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Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue No. 2 - Evidence - February 24, 2016


OTTAWA, Wednesday, February 24, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:23 p.m. to study the issues pertaining to internal barriers to trade.

Senator David Tkachuk (Chair) in the chair.

[English]

The Chair: Good afternoon and welcome to the Standing Senate Committee on Banking, Trade and Commerce.

My name is David Tkachuk and I'm the chair of this committee. Today is our first meeting on our special study of issues pertaining to internal barriers to trade.

I would like to welcome for the first time before our committee the Honourable Navdeep Bains, Member of Parliament for Mississauga—Malton and appointed Minister of Innovation, Science and Economic Development on November 4, 2015. Minister Bains has extensive parliamentary experience, having represented Mississauga—Brampton South from 2004 to 2011. He served as Privy Councillor and Parliamentary Secretary to Prime Minister Paul Martin and then as Critic for Public Works and Government Services; Treasury Board, International Trade, Natural Resources; and Small Business and Tourism. Minister Bains has a Bachelor of Administrative Studies from York University, a Masters of Business Administration from the University of Windsor and he holds a Certified Management Accountant designation.

Accompanying the minister today are officials from Innovation, Science and Economic Development, John Knubley, Deputy Minister; Mitch Davies, Assistant Deputy Minister and Internal Trade Promotion Office, Strategic Policy Sector; and Nipun Vats, Director General and Internal Trade Promotion Office, Strategic Policy Sector. Joining us for the second portion of our meeting, when the minister leaves, will be Stephen Fertuck, Director of Internal Trade Promotion Office.

Minister, please proceed with your opening remarks, after which we will go to a question and answer session. I understand you have to leave by 5:15. I do apologize for our late start, but we had a fellow minister in the Senate, which took longer than we thought.

Hon. Navdeep Bains, P.C., M.P., Minister of Innovation, Science and Economic Development: Thank you very much, chair, for that introduction. My colleague, the Minister of National Defence, can be very engaging, so it's completely understandable. I do appreciate this opportunity.

I am pleased to be here before the committee to provide an overview of our government's approach to internal trade. Thank you, chair, for bringing forward this motion and drawing attention to our government's efforts to enhance economic growth across Canada, not in the short term but also in the long term. I also want to take this opportunity to thank you for your engagement on this file. We have had discussions about this, and I look forward to working with your committee to advance this agenda.

As you know, we are collaborating closely with the provinces and territories to modernize the framework for trade in Canada in support of a stronger, more innovative economy. My department is currently in negotiations with provinces and territories on an improved Agreement on Internal Trade, and we are well on our way to comprehensively renewing the AIT for the first time since it came into effect in 1995. I must confess that I'm very optimistic as I think we are headed in the right direction and making meaningful progress. In my comments, I will take the opportunity to offer a substantive update on our collective efforts to strengthen internal trade together in close collaboration with the provinces and territories.

I know that this committee has conducted major studies, and I want to say that it is great because the expertise and knowledge on this committee are critical in the areas of productivity, retirement, taxation, and digital currency, to name a few. For me on a personal level and for our team, it's an honour to be here. I understand that you are returning to the subject of internal trade following previous attempts in 2006 and 2008 in this regard.

Strengthening trade flows within Canada is a long-standing objective. The original Agreement on Internal Trade was signed back in 1994 under the leadership of former Prime Minister Jean Chrétien and the former Minister of Industry, John Manley. I have spoken with both of them personally on this file, and I'm convinced about the importance, the legacy and the opportunities that this file presents. While the original AIT was a positive step, trade within Canada is not always entirely free and open. There are some outright barriers, but often trade barriers are more subtle, taking the form of different regulations and standards.

As well, there's been some progress since the original AIT was put in place. Most significantly, labour mobility was improved for regulated occupations in 2009, demonstrating the priority that governments of the day placed on enhancing Canada's labour markets. Since then and over time, a consensus began to emerge around the need for comprehensively renewing the AIT. In late 2012, the federal government became the Chair of the Committee on Internal Trade, which is the ministerial body that governs AIT. By working with stakeholders, particularly in the business community, and with think tanks such as Canada's Public Policy Forum, we started to gain some momentum.

You may recall that my predecessor, Minister Moore, released a proposal to renew AIT in the summer of 2014. Soon after, the premiers took on the challenge of The Council of the Federation, committing to major updates by March 2016, which is next month. In the fall of 2014, the federal, provincial and territorial ministers of internal trade agreed to launch negotiations.

