work through those issues to resolve disputes.
In terms of the constitutionality of that situation, I am afraid I am not a constitutional expert, and the deployment of those capabilities that I am not really familiar with, I would not want to comment on.
The Chairman: I appreciate that. I understand your terms of reference do not deal with that. However, it would be very helpful if this committee could get from your department exactly what the powers of your department are, and how they have been exercised with respect to this particular topic.
Finally, are there any studies that you know of within your department, or Statistics Canada would know, about the cost to the economy of these interprovincial trade barriers? I know one anecdotally because I have worked on it for 40 year, and that is that we are the only modern Western economy that does not have one securities regulatory agency. It is the only one in the Western world. I started a study when I was here acting for an assistant to a minister in 1966, 40 years ago, and we are no closer to the realization of a common, one cost-efficient securities regulatory agency in this country. Our committee looked at this question when we did our productivity study. We recognized this lack and we recommended that that be corrected, but there has been no progress on that front.
Can you tell us two things: Are there any studies that indicate the cost to the economy, to the GDP, of these interprovincial trade barriers, and also what is the most recent status with respect to a national securities commission which, to our mind, is an impediment to productivity?
Mr. Parker: Yes. Most of the studies that I have seen were done back in the late 1980s and mid-1990s, and they tend to cluster in terms of their estimates around 0.2 per cent or 0.3 per cent of GDP in terms of the estimated costs of the barriers. That is a permanent effect on the level of GDP. I am not aware of work that has been done more recently. There is a wide range of methodologies and ways to try to measure the barriers. You see some estimates, and at least one study, of up to 1 per cent of GDP. However, the majority of the estimates cluster in the 0.3 to 0.4 range.
The Chairman: This committee will be travelling to New York to talk to officials there about some of the issues that we have been looking at. One of the groups with whom we will be meeting is the Federal Reserve in New York, and this is one of the questions that we will be asking. It would be useful if you could help us to gather as much of that information as possible. I know it is out of time. However, not a lot of attention has been paid to this area. Anecdotally, it is the sense of this committee that the problem is even deeper than is show by those statistics of 10 years ago, but we want the evidence to support any contentions.
Mr. Parker: We have a list of studies with which we can provide you.
With respect to the securities regulation question, I am afraid I am not equipped to tell you where those negotiations sit, in terms of their status.
The Chairman: Perhaps you can sort that out and let us know by way of an aide-mémoire of the most recent situation.
Senator Angus: Thank you, gentlemen, for coming here this evening. Most of you were ready to come here last June, and we are sorry that we had to delay this meeting.
Mr. Parker, you are the Visiting Senior Assistant Deputy Minister. Where are you visiting from?
Mr. Parker: I am visiting from the Bank of Canada to Industry Canada. I am on an interchange from the bank.
Senator Angus: You deal with these issues at the bank, do you?
Mr. Parker: Not in great detail. I have a background as an economist, and I bring that to Industry Canada, which are the essential tools required to make a big contribution there.
Senator Angus: This is a file with which you are very familiar, is it? I noticed earlier in the week that another gentleman was coming to take the lead from Industry Canada. I wondered what the deal was here.
Mr. Parker: In this particular area, I have had responsibility since August of this year.
Senator Angus: We have regular visits from the Governor of the Bank of Canada, Mr. Dodge. In fact, he is coming soon again to see us. We deal in macro issues with him that affect the Canadian economy generally, and productivity and GDP growth or decline, as the case may be. He has mentioned a number of times that one of the inhibiters of growth in this country, and of productivity improvement, is these barriers. Yet, it is an anomaly to me that we have not done better.
I am looking at the B.C.-Alberta initiative — that is, the agreement of this year. In your opinion and that of any of your colleagues, is this sort of the thin edge of the wedge? Is this something where, finally, there is some light at the end of the tunnel and it will open up across the country? Should I be reading something into that?
Mr. Parker: There are several things that I would note. The Council of the Federation, in 2004, indicated its interest in working on internal trade issues. That is a positive development. Within that framework, Alberta and British Columbia have picked up the issue as well.
There is more momentum on this front than there has been for quite some period of time. The ministers at the September meeting agreed to a workplan that is ambitious, especially with respect to labour mobility and the inclusion of the chapters and looking at the issues around foreign credentials recognition within Canada. All of those moves are very encouraging.
Senator Angus: One of the things that we, as individual senators, are often questioned about is all the effort and hullabaloo that went into the free trade agreements with the U.S. and NAFTA. Again, the anomaly of the barriers within the nation came into sharper focus. Here we are spending so much effort trying to get the free trade flowing within the continent, yet right here in Canada, a lot of crazy things are still happening.
I am a member of the Quebec bar, as is Senator Goldstein. As practising lawyers in Quebec, there is a difference between the Quebec civil law and the bar qualifications that we must get to practice elsewhere in Canada. It has always been an impediment to us to go out to British Columbia or Alberta or to other provinces and plead cases that might have a national sort of overtone. That was the first thing I learned.
