Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 4 - Evidence - April 13, 2016
OTTAWA, Wednesday, April 13, 2016
The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:32 p.m. to study the issues pertaining to internal barriers to trade.
Senator David Tkachuk (Chair) in the chair.
[English]
The Chair: Good afternoon. Welcome to the Standing Senate Committee on Banking, Trade and Commerce. My name is David Tkachuk and I am the chair of the committee.
Today is our fifth meeting on the special study on issues pertaining to internal barriers to trade.
We have with us Mr. John Moffet, Director General, Environmental Stewardship Branch, environment and Climate Change Canada. From the Canadian Chamber of Commerce, we have Mr. Ryan Greer, Director, Transportation and Infrastructure Policy. And from the Canadian Federation of Independent Business, we have Ms. Monique Moreau, Director, National Affairs.
Thank you for being here today. We will start with Ms. Moreau, and I understand Mr. Moffet has to catch a plane at 5:25, so we all know for the purposes of questioning.
Monique Moreau, Director, National Affairs, Canadian Federation of Independent Business: Thank you for the opportunity to be here today and to share CFIB's perspective on internal trade. You should have a slide presentation in front of you that I'd like to walk you through in the next few minutes.
CFIB is a not-for-profit, non-partisan organization representing 109,000 small and medium-sized businesses across Canada, who collectively employ more than 1.25 million Canadians and account for $75 billion, or nearly half, of Canada's GDP. Our members represent all sectors of the economy and are found in every region of the country.
Collectively, Canada's small and medium-sized enterprises employ 70 per cent of Canadians working in the private sector and are responsible for the bulk of new job creation. Addressing issues of importance to them can have a widespread impact on job creation and the economy.
As you may be aware, CFIB takes its direction solely from our members through a variety of surveys throughout the year, and today I will share with you some results from a survey and report on internal trade that we released in 2015. You should already have a copy of that with you in both official languages.
On slide 3, to the average Canadian the concept of barriers to trade within Canada may seem ridiculous. After all, there are no guards at our provincial or territorial borders and there are no tariffs on goods or services when they pass from one province to another, and while these types of barriers are what we would normally expect as trade restrictions, the reality is that red tape, whether it be navigating the maze of different or conflicting rules in different jurisdictions, completing paperwork for different governments or jumping through the hoops to ensure compliance with a number of different bureaucracies, all too often limits the opportunities of Canadian firms to do business across the country and serves as a drag on our productivity and economic growth potential.
We define trade barriers as any regulation or obligation created by any level of government that creates an impediment or additional cost when trading with another province or territory.
There are three main categories of barriers to the flow of goods and services where government can exercise authority or influence that we've listed on slide 3. The first are prohibitive barriers. These are written laws preventing trade, such as the prohibition on the direct sale of alcoholic beverages to customers or retailers in other provinces. The second is technical barriers. These are industry specific regulations, such as vehicle weight or dimension standards, and the third is regulatory or administrative barriers. These include obligations to comply with different regulations and completing paperwork in different jurisdictions, such as business registration, permits, licensing, et cetera. Any new internal trade agreements as such must address all of these types of barriers in order to be effective.
When it was ratified in 1994, Canada's Agreement on Internal Trade, known as the AIT, was heralded as a significant step forward for trade within Canada. However, the signing of the Comprehensive Economic and Trade Agreement, known as CETA, with Europe, along with other international trade agreements, has highlighted how the AIT has not kept pace with changing economic environments.
CETA will effectively provide European companies with access to the Canadian market in a way that businesses in neighbouring provinces or territories may not have under the existing AIT. Alongside the progress being made internationally, there are also examples of effective regional trade agreements, such as the New West Partnership between B.C., Alberta and Saskatchewan. While these regional agreements are expanded beyond the scope of the AIT, a comprehensive national approach is long overdue.
As you can see on slide 4, there is broad agreement amongst small firms that the existence of barriers to internal trade is simply unjustified in a modern economy and that governments should make removing such barriers a priority. If we are to achieve the goal of free trade within Canada, political leadership by the federal government and all provincial and territorial governments is necessary.
So what is the current situation among Canadian small businesses? Among the respondents to a recent CFIB survey, 46 per cent had sold goods and services in another province or territory in their past three years, while 73 per cent had purchased goods or services from outside their home jurisdiction. This did vary by province, as you see on slide 5, and for the most part businesses are more likely to trade with businesses within their own region or in a neighbouring region.
For those businesses that do trade within Canada, as you see on slide 6, regulatory and administrative barriers were the most prominent barriers to trade. Different tax rules in different jurisdictions, complying with each jurisdiction's regulations, and completing all the necessary paperwork can be a significant investment in both time and money, especially for the smallest of businesses.
The expenses associated with trade, whether it be shipping costs or paying for permits and licences, are also a significant challenge.
As you can see on slide 7, the most important principle for internal trade from the perspective of smaller businesses is that it should be at least as easy to trade within Canada as it is with another country. There is also great interest in making sure that all businesses have open access to markets within Canada and that the federal government should not just play a role but could consider leading the efforts to facilitate the enhancement of internal trade.
Finally, about three quarters of small businesses also believe that there should be appropriate consequences for governments that create barriers.
To give you a sense of how these barriers affect small businesses across Canada, I will share a few examples of the hundreds of comments we received with our survey. Slide 8 illustrates challenges small business owners face when employees need to work in another province, which is especially true of this particular region, the National Capital Region. Paperwork and complexities associated with different workers' compensation boards and their varying rules around occupational health and safety can be a true challenge when trying to move employees between provinces.
Slide 9 illustrates some of the challenges in dealing with locally made food products across provincial boundaries, which sometimes leads retailers to purchase food from other countries rather than from Canadian suppliers.
Slide 10 has a couple of examples of the challenges faced by trucking companies operating across provincial boundaries, which not only affect them as companies but drive up the cost of shipping and ultimately goods right across Canada for all Canadians.
Slide 11 provides examples of the frustrations small-business owners have in dealing with different certification processes, such as those associated with technical standards and safety, as well as the complexity of figuring out the different sales tax systems across Canada.