The need for change exists, and your study on internal trade barriers rightfully identifies that need and to understand the case for change. Very simply, the current AIT is an important starting point, but it has grown out of date. It's over 20 years old and allows barriers to persist in too many sectors. It really is out of step with Canada's international trade agreements. The North American Free Trade Agreement, for example, was the impetus for creating the AIT framework initially in 1995. Today, with the Canada-EU Free Trade Agreement, we have set a high bar for trade with the EU and owe it to ourselves to upgrade the framework within which we trade with each other.

The federal government worked closely with the provinces and territories on CETA, which is a pretty good standard for an agreement. We now need to carry that ambition forward. The key word is "ambition.'' We need to have an ambitious agenda when we move forward to modernize internal trade.

In addition, in renewing the AIT, we can address issues of misaligned regulations and standards. In some instances, we have regional patchworks of regulation that result in a web of red tape that cost businesses time and money.

In effect, a new agreement would also be more transparent with the structure that is consistent with our international approach, as I mentioned earlier. It would include a strong system for working together to align regulations, and it would open procurement markets in line with CETA.

With respect to the importance of internal trade, our level of ambition matters because internal trade is an essential part of our economy. It represents about 40 per cent of the goods and services exported from provinces and territories that move across the borders within Canada. This is a very significant amount. Also, internal trade provides consumers and businesses across the country with access to high-quality Canadian goods and services and provides a platform for Canadian companies to scale up their operations for export.

I think that's a very important point, honourable senators, because many companies need to succeed in Canada before they can go global, and this is a missed opportunity. It also contributes to growth and jobs, accounting for close to 20 per cent of Canada's GDP and nearly $400 billion of our economy. It's more stable in the international trade market as well as diversified across economic sectors. It's an important part of working towards better preparing Canadian firms to scale up, grow up and compete internationally, as I said before.

For large companies, these trade barriers imply new costs. For small companies, trade barriers can restrict operations to within a province, which limits growth.

The need for AIT renewal is clear. And as I have signaled to all my provincial and territorial counterparts under this government, it will be done on a collaborative basis that respects the jurisdictional responsibilities of the federal and provincial governments. The key point is collaboration. This is something we really feel will allow us to reach the end goal.

Officials have had multiple rounds of negotiations for well over a year, a process that has been chaired by my colleague from Ontario, my counterpart, Minister Brad Duguid. Only last week I met with my ministerial counterparts to take stock of progress and make sure we can work towards a truly ambitious new agreement. I must confess that he has done a tremendous job in working with all our provincial counterparts in leading us in these efforts.

We are working toward significant improvements on issues that would strengthen the Canadian economic union such as government procurement and regulatory cooperation. These are two very significant issues.

Although I cannot get into specific details at the moment, as we're still negotiating and the process is ongoing, I would be happy to provide an overview of areas being discussed during the time provided for questions. I'm hopeful that we will have an ambitious new agreement in the near future, but there is still a lot of work to be done. I recognize that this committee has been part of the history of the Senate since Parliament first met, and I want to say that you have a long-standing reputation for providing thoughtful and considered advice on financial trade and corporate issues.

As you move forward with your study, honourable senators, I will be keen to hear your conclusions on a number of key areas that are relevant to the AIT renewal. For example, while most national business associations have been strongly supportive of AIT renewal, it would be helpful to hear from stakeholders about the most important differences in the regulations or policies of the governments that create friction in Canada's internal market.

I would also be keen to hear your conclusions on how, beyond a new agreement, governments can help to facilitate trade within Canada, including tools and information that make it easier for businesses to expand beyond provincial borders and to access government procurement opportunities. There are some initiatives already ongoing in this regard, such as in the area of corporate registration, and there may certainly be others that could enhance our internal market.

Honourable senators, I thank the committee for undertaking this study on internal trade barriers. As I said, AIT renewal is a central element of enhancing the framework for economic development for all Canadians. It offers an opportunity for governments across this country to demonstrate a commitment to supporting Canadian businesses and helping them to grow and compete.

Indeed, AIT renewal is an invitation for us to work together across governments and across parties in support of a vibrant, more prosperous national economy. The challenge is great, but so is the opportunity, and I'm deeply committed to working with my counterparts across Canada in order to build a stronger, more innovative economy together.

I thank the committee for inviting me to appear on this important study, and I'd be pleased to take any questions that you may have.

The Chair: Thank you, Mr. Bains.

Senator Greene: Thank you very much. I appreciate you being here. I think it's a wonderful opportunity for us and hopefully for you.