As an individual Canadian, somebody sent me a bottle of Newman's Port, which is a fine port produced in Newfoundland. I went to the Quebec Liquor Commission to try to buy some of this port and I could not get it. I then went to the Ontario outlet and found no such thing. That is when I started to realize how parochial we are in this country. I have bought into this, as I believe this new government has. Minister Flaherty remarked to me this morning how glad he is that we are holding these hearings. I am hoping we can get something concrete out of this process.
One of the questions that has been suggested, and that I will pass on to you, is the following — and it is sort of coming at it from the opposite direction: Are there certain barriers that exist today among or between the provinces that could be considered to be good, to be positive and that should be maintained? Can you answer that, either yourself, or any of you?
Mr. Parker: I would have to admit that I have not looked at it from that particular perspective.
In terms of some areas where provinces feel particularly strongly, or where you see differences, even internationally, would be in the field of environmental regulation — that is, health and safety type issues, and culture as well. Whether those barriers are absolutely necessary, I think you would have to look at that very carefully.
Senator Angus: The way the question has been put together for us by our advisers in the Library of Parliament is the following: Is there a positive role for trade barriers? If so, what type of trade barriers, and under what circumstances? Are there existing trade barriers in Canada that should not be removed? If not, why not? If so, why not?
I think you understood my question. It would be helpful to us, if you are putting together the other information for which the chairman has asked, if you could add something on this aspect, perhaps a cost-benefit analysis type of thing.
To help you understand where we are coming from in terms of making public policy, this government has declared that it wants to address, head-on, the issues of productivity and the barriers, whether they be in the securities field — that is, the one single regulator — or in any of the other areas, such as labour mobility, et cetera. It helps the government, whether it be in budgetary measures or in an economic statement, to have a body like this committee, composed of all-party members. Basically, we try to operate in a non-partisan way here and to come up with a balanced view to break down those barriers. It is from that perspective that we are asking these questions. Anything you could add would be very helpful to us.
That is why we are holding the round table. You will notice that we did one recently on the time bomb that is ticking away in terms of how many people will be working five years from now to support all the people who will be on pension. It is very staggering. We issued a report called The Demographic Time Bomb. We were told by the government that this is helpful to them.
The Chairman: I hope you will provide us with whatever information you have. You can read the transcripts. We do not have time for another round of questions, but Senator Moore had a supplemental based on a question that I asked.
Senator Angus: At the bottom here of Mr. Parker's statement, you went through all the initiatives and the positive things that have occurred. Of course, the main one is the Alberta-B.C. agreement. You concluded on page 3 that, all that being said, barriers remain. Could you list those for us in the supplementary information, and perhaps mark with an asterisk the ones that you believe should remain? Also, please indicate the big issues that need to be broken down, whether they are the liquor stores or labour markets.
This committee and another committee have been to the oil sands. We found that the demands for labour there are staggering, even to the point where some projects may not go ahead due to labour shortages, whereas there is unemployment in other parts of the country.
Senator Goldstein: Nunavut has a restrictive or preferential hiring policy meant to encourage employment of local people as opposed to the importation of labour. Those kinds of sectoral or regional development programs have a social and economic benefit for the region specifically, although they may be adverse to a concept of uniformity across the country in terms of there being no exceptions to mobility. Could your answer address that particular issue, please?
Senator Tkachuk: I would like to add to Senator Angus's point about liquor boards, and whether you see liquor boards themselves as major impediments, as I do. Are they part of the negotiations across Canada as an impediment to trade? Are the Canadian Wheat Board and marketing boards seen as impediments to trade? These are existing government monopolies that, by their power, prevent product from appearing on the shelf. Therefore, they are without a doubt an impediment to trade. I want to know if those are part of the negotiations.
The Chairman: That is really a judgment question, but we would be interested in the response.
Senator Moore: Mr. Parker, I want to follow up on a question of the chairman's with regard to the cost to the economy of trade barriers. I think you said that you did not have a number or a way to determine that. Just to give you some help here, back in June, when the Alberta-British Columbia agreement was announced, the Conference Board of Canada estimated that a combined B.C.-Alberta economy would add $4.8 billion to the real GDP and create 78,000 jobs in B.C. alone. Given that estimate by the Conference Board of Canada based on that agreement, perhaps your office might want to extrapolate from that to what could happen if the other provinces joined in and what the number might be. I think it would be substantial.
It was said by someone at the outset that if we remove these trade barriers, we would greatly enhance our GDP. Perhaps your statisticians could look at that issue and come up with a figure. Perhaps this is something you could use as ammunition when you go to your next meeting with the ministers. You could say, "These are the numbers.'' If I were sitting around that table as one of the ministers, it would be important for me to know what we can achieve by taking away some of these barriers.