CFIB members have told us that there are too many barriers to trade and a new internal trade agreement is warranted. To make sure it is effective, CFIB recommends the principles listed on slide 12 be adopted as part of any new or enhanced interprovincial trade agreement. The first is mutual recognition. This implies that when a product or service complies with the regulation of one jurisdiction it will be acceptable in all others unless otherwise negotiated and explicitly stated. This approach has been used in the European Union as well in Australia and Switzerland to remove trade barriers between their own states.
Second is adopting the negative list approach. One of the most essential components of modern trade agreements is an underlying assumption that all cross-border trade is permitted unless otherwise explicitly stated. A commonly cited issue with the AIT is its positive list approach, where each area of trade has to be part of an enumerated list in order for the free trade provisions to apply.
The negative list approach is much more desirable as no new industry that we may not yet have conceived of will need to worry about the archaic barriers that may apply to it or about being unintentionally excluded from trade agreements. Under a negative list approach, if a signatory to the agreement wants to maintain certain barriers in any specific industry, they would have to demonstrate the need for a special exemption.
The third and last is effective dispute resolution. Any compliance mechanism will need to strike a delicate balance between persuasion and punishment. The current AIT compliance process results in disputes that are long and drawn out, and any resolution reached is seldom satisfying to either party or really in the broader interests of liberalized trade.
In order to ensure a more effective dispute settlement process, we would propose a domestic equivalent to the investor state dispute settlement that we already see through NAFTA, where disputes can be launched directly with the governing body, rather than the existing AIT process, which requires businesses to first go through their own government.
In today's economy, few would argue about the value of free trade, and while international trade agreements provide opportunities for Canadian firms and the economy as a whole, for small businesses it is equally if not more important that there be free and open trade within Canada, so governments at all levels should make establishing free trade within Canada a priority.
Political will and resources should be directed to creating internal trade agreements modeled on principles of mutual recognition, negative list approach and effective dispute resolution. While it is encouraging that the premiers and the federal government have all publicly supported moving forward on this file, what matters most to small businesses is that meaningful and swift action be taken to ensure an open and competitive marketplace for firms within Canada.
Thank you and I look forward to your questions in French and English.
Ryan Greer, Director, Transportation and Infrastructure Policy, The Canadian Chamber of Commerce: Chair, committee members, thank you for inviting the Canadian Chamber of Commerce to take part in your study on the issue of internal trade. This is an important issue to our network of 200,000 members. In fact, since 2012 we have been publishing an annual list of the Top 10 Barriers to Competitiveness to highlight the biggest obstacles to growth for job creators in this country. Internal trade barriers have made the top 10 every year, including this year.
I'll also note that the chamber is part of a business alliance comprised of national organizations that have been working towards the common goal of strengthening our economic union. This includes the CFIB, the Business Council of Canada, CME, the Dairy Processors Association, as well as the Retail Council of Canada, and this group has made several recommendations to the Committee on Internal Trade on how the agreement should be modernized.
I won't use my remarks to highlight some of the specific barriers, but we all know that businesses, employees and consumers lose under the current balkanized system. If the patient is sick, rather than focusing on the symptoms, I will focus on a few of the remedies. I also think you won't find a lot of daylight between our recommendations and some those the CFIB just mentioned. Many of the problems with the agreement have been around for quite some time and so have the solutions as well.
The first thing we'll be looking for is a negative list approach. As members of this committee heard from Minister Bains, during his testimony he said ministers are closing in on an agreement, on a comprehensive renewal, based on a negative list. This will be consistent with modern trade agreements and will be good news. It will ensure that new kinds of market activity are automatically included in the agreement, unless otherwise specified. A negative list will also be more transparent for businesses, consumers and governments.
However, for a new AIT or any trade agreement to be worth the paper it's printed on, parties must have recourse to enforce its provisions. So the second we'll be looking for is a new effective dispute resolution mechanism.
It's disappointing that ministers have said that a new, simplified binding mechanism is not currently being negotiated. Without a process that renders decisions in a cost-efficient and timely manner, a negative list is not really an enhanced agreement, it's just a list.
The chamber believes that a new dispute resolution process should expand the right of private parties to more easily access dispute resolution tribunals without a government sponsor and have appropriate appeal procedures to the courts. There is no reason that internal trade disputes, which are based on commercial transactions, should not have at a minimum level the same recourse as commercial activity. Where non-legitimate barriers are put in place, the market and the tools available to the market are the best force capable of driving reform.
The third thing the chamber will be looking for in a new agreement is commitment to mutual recognition. Most of the barriers we are talking about are regulatory, slightly different standards that may serve as protectionist barriers under the guise of the public interest. When there is no genuine public interest, there are two complementary ways that we can eliminate these barriers: harmonizing regulations and mutual recognition.
While regulatory harmonization is a worthy pursuit, it is a complex and long-term goal. In the short term, provinces and territories should move toward mutual recognition and say that one good or service legally provided in one province should be allowed in another even if regulatory requirements differ. Mutual recognition is already the basis for how the EU and Australia govern their internal markets. After establishing mutual recognition, provinces and territories can build on the principle and continue working toward common standards and regulations.
A goal of regulatory harmonization without mutual recognition is a starting point that is likely to suffer the same fate that the AIT has since it was first signed: slow, incremental change that does not meet and keep up with the needs of business.
Another thing the chamber will be looking for and perhaps the most crucial ingredient needed to create a single Canadian market will be political leadership. If you step back it's easy to see why progress on internal trade has been so slow. Internal trade is often a secondary responsibility for the minister that carries it in each jurisdiction. Those ministers and their officials control very few if any of the levers required to actually remove these barriers. This means we rely on a successful whole-of-government coordination for multiple jurisdictions to amend a consensus-based agreement. And even if everything goes right, years or months of progress can be derailed by political or other considerations.