Given my perception that most of the difficulties on this issue are at the provincial level, not the federal level, are there any specific barriers to trade at the federal level that ought to be done away with?

The second part of the question is this: To the extent that all the barriers are provincial — and I tend to think they are — rather than federal, what can the federal government do on this issue beyond exhortation and arranging meetings and things like that?

Mr. Bains: Thank you very much, senator, for the question.

The power to convene cannot be underestimated. I think the fact that we played a leadership role in helping to facilitate these meetings and making sure that we continue to keep engaged with our provincial counterparts is a very important aspect of the Agreement on Internal Trade.

With respect to your question, there are six priority areas that we discussed that do have implications at the federal level. Of course, procurement is one very important area where at the federal level there is tremendous opportunity, but we have also identified goods and services, investment, technical barriers and regulatory cooperation.

So there is some regulatory cooperation that, of course, as you mentioned, exists amongst the provinces. I think they need to figure that out amongst themselves, and if asked, contribute in a meaningful way, but I think ideally they will lead those discussions.

There are some regulations within the federal jurisdiction that we can work with, but I think the key opportunity for us, for example, is in the area of procurement.

Senator Greene: Procurement?

Mr. Bains: Yes.

Senator Greene: Could you elaborate on that a little?

Mr. Bains: For example, when I talked about being ambitious and making sure that we hold ourselves to standards of some of our international trade agreements, there is a situation or scenario, for example, where if we were to ratify CETA, European companies, businesses and enterprises could have better access to Canadian procurement than Canadian companies because of these barriers. So that's an area that we are concerned about. It is an illustration of something we need to deal with in a timely manner in light of the fact that we are in the process of ratifying CETA.

Senator Enverga: Thank you for your presentation, minister. You mentioned earlier that some major work had been done before you accepted your position. What was done before? What is there still to be done?

Mr. Bains: Since 1995, there have been 14 different protocols and changes to the AIT, and these are, I would say, incremental steps.

I think what is really interesting to note is that my predecessor acknowledged the opportunity to advance it in a more meaningful way. The previous government, Minister Moore, took a leadership role, but also our provincial counterparts and the premiers, the Council of the Federation, took this on as a challenge, as I said in my remarks. They met and started some of these discussions.

But what is really unique and different this time around is our negative list approach. As I talked about the CETA model and ambition, what we've done differently this time in terms of our current negotiations under AIT, we have taken the CETA approach, where everything is in and then you identify exemptions or exceptions. That builds upon the previous work. I think there was modest movement, particularly around labour mobility, as I mentioned, in 2009. But this new approach is consistent with the work we have done internationally and presents us with a tremendous opportunity to be much more ambitious. And I am confident that if we maintain focus on that approach, we can achieve positive outcomes.

Senator Enverga: What is the percentage of goals that were accomplished during the other terms?

Mr. Bains: It's difficult to quantify percentages, and that is why we're undertaking a process to develop an index. This index for interprovincial trade barriers is designed to create a baseline. What are current irritants? What are some of the current challenges? What are the costs? For example, there are estimates that go from $3 billion up to $49 billion in terms of costs. It's difficult. That's a pretty big range if you ask me. We are trying to create this index that, to your point, can measure where our baseline is. Then, when we proceed with negotiating this agreement on internal trade, we can measure what that looks like in terms of quantitative success. That's something that we should have accomplished by this fall — this index — which will allow us to give more specific and concrete measures, rather than the examples like trucking regulation challenges or challenges with registration of corporations or challenges around regulatory concerns. Those are good examples, but I think this is a good quantitative way to measure it.

[Translation]

Senator Massicotte: Thank you for accepting our invitation, minister. I really appreciate your fresh approach, your conviction and your confidence in obtaining better results.

However, I must say that it is a bit cynical. Three or four ministers have already come to talk to us about interprovincial exchanges. They are all sure that things will change. The theory is clear. Canadians would gain a lot if those barriers were removed. We all agree on the theory, but in practice, each province protects its people, its industry. Several years later, the process is in place, but no significant progress is being made. This is the 14th time we are asking for an agreement to be concluded. So why this time? Five years from now, you will be congratulated, as you will have accomplished great things. Why?

Mr. Bains: That is a very good question. I will answer in English.