The Chairman: Gentlemen, I want to thank you very much for appearing here today. We have thrown many questions at you in a short period of time. I apologize for that. We are constrained by time in this committee room; therefore, we had to ask more questions than hear answers. I think you have a feeling of how interested we are in the topic. We want to get to the bottom of it and produce a report that will be useful to legislators. Please respond as best you can to the information and questions, and give us as much as you can. We see there is a reference to the conference board. If they have a recent study, that would be useful. We may take an additional day to ask some of these witnesses to come forward, because our sense is that there is a real clog in the economy because of some of these barriers.
Thank you very much for your patience and the information you have provided. This has been an important start to our study.
I now welcome our second panel this afternoon. From the Canadian Council of Chief Executives, I welcome Mr. David Stewart-Patterson, Executive Vice-President. We are delighted that you are here, Mr. Stewart-Patterson. Also present, from the Certified General Accountants' Association of Canada, Ms. Carole Presseault, Vice-President. Welcome.
You were here in the room during the appearance of the previous panel of witnesses, and have no doubt heard how important this study is in order to increase the economic wealth of every Canadian. Our sense is that trade barriers are impeding our growth and productivity and that we are not doing enough to develop what I consider to be something that is lacking in this country: a national economy.
We will start with you, Mr. Stewart-Patterson, and move to Ms. Presseault.
David Stewart-Patterson, Executive Vice-President, Canadian Council of Chief Executives: Honourable senators, obviously it will come as no surprise to you that the Canadian Council of Chief Executives strongly agrees with you in terms of your feeling that the free flow of goods, services, people and investment around this country is essential to the competitiveness of our economy and to the well-being of Canadians. I want to express our gratitude to the committee for taking on this subject and for the opportunity to appear before you today to discuss the Agreement on Internal Trade and, more broadly, how we can strengthen the economic union.
I would like to raise three issues to start. The first is labour mobility; the second is the regulation of capital markets; and the third is dispute resolution.
The primary focus of the Agreement on Internal Trade, more than a decade ago, was on encouraging a better flow of goods and services. Today, though, the most urgent issue facing companies in many sectors and regions is a shortage of labour. The ageing population means that labour shortages are likely to become more frequent and more serious in the years ahead. That makes it increasingly important for Canada to encourage the free flow of people within our borders. As the Council of the Federation recognized in July at its meeting in St. John's, further reductions in barriers to both trade and labour mobility are vital means of strengthening the economic union and improving Canada's competitiveness and productivity.
We are seeing some encouraging progress. Earlier witnesses mentioned the Ontario and Quebec deal on construction workers and the Alberta-British Columbia trade investment on labour mobility agreement. I also want to acknowledge the progress being made by federal and provincial ministers responsible for internal trade at their most recent meeting in September in Halifax, when they agreed that Canadians will be able to work without restriction anywhere in the country by April of 2009.
While we fully support that objective, if anything we would urge governments to move faster, if at all possible. I do not think Canadians should have to wait another 2.5 years to enjoy what should be a right of citizenship, and certainly one as critical to our country's prosperity.
In pursuing this broad objective of greater labour mobility, I want to raise two issues in particular. The first is with respect to apprenticeships and skilled trades. Businesses are facing a severe and growing shortage of workers in skilled trades, but in some trades even highly qualified workers still do not enjoy complete labour mobility, can face barriers in moving between provinces and, more seriously, the fact that apprentices who move between provinces lose their status appears to be a major cause of the distressingly high proportion of apprentices who fail to complete their courses and obtain their certification.
The second concern goes beyond the Agreement on Internal Trade and deals with what I might call policy barriers to labour mobility. Here I am referring specifically to the Employment Insurance system and the impact it has in discouraging people from leaving regions of high unemployment even when their skills are in great demand elsewhere. I want to acknowledge that the decision to move a family from one city to another and from one province to another is not easy. I have done it myself; I speak from experience. However, I believe that public policy should not be discouraging that kind of activity and making those decisions more difficult.
If I may turn to capital markets, I think the business community feels a continuing frustration with the fragmented approach that Canada brings to its capital markets. We live in an era where investment flows freely around the world, yet we maintain 13 separate securities regulators. This fragmentation hurts investors by limiting their opportunities, reducing returns and leaving them with less protection than they would have otherwise. It also adds to the cost of raising capital and thereby hurts the ability of Canadian companies to grow and create jobs.
The need for a single securities regulator in this country is clear and compelling. The passport approach being pursued by most provincial governments is a modest improvement but does not meet the needs of today's investors and issuers. In June, the Crawford panel on a single Canadian securities regulator put forward what we believe is a creative model that would pool provincial expertise, respect constitutional authority and prevent dominance by any one jurisdiction. It also suggested a federal presence within a governance structure that is modeled on the proven and successful Canada Pension Plan Investment Board.
The federal Minister of Finance has been clear in his support for a single regulator, and we appreciate that. He has also suggested that we address this issue in the context of the broader federal-provincial discussions on issues such as equalization and transfer payments.