A look through the AIT annual reports will provide a glimpse of this. I will read an excerpt from the AIT Annual Report for 2010-11; in an update on the energy chapter it says:
The conclusion of an Energy Chapter for the AIT has been an outstanding obligation since the AIT came into effect in 1995 and has been a key element in the Council of the Federation plan to improve internal trade since 2004.
A draft Energy Chapter was concluded and presented to the CIT at its October 2009 meeting. All Parties except one supported the formal inclusion of the draft Chapter into the AIT. Since consensus of all the Parties is required to incorporate the Chapter into the AIT, the draft Chapter was rejected.
It's just one example but highly illustrative of why a change to the agreement has been so slow and insufficient.
Would we have signed any of our international free trade agreements without the strong investment of political capital from prime ministers to conclude those negotiations? That same political investment is required from our first ministers and the federal government if we are going to significantly enhance internal trade.
This is why the chamber is cautiously optimistic about a renewed agreement. The Council of the Federation set an ambitious goal and timeline in May of 2014 to reach a new agreement by the spring, and Western premiers in particular have beat the internal trade drum louder in recent years. Whatever is announced, the first ministers must remain front and centre to ensure that we have aggressive implementation timelines and that they are met. Implementation should also include increased business engagement throughout the discussions to help ensure that political or other considerations do not derail the movement toward opening up the Canadian market.
In his testimony at this committee, Minister Bains estimated that we are probably at around 20 per cent of optimal trade within Canada, and he suggested that a renewed agreement will bring us to somewhere around 60 per cent. This would be a huge jump, and ministers will be deserving of our congratulations for getting us there, but afterwards the chamber will be interested in hearing what leaders are going to show us about the path to get to 90 per cent or 95 per cent and start moving us in that direction.
I'll close by saying the chamber has watched with great interest the continuing debate in Ottawa about the best way to stimulate the economy, how much the government should spend, how quickly it can get that money into the economy and where it should be spent. Members of the Canadian Chamber of Commerce are telling us that there is a huge amount of private investment and economic growth just waiting to be unlocked across this country if governments will get on and remove some of these artificially constructed barriers that we as a country have put in place, so let's get on with it. Thank you.
John Moffet, Director General, Environmental Stewardship Branch, Environment and Climate Change Canada: My full title is Director General, Legislative and Regulatory Affairs. I say that to let you know that I am a regulator, and I am here to discuss the role of the federal environmental regulations.
I have two basic points. One is that federal environmental laws and regulations do not create internal barriers to trade, although of course provincial environmental regulations might. And then the second has to do with the ways in which an agreement on internal trade should address environmental protection.
I'll turn to the first point then, and apologies if I'm telling you things that you already know, but I'll start with constitutional law 101, and the basic point is that environment is not mentioned in the Constitution and, as a result, both the federal government and the provincial governments have authority to legislate various aspects of environmental protection.
Federal, provincial and territorial environmental laws and regulations can coexist and indeed do coexist in addressing many issues. Where they are in direct conflict, however, in general federal laws trump.
As my two co-presenters have emphasized, barriers to internal trade may arise where there are differences in laws and regulations between one province or territory and another. Where environmental requirements may differ from one province to another, those differences may create barriers. By contrast, however, federal environmental laws and regulations apply uniformly throughout the country and thus by their very nature do not create the barriers to internal trade.
This logic applies to the full suite of issues that the federal government addresses from an environmental protection perspective, so product standards, emission standards, water effluent standards, conservation-related requirements and rules for imports and exports, including movement of products that may have environmental risks across provincial borders.
That sort of sets a bit of a context for the ways in which environmental rules at the federal level do not create barriers but may create barriers at the provincial level.
The second issue I wish to talk about is that while the elimination of barriers to trade is of course important for economic development, it will also be important for a renewed agreement on internal trade to acknowledge the importance of continuous improvements in environmental protection, and to recognize the right of each jurisdiction to establish legitimate environmental protective measures.
This is basically the same balancing act that needs to be struck in international trade agreements, and thus it's the perspective of the Department of Environment and Climate Change that the environmental provisions in a renewed agreement on internal trade should be analogous to the environmental chapters of bilateral and multilateral free trade agreements. I will highlight some of the key features of those agreements that are now pretty standard across all agreements.
In general, they recognize the importance of promoting high levels of environmental protection. They recognize the authority of each jurisdiction to identify and address their own priorities and to establish levels of environmental protection that are appropriate to the particular jurisdiction.
On the other hand, virtually every trade agreement explicitly precludes jurisdictions from establishing trade barriers in the guise of environmental protection. Similarly, trade agreements generally preclude parties from waiving or derogating from environmental laws or requirements on the basis of a policy decision in order to promote trade or attract investment. In other words, what we're trying to avoid is a race to the bottom from an environmental protection perspective.
Finally, we suggest it will be important to ensure that nothing in a renewed agreement on internal trade interferes with Canada's obligations that arise from the various international environmental agreements to which Canada is a party.
Senator Ringuette: I have two questions, one for Ms. Moreau and one to Mr. Greer.
Ms. Moreau, welcome, and my regards to Mr. Kelly.
I'm interested in the issue you highlighted on your slide 6, and I'm reading all of this. You indicated to us that you have 109,000 members; however, here we see that the survey only accounts for 6,340, not even 1 per cent of your membership.
Is that the normal response rate that you have when you send out surveys to your members, less than 1 per cent?
Ms. Moreau: It varies. For example, we'll get as many as 12,000 responses on a survey on the Canada Revenue Agency that maybe touches more of our membership. Our research team has told us this is a pretty robust sample size, if you consider that most —
The Chair: That's wrong, 5 per cent or 6 per cent. Right?
Ms. Moreau: Thank you.
Most polling that is done on opinion polling usually only uses a sample of size of about 1,000, and they use that to extrapolate what Canadians think about a particular issue. When we get numbers ranging from 6,000 to 8,000 to 12,000 responses, we typically feel that that's a sufficient base on which to draw conclusions about our membership, keeping in mind that not all small businesses trade, and so this sample size is a smaller number as a result of that. Maybe they don't have a service that is tradeable, or they tried and have stopped.