[English]

You raise a very good point about the political will, about the ambition and about some of the past not failures but disappointments. I can tell you right now that, if you look at the economic circumstances, we've seen slow growth now for many years, and that has really created a shared sense of urgency amongst my provincial counterparts. When I met with them last week and we talked about why this is important, everyone recognizes that, if we want to create an environment for businesses to succeed, if we want to create an environment for people to succeed, we need to sit down and deal with these irritants. Otherwise, it's a missed opportunity. So I think that shared sense of urgency, the fact that we have good leadership from Minister Duguid, who is the chair of the committee, from Ontario, the fact that other jurisdictions understand that if they hold back or get caught up in technical issues that they are missing an opportunity as well creates a shared sense of responsibility and that ownership. You are right; I can't guarantee anything. As I said in my remarks, I'm very optimistic, very hopeful. We are very ambitious, but there are no guarantees. But I must confess that this new CETA approach has created a very positive work environment. When our negotiators met — and they have met numerous times, and we met at the table and discussed this at great length — there seemed to be a great deal of openness. Rather than to your point of protecting one section or protecting one particular practice, there seems to be a desire to move beyond internal trade. For example, as minister responsible for innovation, science and economic development, one of the things that I'm going to be working on is the innovation agenda. Many of my provincial counterparts not only want to make sure that this deal is addressed in a meaningful and timely way, they want to meet again so that we can talk about the innovation agenda and take advantage of this new framework, for example.

That kind of ambition, those kinds of opportunities that exist going forward are creating an environment for success, I believe, but we're going to work very hard. We're taking nothing for granted, but I am feeling very confident.

[Translation]

Senator Massicotte: We often meet taxi drivers who used to be doctors, accountants, and so on. When they arrive in Canada, they are not admitted into their professions, or even into the unions of certain occupations. What should be done in such cases? It is very difficult for them to define their qualifications, their skills — Clearly, there is a problem. What would be the solution? We are losing workers with useful expertise.

[English]

Mr. Bains: Again, you raise a very important point because I remember, a few years ago, the Conference Board of Canada conducted a study on the under-utilization of the skills of our immigrant population and newcomers, and there was a significant impact to our economy, in the billions of dollars. I believe it was in the $20- to $30-billion range. Foreign credentials is an issue that I have heard at the doors and seen many times and people have brought up. In my riding of Mississauga—Malton, the story that you talk about, the taxi driver being a PhD or a doctor, is very common, and so we are working on that. But I believe the platform through agreement on internal trade is maybe not the ideal mechanism to deal with foreign credentials. So our government is committed to that. We are working with the provinces because it does include some of the different associations embodied in the different professions. That's a very different process, I believe, in a very different way to deal with that issue.

We are dealing with it, but not through the AIT process.

The Chair: To follow up on that, when we recognize different skills or professions, do we do it on a country basis, or do we do it on a university basis?

Mr. Bains: It depends. For example, there are different accounting bodies. There are different medical bodies in each province and territory. It really is based on the local jurisdiction. The challenge is that we have an immigration system where people come in based on points that we allocate based on their skillsets. When they come here, they not only encounter challenges of those being recognized, but they also encounter challenges within different jurisdictions. That is something around foreign credentials that has been raised on numerous occasions and something that this government is looking at.

The Chair: Just one little follow-up on that, and then I'll go back to Senator Massicotte. On that, I know a number of years ago, we had a shortage of general practitioners, and we seem to have had no problem licensing South African doctors and British doctors. But, as far as I know, it kind of stopped there. So I don't know if that was done by country or done by the universities they went to?

Mr. Bains: Part of the foreign-credential recognition challenge is that, when you work with the provinces, they say that these are different associations and have their own mandates. It is very difficult to work with them on a pan- Canadian level. That is the challenge. There might be some exemptions made for certain jurisdictions where they think there is better alignment or a more timely process. But, as you know, we attract skilled workers globally, from many different jurisdictions, and we can't have a patchwork of that kind of recognition. It is really a missed opportunity. That goes to my earlier point about the fact that under-utilization is costing our economy billions of dollars. If you look at it, right now, we have jobs without people and people without jobs. That challenge that we see in the labour market is a cause of concern, particularly right now when we are dealing with 1.4 per cent in terms of GDP growth projections and seeing slow growth going forward as well. What we need to recognize, as a government, is that we need to have a comprehensive approach when it comes to dealing with these issues. In the past, we have kind of dealt with it in silos. Oh, this is an immigration issue. Well, no, it's an economic issue. How do we make sure that we have better integrated policies where, for example, if I'm working on the innovation agenda and trying to bring talent here to Canadian to scale up companies or grow companies or have people with certain technical skill sets, there are immigration policies that can do that in a timely manner? This is something that, aside from the agreement on internal trade, I will be pursuing in my mandate when it comes to the innovation agenda.