We, as a council, have made it clear that we are prepared to support some bold ideas in terms of reforming fiscal federalism, but we also believe that the provinces should be willing to give as well as take in the context of these discussions. We would therefore go one step further than the minister and suggest that an agreement by the provinces to establish a single securities regulator for this country should be an explicit condition of the next federal-provincial accord on the reform of fiscal arrangements.
Finally, let me speak to the issue of dispute resolution. The lack of an effective process for resolving disputes has been the greatest weakness of the Agreement on Internal Trade. The recent agreement between Alberta and British Columbia includes a much more effective approach. We are extremely pleased that federal and provincial ministers agreed in September to develop an effective, fair, efficient, accountable and enforceable dispute resolution process by August 2007, to take effect a month later.
The Canadian Council of Chief Executives strongly supports this commitment by ministers. A truly effective dispute resolution process is essential for achieving the goals of the Agreement on Internal Trade and would, perhaps, be the single most important step that governments could take in moving the Canadian market toward one that would truly be free within our own borders, and would help propel the competitiveness of our economy and build the prosperity of Canadians in the years ahead. I will conclude my remarks with that thought.
Carole Presseault, Vice-President, Certified General Accountants Association of Canada: Honourable senators, I will take up where Mr. Stewart-Patterson has left off and focus on the dispute resolution mechanism. There are few organizations that can claim to have the experience of the Certified General Accountants Association of Canada, CGA, in seeking to resolve trade disputes under the Agreement on Internal Trade, the AIT.
The Chairman: I must declare a conflict. At one time, I was a teacher and lecturer for the Certified General Accountants Association of Canada. It helped me pay my way through school.
Senator Angus: It is just a way for you to show us how qualified you are to be a chair, but there is no conflict.
The Chairman: Thank you so much.
Ms. Presseault: As accountants like conflict of interest to be declared, it is an important part of who they are and what their work is. Therefore, we have been a staunch supporter of this movement and we have put forward three papers that we have produced on the issue on the AIT and our experience with this concept. We know, like others, that an effective, accessible and credible dispute resolution mechanism is central to improving provincial trade. However, we have discovered the hard way that the dispute resolution is not working as it should, and it needs to be fixed.
To date, our efforts to level the public accounting field across the country has yielded mixed results. We have used the AIT to eliminate restrictions on CGA's access to public accounting in some provinces, yet continue to be challenged by limitations in others. At present, there is no guarantee that provincial governments will implement panel findings at all, much less in a timely fashion, because there is no provision within the agreement to ensure that they do.
Canada has a framework of rules and regulations governing fair trade practices between the provinces but no real means of enforcement. The AIT architects were well intentioned, but they created a paper lion. An absence of political will to address these concerns lies at the root of the problem. Until we face up to that reality, Canada will never have free trade within its own borders, to say nothing of the cost to businesses and risk to Canadian jobs. In sum, restricting trade spell lost opportunity — an outcome that is in no-one's interest, least of all that of small- and medium-sized businesses that count on access to larger markets to become competitive and grow.
[Translation]
We think there is a better way. The AIT is basically sound though in a need of refinement. We look forward to the introduction of specific measures aimed at resolving trade disputes more quickly and efficiently.
We believe that governments should be obligated to live up to the letter of the agreement by upholding trade panel findings. We suggest specific measures to ensure the effectiveness of dispute resolution processes. First, those processes have to be simplified.
[English]
To illustrate this point, I would draw to your attention one of the papers where we have produced a diagram of the dispute resolution process. We were very challenged in trying to draw that diagram. We have been through this process twice. We can walk you through this diagram. I know you have gone through it with others, but it is a very costly and complex dispute resolution mechanism. In one of our papers, we made a number of recommendations on how we can simplify the process.
[Translation]
We believe that we should lower the costs and the time required to launch complaints and that we should introduce a measure of certainty that governments with respect and act upon panel findings in a concerted effort to eliminate barriers to trade and labour mobility.
[English]
Today we have had two panels rule in favour of CGA's access to public accounting in two Canadian provinces. One ruled five years ago, and the formal framework has still not been implemented. One other panel ruled against the province of Quebec last year and, to date, no progress has been achieved in the negotiations and discussions.
[Translation]
Finally, we must create realistic and practical sanctions aimed at ensuring that governments respect their obligations under the AIT.
[English]
We are encouraged by the progress achieved from the most recent meeting of federal, provincial and territorial ministers. You have heard about that from the previous witnesses. It appears that there are some improvements to simplifying the dispute resolution mechanism. We think they do not go far enough, and we have some recommendations on how to go forward.
A report we made four or five years ago is entitled "It Can Make Work If We Want It To.'' To that end, we count on this committee's work to help us get to the desired destination. The level of experience that the CGA community has gained with the AIT is somewhat unfortunate. The AIT should really be a tool of last resort. First and foremost, the aim should be to reduce and eliminate interprovincial trade barriers.
Senator Angus: Thank you. Congratulations to both of you for your clear and right-on-the-money presentations. They are helpful to us, as is the documentation from the CGA. I know your organization well. This is helpful background. I know you have an ongoing issue, and I will ask you about that in a moment, Ms. Presseault.