Senator Ringuette: Thank you for that, especially that last comment because it helps me put the numbers that you've brought forth into perspective.
Mr. Greer, thank you very much. I would like to talk about the last issue that you pointed out in regard to the problem of political leadership in this file because of all the provinces and territories and the federal government and the constitutional jurisdiction of each one of them. You indicated as an example one clause that was proposed and because one member, I assume one province, didn't agree, it was not adopted within the trade agreement.
My question is this: Should we not also include in this kind of negotiation an opting-out approach so that if there are nine provinces or legal entities at the table that agree on one interprovincial trade issue, if one doesn't agree they have the option of opting out instead of not having that clause at all within the agreement for all the other legal entities?
Have you looked into this kind of approach instead of having a unanimous approach that there could be an opting- out approach in regard to trying to facilitate moving forward?
Mr. Greer: That's a really good question and one that we should ask when we're dealing with an agreement that involves so many parties and requires so many different regulatory processes and otherwise to reach successful conclusions.
The energy chapter you were referencing, having had a proposed chapter ready for agreement at a meeting means that there must have been months if not a year and a half of work by officials at all levels of government to come to an agreement that was acceptable to everyone; at least it was acceptable until the last minute.
Now, I believe the Committee on Internal Trade has actually already tried to address this question of allowing an opt-out or allowing people to agree to disagree, and it was actually addressed in some way by the committee even before 2008-09, whereby the committee said exactly what you suggested. We don't all need to agree; we should perhaps allow a scenario where someone can opt out of a particular chapter. Despite that, it's still consensus-based, so even to opt out you would have to agree to disagree. And in case of the energy chapter, my understanding is that at that time there was not even agreement to disagree so the disagreeing party could have had the opportunity to step outside of that chapter and not be a part of that chapter, but whichever party it was decided that they could not provide even that approval to the agreement to sit outside of it.
I believe the committee has already looked at the question regarding how we will progress if this idea of consensus- based agreement is agree to disagree. In some cases, if you can't even agree to disagree, then we find ourselves where we are now. That's why we see more regional-based agreements. The other way of opting-out is to proceed on a regional basis.
Senator Ringuette: I am saying this because if we want to change the Constitution, the minimum for most clauses is seven out of ten. Why not apply such a principle with regard to interprovincial trade? With allowing and opting-out there might be some legitimate reason for one legal entity to want to do that.
Mr. Greer: If there was a way, I think that would be productive. However, the agreement itself is a political agreement, which does not have much force in law except for its own dispute sort of resolution mechanism. If we can't even amend the consensus-based agreement to come to some sort of agreement, to enact a new system with those kinds of protections would seem to be a long shot. However, if it were possible, wouldn't that be great?
Senator Ringuette: I think so.
[Translation]
Senator Hervieux-Payette: With regard to professions, I take Quebec's side. There are engineers, accountants and computer scientists from Quebec who go to work in Alberta and elsewhere. Lawyers, doctors and members of other professions in this sector cannot work in other provinces since all kinds of barriers come into play. We're talking about individuals.
With respect to trades, there is the Red Seal Program. I was a deputy minister in Quebec in the 1970s and I don't think there has been any change since then as regards trades. As to services, I would like to know the main services affected. As far as I know, in the financial services sector, Canadian insurance companies are incorporated in Canada and federally regulated. The same is true of banks.
In terms of products, beer is the most well-known example. Everyone knows that beer produced in one province cannot be sold in another province. For wine, there must be some loophole because wine from Ontario and British Columbia is sold in Quebec. Potatoes from New Brunswick are also sold on a regular basis. There must be some exception that allows for the sale of potatoes but not peas.
These few examples raise the question of who imposes these restrictions. Is it the companies? I am thinking of the beer companies that all want to protect their territory. Or is it government?
As to professions, I would say they are regulated by the provinces. Who will decide at some point that lawyers trained in both common law and civil law can practise throughout Canada? It's really not that complicated.
Let us return to products, such as the food products you are discussing. It is absurd that there are provincial regulations on tomatoes. A tomato is a tomato. What is the point of having regulations? Who benefits from them, apart from the fact that all kinds of taxes and various other charges are levied? Why would the provincial governments all want to collect taxes rather than reduce their budgets? I want to know who is responsible.
Ms. Moreau: In general, I would say, with the utmost respect for my colleagues, that it is the fault of the regulators, of governments. You mentioned governments wanting to collect taxes. Yes, that is part of it, indeed.
The tomato example is perhaps not the best. The sale of meat from province to province is very complicated, however. In some situations, approval is at the federal level, not the provincial level. Federal permission is not required to sell or share meat among provinces.
I would like to talk about lawyers, since I am one. The current situation is fairly straightforward. I studied law in Ottawa, did my articling in Alberta, and then applied to return to Ottawa. I paid a fee, filled out some paperwork, and that was it. I am just one person, though; I went through the process once and everything has been fine since then.
Small- and medium-sized businesses that do their own legal and accounting work have to go through all the paperwork, applications and regulations that are constantly changing. Transportation is a prime example. In some provinces, such as in the Maritimes, they have to change their tires because tire size differs from province to province.
Senator Hervieux-Payette: That's like the trains in Spain and France.
Ms. Moreau: Exactly. Another good example is first aid kits, for which safety standards differ. My favourite example is that of the little coffee creamers you see at meetings. In some provinces, they are 14 millilitres, and, in others, they are 15 millilitres or 16 millilitres. Each province does its own thing. It might be straightforward within each province, but over time the provinces have kept adding things so it has now become very complicated and expensive.
Senator Hervieux-Payette: So our colleagues at the provincial legislatures are to blame. At least we know who we have to do battle with.
Even the average citizen needs to know where to start. You will remember when work began to establish the National Securities Commission. To create this body, which in my opinion will not amount to anything, we had to buy the provinces' consent, writing them a cheque since they had to give up an area of jurisdiction.
My last question is the following: how much will it cost the federal government to get the provinces to realize that they are overdoing it and duplicating their efforts? They will all lose money ultimately.