Senator Massicotte: I have a brief supplementary. I thought it was one of the 14 amendments to the Internal Trade Agreement that, if a profession is accepted in one province, it is automatically accepted in all of provinces?

Mr. Bains: Yes, in chapter 7, in 2009. It has been brought to my attention that the introduction of mutual recognition of certification requirements for regulated occupations and the call for reconciliation of these standards and elimination of residency requirements did take place in 2009. The issue is really with implementation, and that's where the challenge is.

Senator Black: Minister, thank you very much for being here. I very much appreciate your leadership and your ambition on this project. I have a question, and there are three elements I'm hoping you can answer. I'm looking at you. I'm not going to look at the chairman because, if I say I have three, you know what he's going to do.

The Chair: Senator Black, I can hear.

Senator Black: Ever so quickly then, minister, I'm interested in whether you could characterize for us your broad goal respecting the interprovincial trade negotiations. If you could direct how we're going to end up, where would you want to land? The second is timeline, please. And the third, the top two or three obstacles that you currently see to implementing your goal.

Mr. Bains: For those three questions, I'll be as concise as I can to allow opportunity for further questions, so I will be quick. My broad goal is driving the ambitious agenda on this. The benchmark I'm using is CETA. CETA is one of the most recent free trade agreements we have negotiated. It has set a very ambitious framework for us and is something we can consider at a domestic level. That is a benchmark I've set in terms of ambition and goal. I believe that my colleagues at the provincial level share the same goal and ambition as well.

With respect to timeline, I wish it had been done yesterday. As I mentioned before, many attempts have been made in the past. The Council of the Federation and the premiers set a timeline for March 2016. We are working diligently to see if we can maintain some sort of progress to achieve meaningful results by then. That is in the short term. There will be an opportunity again with the first ministers at the Council of the Federation meeting in the summer. Those are two points of opportunity to move this agenda forward.

One of the challenges I've noticed in my discussions when I was with my provincial counterparts was not getting caught up in the technical aspects of it. At the political level, we need to give them clear guidance and set those goals. It is easy to get caught up in regulatory, technical or jurisdictional issues. There might be some bilateral issues between provinces and territories, but we do not need to bog down the meetings with that. Our challenge is not to get caught up in the weeds at the political level. Our negotiators need clear direction. As long as the political will is there, it will be fine. If we get caught up in the technical aspects and allow it to drag down the process, that's where we might have problems.

Senator Black: Arising from that answer, do you see any areas that you feel should be protected and not subject to freedom of interprovincial trade?

Mr. Bains: There are exemptions at the federal level that we are mindful of, for example national security, which is under exclusive jurisdiction at the federal level, taxation and Aboriginal peoples. These are examples where we have sole jurisdiction and responsibility. We want to make sure we maintain that in the discussions. These are exemptions that we have outlined from the beginning.

Senator Greene: I have a supplementary question. Are there any exemptions at the provincial level where you would allow a province to maintain a different standard?

Mr. Bains: Absolutely, opportunities arise for provinces to present their exemption lists. We are still in the process of negotiating and I do not want to prejudge the outcome but I suspect there would be. As we know, with any free trade agreement it is never 100 per cent free trade as 1 or 2 per cent exemptions will always exist. It's important to have a process to deal with those exemptions going forward. We are trying to focus on the process. We are saying that if you have challenges, let's not get bogged down by the challenge. But if you agree to a framework and a process to resolve it, then ultimately we can achieve the 100 per cent goal.

Senator Wallin: Thank you, minister, for being here. Given the CETA approach and that everything is in until it's negotiated out, and the question in the agreement on energy and harmonizing the treatment of energy goods and services and the movement and transportation thereof, are you at all optimistic that there will be some framework for troubling issues like pipelines? Are you seeing that captured in this?

Mr. Bains: Of course, when it comes to some of the discussions around this at the AIT table my federal colleague Minister Catherine McKenna and the Prime Minister will meet with the first ministers in Vancouver to discuss the issue. We are trying to proceed with the six priorities we have identified around environmental issues in terms of pipelines, carbon pricing, et cetera. They will find an agreeable framework and over the longer term we can find a way to merge these two. They are taking the leadership role and we are focusing on procurement and regulatory reconciliation.

The Chair: I don't have any more senators on the first round so if no one raises a hand, I will go to second round.

Senator Enverga: We're looking at trade barriers. We signed a TPP agreement. Have you taken into account supply management for issues that have always been at the provincial level?