Mr. Stewart-Patterson, you caught my attention when you said that we put up these public policy-driven barriers. With respect to unemployment insurance, I understood you to be saying that we need labour like mad up in Fort McMurray. There are huge projects hanging in the balance, and cost overruns because of supply and demand issues. To get somebody to serve coffee at a Tim Hortons in Fort McMurray, you have to pay them what you pay a neurosurgeon in Montreal. It makes no sense. How can we resolve that situation? Is it within the remit of the federal government to fix? Do we just change social policy and not give unemployment insurance? Is that what you are saying?
Mr. Stewart-Patterson: When you deal with public policy, many signals can be fairly subtle. Much of our policy framework was designed in an era where the perpetual central issue for policy makers was that we did not have enough jobs to go around. There was high unemployment; "jobs, jobs, jobs'' was the central issue. We are now moving through a significant demographic shift in this country, but we are only halfway there. We are now in a situation where we have extreme labour shortages in some parts of the country, and regions of high unemployment in others. Our policy framework is still geared to the former situation, where the problem was not enough jobs anywhere. We should be thinking about how to move that policy framework towards ensuring that we have the people we need to fill the jobs. We will increasingly be short of people instead of short of jobs in more sectors, more industries, more companies and more regions. It will never be a completely level playing field. That does not mean you do away with the social safety net. An important piece of the puzzle is on developing people, ensuring that every Canadian is able to do productive work within the economies that evolve.
That said, I think we need to start now to look at some of the signals we are sending to people in terms of what they should consider and what they should lean towards in terms of the decisions they make in their personal lives. As I say, the decision to uproot a family is never easy, especially if you are living in a community in which you have grown up. You have relatives, friends and family, and it is not easy to pull up stakes and head off somewhere else because of the paycheque.
It is important to recognize, as we move into this labour-short economy generally, that it will be possible to attract work and investment to communities where labour is available. In other words, investment is mobile, and perhaps more mobile than people. It is not just a one-way flow. We are not just saying we should push people into moving away from regions of high unemployment. We should still be looking at how communities in every part of the country can attract investment and attract jobs so that there are opportunities wherever people happen to live.
It is important to recognize the context of the Employment Insurance system. We have provisions geared specifically to encouraging people to stay in regions of higher unemployment and to stay in seasonal work because those kinds of jobs were mainstays of employment in those regions. There may still be a social purpose to that, but we must recognize that there is an economic option. We should ask ourselves, from a policy point of view, to what extent should policy be trying to bring jobs to people, and to what extent should it be leaving people free, one way or another, to seek opportunity wherever that opportunity arises.
Senator Angus: The council you represent, was that formerly known as the BCNI?
Mr. Stewart-Patterson: Yes, it was formerly the Business Council on National Issues. Our members run 150 large companies. Our members tend to run companies that operate coast to coast, and certainly across regions.
Senator Angus: Your membership understands these issues clearly, then. Do we have the mechanisms in place, whether they be the AIT or this new council of the provincial ministers that seems to do good things? It was a big issue when the government decided to embrace free trade. The whole 1988 election was about free trade. It was a very divisive issue in this country. The facts are now starting to show that it was the right thing to do, but it was an upheaval. It is tough for the retailers to see a Wal-Mart next door, but I am told the numbers prove that it was the right way to go. In order to break down these barriers, does somebody have to make a leap of faith? Does it take real political courage to break down these barriers, as it did then with respect to free trade?
Mr. Stewart-Patterson: There is no question that the history of agreements generally on internal trade suggests a lot of good intentions and a lot less in terms of concrete action. It is also fair to say that the more ambitious your actual actions, the more disruption there is likely to be in the short term. You have to look at the impact over time. The comparison to free trade with the United States is a good one. Looking at regional impact, somebody mentioned alcohol and wine earlier. The wine industry in Niagara was threatened with annihilation by the advent of free trade. Many people were convinced that that whole sector would disappear because of competition with the United States. If we look at the Niagara region today, we see that many companies are producing higher quality product, making more money and attracting international attention. Nobody would argue today that the Canadian wine sector is worse off than it was before the free trade deal was signed.
When we talk about breaking down barriers and opening up markets, whether it is within the country or between our country and other countries, being more open increases the risk for people doing things on the basis of the way the rules are today. It encourages change, and change is disruptive. However, as a general statement, the fewer barriers there are within the Canadian marketplace, the better off all Canadians will be, over time.
The Chairman: I am mindful of the clock. We have 20 minutes left, and I have a number of questioners. The next witness should respond to a question from Senator Angus, and then we will have a chance to go around.
Senator Angus: I wanted to conclude with you, sir. You heard me saying earlier what this round table is about. The ministers, the Honourable Mr. Bernier and the Honourable Mr. Flaherty, are quite interested in seeing what we, as a committee, might come up with. If you could give us one recommendation to put in our report to address this issue, what would it be?