In my opinion, our only option is to write them a cheque for potatoes, a cheque for transportation, and so forth. They do not really want to lose areas of jurisdiction that generate revenues. It all boils down to money. For their part, consumers are stuck with the problem and can't do anything to fix it.
Ms. Moreau: Let me answer briefly before turning it over to my colleagues. It is not impossible. Every January, the Canadian Federation of Independent Business holds its Red Tape Awareness Week to highlight problems with red tape. We also recognize governments that have made efforts to reduce red tape in their communities. That can include initiatives such as eliminating business licences. A mayor in Alberta decided to eliminate the yearly licence renewal. Once the licence is issued, the SME is no longer required to pay. The cost is no longer worth the trouble.
Senator Hervieux-Payette: Do you have anything else to add? Who will have to bear the cost of getting everyone out of this mess?
[English]
Mr. Greer: I can add a bit. On who is responsible, I agree with my colleague. It's the regulators. It is they who make the rules, but it is political leadership in trying to remove those rules once they are in place. Not all these rules and regulations were put in place to be protectionist. Often when there was a new service or a new sector, provincial governments were rightfully enacting new regulation to protect health, safety and the environment. There were differing standards because other provinces hadn't yet regulated in the space at all. But when all of a sudden you have 10, 11, 12, 13 different regimes and it comes time to look at changing that regime, there are interests that will be protected by keeping that regime. You have privileged access to a market that makes it clear that there will be political or other consequences to a government who decides to change it, and it's not worth the trouble to change it.
However we got to this crazy system, as we said, of regulating milk containers by volume and saying that first aid kits have to have different content in every single province —
Senator Hervieux-Payette: How many plasters?
Mr. Greer: Yes. Now it is incumbent on political leaders to get together and say, "This is enough. This really is silly.'' Where there are legitimate reasons to regulate in a different manner because of health and safety, fine. But when we're not trying to deal with those measures, let's get rid of them because there is no good reason to have any of these barriers.
Senator Campbell: I'm embarrassed, and I don't get embarrassed that often, of what I have heard here.
Explain to me why I need 100 per cent or even 50 per cent? We are all in here and three of us want to cut a deal. Why can't I just cut a deal? I know we do that regionally, but why aren't we doing that across Canada? It's stupid; it really is. After 150 years, we have 20 per cent. You are complaining that it might go to 60 in the next couple of years. If it got to 30 in the next couple of years, it would be as astonishing, and you are looking for 90. Who is it? The feds have the money.
For example, 100 migrant workers arrived in Newfoundland for that fishing plant that burnt down. Unemployment rates across Canada are up. What are we doing and why are we not — it is the federal government, I guess, are they the ones? — saying, "You want money? You want transfer payments and all this? There is a new game in town. It's called Canada.'' Is that who has to do it, because we are going to be talking 150 years from now about this exact same thing.
Mr. Greer: The federal government has a role. If the federal government wanted to, it could try to exercise its powers under the trade and commerce clause in the Constitution. No federal government has tried to do that to date, and I expect none will have the proclivity to do so any time soon. While legally the federal government could try to knock down some of these barriers, with strong provincial governments, with the political consequences of doing so, I don't see that happening ever, much less anytime soon. Unfortunately, the federal government has a bit of a back seat in trying to facilitate, to provide political leadership and encourage their political partners to come to the table. Sometimes that is not enough.
There have been some recent measures at the federal level that I think are encouraging. The people in Ottawa here who work in the secretariat for the CIT are very smart and hard-working people who strongly believe in freeing up internal trade, but it's a small shop, and it's not well funded. If you go to the CIT website, which I encourage you to do, it has a very Windows 95 feel to it. This group could be enhanced so that we can do a better job of shining a light on these barriers and what has to happen to remove them.
At the federal level, it is mostly a facilitator role, and a lot of the responsibility is with the provinces to collect. Where there have been like-minded provinces, you're right, they've collected regionally, particularly out west with the New West Partnership trade agreement, to say, "We can't wait for the AIT; it's taking too long.'' But there are other provinces that I think at some point will recognize the need to knock down some of these regulatory barriers. In a time of structurally slow growth, we need to improve productivity, and this is one of the tools we need to use to do that.
Senator Campbell: Which idiot doesn't understand that we have as much to gain internally than we ever do by going externally? It's embarrassing. Quite frankly, I don't even know what we are doing discussing this here because I don't see any hope. I just see the same thing going on.
I am curious, why would you say that federal environmental laws are not an impediment but provincial environmental laws are an impediment to interprovincial trade?
Mr. Moffet: I say that because federal environmental laws apply uniformly across Canada. I'm distinguishing between the economic costs of complying with a law. In the case of environmental laws, that's a uniform cost across the country. I am not here to defend the cost-effectiveness of any given federal environmental regulation. However, I'm saying that when we put in place a regulation it applies uniformly. There is no barrier to internal trade in the sense that you don't face one rule in British Columbia and a different rule in Alberta federally. However, I say that there are well- documented barriers associated with the differences in environmental regulations from one province to another.
Think about end of life, so waste disposal requirements. They differ from one province to another. If you are a national producer, you might have to have different processes in place to take responsibility for your product in different jurisdictions. That is just an example.
Senator Campbell: Thank you. That clarifies it for me.
Senator Wallin: I kind of share Senator Campbell's view here. We've been talking about trade for a very long time. It's easy to point the finger at the regulators, or at the protectionist premiers, or at the lawyers, or whatever it may be. As there will be a report coming forward from this committee, I will give you each a brief opportunity to give us a summation statement about what the problem is or what can be done tomorrow morning to move this other than just if everyone would change their mind. Do you see anything prescriptive in the work you have done that you could share with us so that when we are forming conclusions, we might have some help?
Mr. Greer: Yes, one thing we would offer that should be in a new agreement — whether it is announced tomorrow, or six weeks or six years from now — is dispute resolution. Whatever the agreement is, if governments and entrepreneurs feel that they cannot enforce an agreement that governments have freely agreed to, it's not really an agreement it's sort of a statement of goodwill, perhaps. A strengthened and efficient dispute resolution mechanism is one of the most important things that any agreement needs to have so that whatever is agreed to, getting past all the barriers to getting us to agree to something, allows us to be fast, efficient and cost-effective, and allows the business communities to access it.
Currently if a business wants to make a challenge under the AIT, they need a government sponsor to issue that challenge. They can maybe challenge afterwards if the government sponsor doesn't want to take it up, but it's a lengthy process, and accessing a tribunal is not an easy exercise. It's difficult to force the government on the other side to comply with the measures. Putting teeth in any agreement will make it infinitely better.
Senator Wallin: We always leave that to the last part of the negotiation; that needs to be first. Thank you. Go ahead.
Mr. Moffet: I will add another point. I would reiterate the suggestion that an effective agreement on internal trade should clearly distinguish the purposes of regulation and standards. We can no doubt debate precisely where to draw the lines, but in general in international law there is an acknowledgement that there are legitimate grounds for establishing technical standards for health, environmental protection and safety reasons as opposed to disguised barriers to trade.
The purpose of an agreement on internal trade should be to eliminate technical barriers that are disguised barriers to trade that are really erected for the purpose of protecting economic development in one jurisdiction and thereby precluding more efficient, nationwide economic development.
Ms. Moreau: I will add briefly, echoing what my colleague Mr. Greer has said. Our members have told us that when they are looking at the elimination of harmful regulation, they never mean health and safety regulations. Those are there for good reason, as our colleague has suggested. It's the innocuous, inane ones that I described before.
Our report has areas for immediate attention on page 12. With corporate registration, almost every business in Canada gets a business number from CRA. Why can't that number be used across the provinces? Some of them are even called the Canada registration number. Surely, if it's good enough in Ontario or B.C., it's good enough in Nova Scotia or P.E.I.
Regarding transportation regulations, this is a country that is enormous and uses trucks almost exclusively sometimes to get products from A to B. It's completely inane that you need to be changing tires and getting permits for different times of years to go on different size highways.
Professional trade licensing, as some of your colleagues have already mentioned, is another place where readily available changes could be enacted tomorrow. Worker's compensation and occupational health and safety are another place.
In addition to the bigger-picture issues, if you are looking for some of the granular suggestions, that would be a good place to start as it will remove some of those regulatory barriers that are the invisible ones that cause business owners heartache every day.
Senator Wallin: I will ask you one final question to put you on the spot. You have eloquently stated, and with passion, all the barriers there are. What chance do you give this of ever happening? We will hear from all of you.
Ms. Moreau: I'm optimistic; I really am. As I said earlier, we have a red tape awareness week, and we give out awards every year to policy-makers and government for reducing red tape. That is really what internal trade barriers are, red tape. There has been a lot of good progress. Mayors are deciding not to renew business permit licensing every year and foregoing the bit of income that comes from that.
There is a great example of Mayor Nenshi in Calgary who got food trucks on a street in a short period of time. It is possible if the political will is there. Whether we chip away at the small and that adds up to the big or we start up top, either one of those issues. If you take away one message today it is that it has to make a difference on the ground to your constituents, to the average Canadian. If they don't feel it, then all the paperwork, the agreements and press releases really just remain that.
Mr. Greer: I would say cautiously optimistic. Something is coming. The deadline was March. I understand with the change in some governments that it may take longer. We have heard that negotiators are still meeting and ministers are on conference calls to try to bring this thing home. We don't know yet what is in it, but we are cautiously optimistic that all the political momentum that existed starting at the top, with the premiers, resulted in something.
How long it will take to implement that? That's what we still don't know. Will it be long, lofty, sort of 10-year goals to get to something that might be better, or will there be instantaneous changes? What will happen after that? I want the premiers to take that momentum that was expressed in May 2014 to look at whatever comes next and say, "Great. Two years from now we want something even better. Keep it going.''
Beyond that, again, there are structural changes happening in the economy. I think regulatory reform and red tape reform have to be an essential part of any pro-growth agenda. I think all levels of government will have to realize that. With that momentum, hopefully governments will also be continually looking at ways to ease up how to do business in their own borders and in between borders.
Mr. Moffet: I don't think I am well placed to give you a thumbs-up or a thumbs-down but I will echo my colleagues' comments to the effect that this is fundamentally a question of political will.
Yes, there are many ill-advised examples of bureaucratic ineptitude which then get locked in place through institutional inertia. But we will only overcome those and overcome the more significant barriers that are really disguised protectionist measures with the exercise of political will. Of course, the best way to leverage political will is to identify clearly the benefits for all Canadians.
Senator Enverga: Thank you for the presentations. I know, Mr. Moffet, you are leaving soon. Time is clicking.
My question is about environmental losses all over Canada. With regard to environmental laws, can the provinces add up to the environmental laws? I am thinking more about the pipelines. Some are okay, but some provinces have environmental laws that make them not acceptable. Is there anything like that? Can provincial laws override federal laws?
Mr. Moffet: No, provincial laws can't override federal laws, but provincial laws can address an issue that is not addressed by federal laws. On pipelines, for example, the federal government has jurisdiction on pipelines that cross borders. However, there are many pipelines that operate within one province. Those are regulated exclusively by that province.
The issue of a pipeline that crosses a border, then, would be regulated under the National Energy Board, which is a federal entity. Legally, the decisions around interprovincial pipelines will be made at the federal level. That's the legal answer. Of course, there's a political response as well that issues like pipelines generally have to meet some sort of political or social acceptability test that often gets raised on a jurisdiction-by-jurisdiction basis. That's not a legal question. That is more of a small "p'' political question.
Senator Enverga: We have seen that the New West Partnership Trade Agreement works. It is basically a region. Maybe it is possible for the two of you, namely the Canadian Chamber of Commerce and CFIB, to work with the provinces and tell them, why don't you do something regional with each province, for example with the Maritimes? Let's make an agreement that is central. Let's start with that. We don't need to have a Canada-wide agreement. Can we possibly do that? Is that easier for us to do? What would you suggest there?