Mr. Stewart-Patterson: If I were to pick a single one, I would echo my colleague here. Look at what the Alberta- British Columbia agreement has done in terms of dispute resolution. Look to see if we can do that on a national basis; and there are three aspects in particular: One, the fact that individuals as well as governments have access to dispute resolution; two, that arbitration panels can deliver binding decisions; and three, that there are teeth in it, and there are penalties and fines that are significant enough to make people pay attention. If we could consider a national dispute resolution process with those kinds of features, that would be the single most important thing that governments could do.
Senator Goldstein: I am interested in your assertion that some social policies act as disincentives. Your specific example was quite striking, and that was that Employment Insurance appeared to make people stay put rather than seek jobs elsewhere, ignoring for a moment the dislocation of a family, leaving a particular spot and going to another one. When you speak of that, rather than diminishing unemployment benefits, could you imagine a system that would increase or enhance or create cash incentives to people to move, to go to a place where their particular skills or their general skills would be useful, whereas they are not useful in the specific spot in Canada where they are residing at the moment?
Mr. Stewart-Patterson: Positive incentives generally are certainly a feature of any kind of social program worth looking at. As you say, not only is moving a family between provinces disruptive, it is also a costly process. Already we have tax policy that makes moving costs deductible. We want to enhance that kind of positive incentive as opposed to reinforcing negative incentives. We get into complex design issues whenever social programs are concerned. Thinking about moving the incentives in the right direction is a good idea.
Senator Goldstein: My second question might be somewhat embarrassing to you. If it is, tell me that you will not answer it. The existence of 13 securities commissioners across the country, is that a function of the desires of provinces and territories to have their own securities commissions, or is it an entrenchment of the particular securities commissions in each province saying that they do not want to become national; that they want to remain exactly where they are, and a reflection of the inability of provinces to take appropriate and bold measures to remind securities commissions that they serve the people and do not control them?
Mr. Stewart-Patterson: I believe there is an honest desire on the part of the governments, and even some parts of the business community in some jurisdictions, to kind of just prefer to keep control more local, more comfortable. It is something with which they are familiar. Business people might know somebody down the street that they can go to, for example. However, I think there is broader recognition that this is imposing costs. If you look at the costs of a relatively small company going public, the amount of money you have to spend to apply to 13 jurisdictions instead of one is quite significant in terms of legal fees, accounting fees and registration fees.
If there is one overriding concern, it also flows from the experience that we have gone through internationally with the challenges to corporate governance and the spillover from the United States in terms of the Sarbanes-Oxley Act and a more rigid approach to regulation, which I believe some jurisdictions see as being driven within Canada by the Ontario Securities Commission. I think there is resistance in some jurisdictions towards going that way. That is why I think the Crawford report was important because it emphasized, on the one hand, the efficiencies of having a single regulator with the ability to compel. However, we also need to take a good look at a more principles-based approach that will meet the needs of smaller as well as larger issuers in the Canadian context, and also to avoid domination from any single jurisdiction, which was a quiet way of saying that Ontario should not run it. That may be my interpretation.
Senator Goldstein: That is exactly what it said.
Senator Angus: Before the Purdy-Crawford report, the wise men, this Michael Phelps, et al, what happened? Did their report end up being buried?
Mr. Stewart-Patterson: The short answer to that is that because the wise persons' committee was established by the federal government, provincial governments used that as an excuse to say that we should not really pay attention to its report. The Crawford panel was set up by a provincial government to get around that excuse.
Senator Angus: Should they be looked at in a complementary fashion now?
Mr. Stewart-Patterson: There is more than one model of a viable single regulator for a securities market. The Crawford panel has benefitted from the fact that there have been a few more years of debate and progress, in terms of things like the passport system and other discussions. The governance model is more evolved and more thought through, and perhaps more acceptable. The end goal is clear in terms of where we need to get to; it is just a question of how.
The Chairman: To ask a question of both witnesses: We have decided, as a question of general government policy, not to pursue a legislative constitutional means of exerting pressure on the provinces to reduce their barriers. The choice was to make a consensual approach to see if the federal government and others could urge the provinces to get together in some sort of consensual fashion to reduce these barriers. Then we had an outburst, as a reaction to that, by having local or regional bilateral agreements, some of which have worked very well.
The whole process is cumbersome and slow-moving. I turn to the witness from the CGA and ask her about her concluding paragraph. I just want to put this on the record so that people understand what we are talking about here. We have decided not to use the legislative means, we have decided not to use the constitutional means, and we have decided to use the consensual means. It says here that the AIT is not a legally binding document. This agreement that the provinces have put together is really a consensual document, that it does not have the status of law and therefore the issues cannot be referred to the courts. Then we end up with a very curious scenario in that we now have a situation that is not dissimilar from what we had with the free trade agreement with the United States and Mexico. That is, there is a huge hang-up between two sovereign countries about having more effective, binding settlement disputes, yet in our own country we cannot get the legislative means to enforce quick resolutions to problems that are quite obviously to the benefit of everybody. Do you not find this curious?
Ms. Presseault: We might find it curious. I think our members find it really frustrating. In fact, in the statement coming out of the minister's meeting in Halifax, the September statement, in one of their opening paragraphs they really reinforce the administrative nature of resolving disputes contrary to the Trade, Investment and Labour Mobility Agreement, or TILMA, for example, that could go to judicial review. It is frustrating to our members because that might lead to a big expense. I know this committee is very curious about data and numbers and we, like others, cannot provide you with much, but we can tell you that our members who are sitting on the New Brunswick/Quebec border are losing clients because they cannot provide public accounting services in the province of Quebec because of one piece of legislation. They are losing not big clients, not David's members, but they are losing small clients. That is where the real cost to business is, and where that is happening every day.
In fact, the case we brought forward to the panel was that of a daycare operator who had to change accountants because of an old piece of legislation in Quebec. When we went to the panel, the Quebec government argued forcefully — but the panel did not buy into the argument — that they had the right to regulate professions. That is how they came up with that restriction.
The Chairman: Is it fair to conclude, from the evidence of both of you, that this consensual approach is moving too slowly and it is costly because of the delays and frustrations? Is there a better model that we could propose to expedite decisions that every logical and objective person knows would be in the national interest?
Mr. Stewart-Patterson: I think there are two things that can be done. One is to recognize where progress is being made.
The Chairman: We accept that.
Mr. Stewart-Patterson: Alberta and British Columbia have come to a conclusion that a bilateral deal makes a lot of sense. It is easy to say: If it makes sense for you there, why should we not do the same? The other one is the one I alluded to in terms of the single regulator on securities.
The fact is that the provinces are constantly coming to Ottawa, looking for help. I think it is fair for the federal government, in return, to say that there are things we think the provinces need to do that are in the national interest. I think it is perfectly reasonable, and it is non-legislative. In the context of federal and provincial negotiations, when one side wants something, it is fair for the other side to want something too, and to put a broader agenda on the table.
The Chairman: We had an active discussion several weeks ago about how to reduce poverty in this country. One of the ways is to increase the minimum wage. Unfortunately, there is a provincial jurisdictional issue here, and we cannot increase the minimum wage because of provincial differences. Therefore, this is impeding our ability to move a lot of people out of poverty into a more sustainable way of life. This is a negative problem as well.
Your two organizations must be deeply frustrated because you go to meeting after meeting, proposing in the national interest to include productivity, and still the consensual model we are working on is not moving quickly enough.
Give us some public advice. We are politicians. We represent Parliament. Is there some way that we can light a fire under those provinces or bureaucracies or agencies, and perhaps some of the labour unions? I am pro-labour, but I know that in Toronto until recently, if you were an immigrant bricklayer and there was a job opening with a contractor for whom you had been working in Montreal, then you could do that. You could take a train and go and work for two or three weeks and then go back home. That certainly reduced productivity and vice versa — the same applied in Montreal, back to Toronto.
Please help us here. This will be the core of our study. How do we move people to resolve these issues quickly and more effectively?
Ms. Presseault: That is a difficult question. Your witnesses are looking at each other. It goes back to what both of us are saying in terms of ensuring that there is a trade agreement that is fully enforceable but, more important, is accessible and transparent.
The Chairman: Why do we need a trade agreement?
Ms. Presseault: You need a place to which people can bring disputes if governments fail to live up to their responsibilities. Before the trade agreement, governments that signed this agreement 11 or 12 years ago need to commit to their —
The Chairman: I do not mean to interrupt, but just stop there for a moment. The United States is the most dynamic economy in the world. They have state rights, border problems, barriers and so on, but they have a very effective national economy, even though it is segmented. On the other hand, we do not. Our report demonstrates that we are falling behind dramatically in terms of productivity in our country. Obviously, some of that has to do with this situation.
In the United States, if we look at their model, I do not think that they have trade dispute mechanisms between states. Governors talk, and they try to resolve differences, but there is no mechanism. Why are we setting up a mechanism to resolve issues that should be dealt with quickly between governments?
Senator Goldstein: There is a mechanism in the States.
The Chairman: But it is not a barrier.
Senator Goldstein: It works.
The Chairman: It works, but it is legislative.
Ms. Presseault: From my very limited knowledge of how the accounting system works in the United States, I understand that there are barriers between states; I am not sure how that system works.
I will turn it over to Mr. Stewart-Patterson for his comments, but governments must comply with the undertakings they made when they put their signature on the Agreement on Internal Trade. That agreement was to reduce and eventually eliminate barriers. Governments must meet that commitment. They made that commitment; now they must deliver on it.
Senator Angus: We have been hearing about this situation in Quebec for so long. There must be a strong lobby by the chartered accountants. It is just like the situation with the notaries, and that stupid thing.
Ms. Presseault: The Competition Bureau is undertaking a study of the professions, and those are some of the issues that we want to look at. There is strong interest on both sides of this question. On any side of the question of trade, there are strong interests — some stronger than others; some more traditional than others.