The Chair: Careful what you wish.
Mr. Moffet: Can I take the floor? I apologize to everyone. My flight is not at 5:30 but I do have to catch a flight and I have to leave now. If there are follow-up questions, I or my colleagues are available to return. I hope this has been helpful.
The Chair: Thank you very much, Mr. Moffet. We appreciate it. Please continue.
Mr. Greer: I think regional agreements are what happened in a system where it is very difficult to reach national consensus on amending this agreement. The New West Partnership Trade Agreement is a good example. It's a good agreement. It has some areas where it could be stronger, but it is a good agreement that is certainly stronger than the AIT and might be stronger than some elements of what the new coming AIT might look like.
In the absence of being able to make a strong national agreement, having regional agreements is worthwhile. Like-minded provinces and certainly the business interests in those provinces should continue to work on and expand those agreements. There is potential in the current Manitoba election for Manitoba to join the New West Partnership Trade Agreement. In the absence of a strong federal agreement, sure, regional agreements are good. For a business that has to transact between Ontario and Quebec and the Western provinces, the New West Partnership Trade Agreement doesn't do them a lot of good, but it's a start. It's better than nothing. Ultimately, a strong national agreement that includes all provinces and frees up labour and trade and capital is what we need.
Ms. Moreau: There is not a lot I can say to improve on that, so I will defer.
Senator Enverga: Would it be an easier agreement to achieve, a regional agreement first?
Ms. Moreau: The answer to that is clear. Some of them already exist, so clearly they found it easier to make arrangements amongst three or four provinces than working nationally. I agree with Mr. Greer. We cannot emphasize enough the importance of a national agreement for Canadians. Small businesses that are attempting to trade are more likely to try to trade with their neighbours, but that doesn't mean they don't. We do have businesses that sell from Alberta to Quebec and Nova Scotia to B.C. They are still plowing through those barriers that have been identified, and I think they should benefit as much as the provinces that get to benefit from a regional agreement right now.
Senator Enverga: Can the federal government do anything to make it easier, like a tax incentive? Would it be advisable to do that? To say if you agree with each other, we will give you a tax incentive, those kinds of things?
Senator Campbell: A bribe.
Senator Enverga: There you go.
Ms. Moreau: We would have to go back to our members to see what would be useful to them, ultimately.
On the whole, it should be easier than that; it shouldn't be so complicated. Many researchers have tried to attribute a cost to these trade barriers. There is recent research saying it's $7,500 per Canadian. No one can agree on a number, but the numbers are all staggering. That alone, in terms of savings, should be enough to convince government that this is an important issue.
Senator Black: Mr. Greer, to help us frame the discussion around dispute resolution mechanisms, are there any of those mechanisms you would point us to as good models?
Mr. Greer: We need to look at the mechanisms that exist within our current free trade agreements, including CETA. We made some adjustments to the CETA dispute resolution process to accommodate —
Senator Black: There's not one that stands out as ideal in your mind?
Mr. Greer: That stands out. Even the New West Partnership process is more expeditious and accommodating than the federal process. So I would look at CETA and the New West Partnership as two immediate examples of ones that are better than what we have.
Senator Black: Ms. Moreau, anything you would add to that in terms of models for dispute resolution?
Ms. Moreau: We highlighted NAFTA to start. At the time, we didn't have as much detail on the CETA. Basically, anything that makes it easier to get your case heard, if that is what is needed, ought to be pursued.
Senator Black: Absolutely.
One last question, if I may. And I apologize — I had to scoot out for a quick call, so if this question has been asked, it doesn't need to be answered again.
You raised the topic a moment ago about the cost to the Canadian economy, so we understand there is a cost to the Canadian economy. What does each of your organizations believe that cost is?
Mr. Greer: We don't have a specific number that we have attached our name to. You've all seen the estimates. They range from those who believe internal trade is not a big problem, that it's minuscule and a small matter of GDP and not worth the effort of trying to fix, and I've seen other studies that talk about $50 billion.
Based on what we hear from our members, it's big. I don't know how big; we don't have a number on that. It's tough to measure the economic activity that would otherwise take place in the absence of small regulations that exist across a million different goods and services, but we believe it's substantial.
Ms. Moreau: We are in the same boat. I will enhance my answer a tiny bit. As I said, we are in the same boat. It is a difficult thing to capture, but we have done research on red tape, generally, at all levels of government, and I can provide the committee with that information. Not all of it is linked to trade, but it will give you a good flavour, and those costs are in the billions.
Senator Greene: Is Canada unique among federal countries? I'm thinking of the U.S., Germany, Australia, et cetera. Is this a particularly Canadian problem, or does it exist generically among federal states?
Ms. Moreau: It does; it's not unique to Canada. The geographic size of our country has created some unique issues, but the EU, Australia, Switzerland, the U.S., Canada — any country that has a sub-national structure to its country suffers from these issues. But if the EU can get 27 countries to sign on and harmonize many, many regulations, surely we can get things happening province-wide.
Senator Greene: That's what I was thinking.
Mr. Greer: I would add that, although the problems are certainly not unique to Canada, that we haven't found a solution is starting to become unique to Canada. In Australia, the different sub-national levels of government tried to sort this out, couldn't, and they went to the federal government and asked for help. They used their constitutional power to enact some mutual recognition and other cross-border trade.
The inability to come up with solutions is becoming unique to Canada.
Senator Campbell: I want to go back to the cost again. In your document, you quote Copeland, and it's 1998. That's a long time ago and a lot of water under the bridge. Is there nothing more up-to-date than somebody from 1998 who says that the gain to the economy from eliminating internal trade barriers with however close to 0.1 per cent or even lower at 0.5 per cent? Then you said that a consortium of business groups, including CFIB, has valued the cost at $14 billion a year.
It seemed that if we could put some science-based figure out there — I mean, $14 billion catches my eye. If the public saw these kinds of dollars virtually going right by us — we don't even get near it — that might help. Some people say it's not that big a deal and others say otherwise. I think it's a big deal; I believe $14 billion. But is there anything else out there that we can refer to that can give us a better grasp of the numbers?