Senator Angus: You have a judgment that needs to be enforced. The Quebec government found that, under the agreement, they not only have to pay costs of $35,000, they are supposed to change that law — disband it, it seems to me.
Ms. Presseault: The panel said that they had to change section 24 of the Chartered Accountants Act. It does not make sense that a certified general accountant out of Alberta cannot work for the same client in Quebec.
Senator Angus: In order to get the answer into our report, the ideal thing for us to do would be to ask Premier Charest to send somebody here to explain when they will be making this amendment.
Ms. Presseault: Governments need to explain why they are not committing to their obligations under the AIT, and why they are not enforcing panel decisions. Governments have to be held to account on that.
Senator Moore: You have mentioned this panel. Who is on that panel? How many people, and how do they get there?
Ms. Presseault: Provincial and federal governments have a roster of panellists. When a panel is convened, each party can choose or nominate a panellist from a roster already established. There is a whole process by which the roster is appointed.
One of the challenges in some panel discussions is that one government has not named any panellists. If you do not have a panellist, you cannot go to a panel.
Senator Moore: To frustrate the process?
Ms. Presseault: Yes.
Senator Moore: How many people sit on a panel?
Ms. Presseault: Three people.
Senator Moore: One province whose turn it is to name a panellist cannot do so, and thereby frustrates the process?
Ms. Presseault: Yes. For example, if I, as an individual, were to go through the dispute resolution mechanism against the Yukon Territory, I would nominate a panellist from the Yukon list. However, if Yukon or Ontario, or whoever, does not have a list, there is no panel.
TILMA, the B.C.-Alberta agreement, has now uncomplicated that process. If you do not have a panel, they will name one for you. However, there are ways in which people have frustrated the process, yes.
Senator Moore: I am looking at a report from the Library of Parliament dated September 20, 2005, dealing with the Agreement on Internal Trade. They talk about various activities that were brought under consideration. One I find interesting is the following:
A panel report was published on 10 November 2004 concerning Alberta's and British Columbia's challenge to Ontario's Edible Oil Products Act; The Government of Ontario subsequently repealed the legislation. The plaintiffs remain concerned that Ontario has not entirely fulfilled the recommendation, as it has introduced new interim regulations for dairy edible-oil products.
Perhaps this goes back to question of the deputy chair: Who enforces the ruling of the panel? Who polices it to ensure that that ruling is put into effect and is observed by the relevant parties?
Ms. Presseault: It would be the complainant. I am not familiar with this particular case but we hope that one of the recommendations coming out of the provincial-territorial ministers meetings calls for a panel to be reconvened. We are curious about this case, and looking at it carefully. In our case, in Ontario, the government has introduced measures that are not fully implemented. At some time we will need to test those measures to know whether they meet the panel recommendations.
The Chairman: That will be in the future. Senator Moore is asking a question about what happens in the present.
Ms. Presseault: My understanding of the agreement is that the complainant would need to begin consultations with the provincial government to determine whether their measures meet the panel recommendations.
Senator Moore: In this case, two provinces take up an action against another province before the panel. They are successful, and yet it is up to the successful provinces to chase down the other province to ensure that the ruling is put into effect. Is that correct? It would seem to me that the foundation of any civil society is the rule of law and the observance of it. That is why I do not like the softwood trade agreement.
Ms. Presseault: I cannot comment further because I am not familiar with the government-to-government challenge process.
Senator Moore: Is it in the hands of the plaintiffs to ensure that the ruling of the panel has been observed? Who does the follow-up? What are the sanctions?
Senator Angus: It is unenforceable.
Senator Goldstein: It is a voluntary jurisdiction; it is not compulsory.
The Chairman: To be fair, based on the evidence we have heard, if this is correct and it is a consensual agreement, it will go through a coalition of the willing. Even if a decision is taken and the willing partners are prepared to implement the decisions, even if they are unfavourable, then it is nothing more than a process. That is what I think both witnesses have been telling us.
Senator Angus: It is like the softwood lumber agreement.
The Chairman: They are trying endlessly to come up with some hammers that will conclude the process.
I would ask the witnesses to explore the American model, which has teeth, and the Interstate Commerce Committee, ICC, is an enforcement body dealing with disputes. We do not want to end up with an entire series of mini-fiefdoms dealing with disputes for which there is no resolution. Canadians need to understand what has been going on here for years and years so that they can begin to know how it affects their incomes and their taxes. Everyone here today is nodding in agreement. We share your frustration, and we hope to get to the bottom of this.
I urge the provincial premiers and their counterparts to come to this committee to explain their lack of conduct. We have invited them but they do not want to come, and now I understand why that is. They would not like to hear the Senate of Canada criticizing the provinces; that would be horrible. Frankly, there has been a lack of public responsibility and, to use the code word of the new government, accountability. We will come back to this question.
If the witnesses can help us further in the committee's deliberations, please do so in writing, as it would be helpful to our ongoing discussion.
The committee adjourned.