Ms. Moreau: I can point to a recent Financial Post article about research done in the Canadian Journal of Economics that says $7,500 per household. We haven't endorsed this by CFIB, but in terms of research, I can point you to that as a more recent piece of information. Putting in about $100 billion to the economy is how they calculated that figure.
As our piece shows, and as our comments have said, whether you can get a number or not, they are all significant — every attempt —
Senator Campbell: Yes, but you know that from a political point of view, that's simply not true. Not all of them are significant; some are more significant than others. You just went from $14 billion here to $100 billion. That's a big gap, and people say, "If you can't even figure out what it's costing us, what are we doing?'' The ballpark — even if you narrowed it — but $14 billion to $100 billion is a little beyond a rounding error.
Ms. Moreau: I agree. That's why I said this research is new; we haven't necessarily tested it with our membership in terms of identifying a cost.
As I mentioned, we have not isolated for internal trade, but I can share our research on red-tape costs to the economy. In Canada, we have tested the cost between Canada compared to the U.S, and the numbers are in the billions, as well. So $14 billion is a smaller figure we pulled from our own red tape research on that issue.
The Chair: Would the studies have different parameters? In other words, would you include pipelines or egg marketing boards, for example?
Ms. Moreau: For the red tape research —
The Chair: Not for red tape but for interprovincial trade. Definitely, some studies may include that and some might not; the numbers would vary probably because of that.
Ms. Moreau: I think every economist would give you a different answer.
The Chair: They usually do. Doesn't really matter what you ask them.
Senator Tannas: I'm going to leave you with an uncomfortable question, potentially. I just want to make sure because, in my few years here, sometimes I find out that I have been naive about something. Are there any provinces that are clearly identified as the holdouts in this? We've seen Alberta, B.C. and Saskatchewan manage to put together something rivalling what we are all aspiring to — for what may be good reasons.
Have you heard of or do you observe a province or more that are absolutely in the way of this happening? If so, could you name them?
Mr. Greer: It's not endemic to particular provinces. As governments change and as political leadership changes — sometimes as ministers change within governments — the particular stance of a particular government and a province changes. It's varied, and it's been various provinces at various times.
The problem partially with the agreement and a consensus-based political agreement is the example I cited in my remarks around an energy chapter in that every province had agreed, but one at the last minute said, "No, thank you.''
Under that agreement, Canadian business doesn't get to see who that was and who said no. There is a real lack of accountability in the agreement that when we don't reach agreement and when three quarters of the provinces agree on a particular set of rules that we don't get to find out who said no. That lack of transparency in the agreement doesn't really help us to answer the question that we're all seeking the answer to.
Senator Tannas: You have not heard of any consistent holdout that you would know of throughout the years. As Senator Campbell says, it has been 150 years.
Ms. Moreau: Maybe I could add briefly that the structure of the Committee on Internal Trade is set up with a rotating chair. Every year a new province takes the chair, and the federal government gets a turn as well. One year is not enough time when you have good momentum, and then the chair switches and political will changes. I don't have a solution to that off the top of my head — whether you extend the period. Our members have said that the federal government should play that leadership role. Maybe that means the committee would play more of a supporting and foundational role and still maintain the rotating chairs, if you like; but at least that way there's someone in the driver's seat consistently the whole time.
Senator Ringuette: Well, we all know Ottawa and your part in the lobbying system. Maybe this is a comment or a question that you can answer in defence. We seem to be easily attacking provincial leadership and political leadership. However, how many members from the Canadian Chamber of Commerce and the CFIB would be lobbying their respective provincial government in order to maintain regulations that safeguard their businesses?
Mr. Greer: That's an incredibly fair and important question. At the national level and for the majority of our members this is an issue where for the most part it's pretty bread and butter. We don't get a lot of disagreement or phone calls at headquarters saying, "We can't believe you are guys are out there on internal trade again.'' I can't speak to certain companies and sectors that may lobby to protect, but it certainly exists. We can sit here and say it's really important that we change this agreement and the provincial governments need to get their act in order. The business community is ready to be a partner on knocking these barriers down, so not to just bang on the table and say fix it.
I would point out that last July members of the business alliance were brought to the Committee on Internal Trade. I think it was the first time that they'd been brought to the table as part of at least a presentation to these negotiations that have huge impacts on the community. Even as we pound our fists on the table and say the time for action is now, we are a willing partner to sit down and work with government on what makes sense. We were pleased to have the chance to participate in that meeting.
As the government is prepared to unveil a new agreement, we hope they will bring us back to the table for some sort of briefing that can show us what has been agreed to. We can help to validate the approach and unwind what some of the implications are and be frank where we think they haven't gone far enough. Certainly, then we'd be at the table to partner on implementation and how we get to the next agreement. We are ready to help.
Senator Massicotte: I have a technical question, if I could, Ms. Moreau. One of your graphs of your firm shows who exports and who buys. You will notice that all provinces buy more than they sell. There is something wrong there. What is the explanation?
Ms. Moreau: It depends on the province, of course, and the products.
Senator Massicotte: Every province buys more than it sells.
Ms. Moreau: That's also true of our country as a whole. Of our members, 50 per cent of them import but only 25 per cent export. Exporting is an extraordinarily challenging thing for a small business, in particular to export internationally or just to your province next door. If you need something, you order it, it comes to you, and you pay the associated costs. We're a country that doesn't have everything in one province, so we're stuck with ordering potatoes from P.E.I. or whatever it is.
Senator Massicotte: The non-Canadian element would explain the gap, I guess.
Ms. Moreau: I could get back to you on that. Certainly interprovincial importing can meet needs like milk or wheat or services.
The Chair: If there are no further questions, senators, we are going to need a little bit of in camera time, maybe five minutes or so.
First, we'll say goodbye to our guests and then reconvene. Senators who are not members of the committee are most welcome to stay.
(The committee continued in camera.)