Mr. Bains: The TPP has not been ratified, so we need to be mindful of that. With regard to how that unfolds in terms of compensation for supply management and the ratification of the TPP has yet to be determined. We are still in the process of consulting with industry and stakeholders on that front. With respect to the issues with us, it has not come up in a meaningful way because it is an area of federal jurisdiction. The provinces and territories have been focused on procurement, where we see tremendous opportunities. It has not come up in any of the discussions where I've been involved.

John Knubley, Deputy Minister, Innovation, Science and Economic Development Canada: There were changes in 2009 to the agriculture chapter, which focused on technical barriers and phytosanitary rules. Supply management issues were not considered.

Senator Enverga: Do you have an approach to talks about supply management? Have you thought about it?

Mr. Knubley: We have all thought about it.

Mr. Bains: As with the CETA model, there is a process to deal with this. Our ambition with the first stage of this agreement on internal trade is more to the point that you raised before. And maybe I will do my best to quantify. I would say that we are at 20 per cent right now of the optimal level of having true free trade amongst the provinces and territories. If we were to proceed with this approach now with AIT and our provincial counterparts and agree to the framework we're focused on, I would say that we would be around 60 per cent.

The idea of this is not the percentage but the framework created to deal with supply management and energy issues within a robust process and in a timely manner. The acceleration of dealing with these issues and a framework and process would help us to take that percentage from 20 per cent to 60 per cent and ultimately to a high percentage with the irritants removed to have the free flow of goods and proper labour mobility.

The challenge now is the patchwork between the three Western provinces and their agreement, the New West Partnership. When I was in Atlantic Canada, for example, the provincial premiers had their own regulatory framework in place. These frameworks have created a bit of a patchwork; but there is no process in place to deal with it. With regard to supply management and other issues, there would be process above and beyond once we negotiate this AIT.

Senator Enverga: There is no time frame.

Mr. Bains: It's a sequential approach, so we want to ensure that we have this comprehensive agreement and the process in place. Once we have the process in place, we will continue to work with our provincial counterparts to deal with the issues in a timely manner. As I said before, the goodwill is there and each jurisdiction is dealing with its challenges in the economy with slow growth. They know they have limited levers.

They can make tax policies or they can make investments, such as in infrastructure. Or they can look at creating this change with an agreement on internal trade to help stimulate some growth, in particular with SMEs. The major benefactors are SMEs. They benefit enormously from the opportunity. If they do well in Canada, it allows them to compete globally because we are part of global supply chains now. If we have companies with a strong Canadian presence, it allows us to succeed globally as well.

Senator Massicotte: Thank you. Typical of my cynicism, you say there's a lot of enthusiasm with your provincial counterparts. You have an innovation agenda and your level of confidence emanates a lot from that meeting last week, I gather.

Mr. Bains: Also from discussions I had when I first became minister. The first thing I did, aside from getting a briefing from my deputy on all the unique portfolios that exist in this exciting department, I reached out to my provincial counterparts. I called them immediately to introduce myself and to talk about some basic issues. And that set the tone from day one.

This enthusiasm is not necessarily a reflection of my discussions last week. We've been in negotiations with them for a few months. I have had numerous conversations in between to talk about some of these issues.

As I said, since November 4, in my official capacity as minister, I have reached out to them multiple times and even seen them on multiple occasions with some of the opportunities I have had to travel to different parts of Canada.

Senator Massicotte: I hope you're right. As you know, many of us are businesspeople who have made a lot of deals. And we have learned quickly that talk is cheap. People say nice things on the phone and so on.

You mentioned "innovation agenda.'' Is it maybe because they think you are coming with money? Therefore, everybody's happy. Of course they want to work with the feds right now because we are talking about big deficits, a lot of money and a lot of support. Is there any possible financial benefit to doing this deal?

Mr. Bains: No, there is no quid pro quo. It was never designed that way. I think the only agenda that I have clearly articulated is our desire to grow the economy, to create jobs and to make investments on innovation, because I think innovation and growth are interconnected.

I truly believe that the commitments we made in the platform campaign speak to that. We have made significant commitments on creating clusters and accelerators and incubators that would allow new ideas to emerge and, more importantly, to help them scale up.

We have also made commitments to putting more money through the Industrial Research Assistance Program and that is a very important tool to help companies with R&D so they can grow.

I think the provinces see a federal partner, a partner that's aligned with their provincial goals around growing the economy, making investments, investing in people, investing in companies and building those partnerships. I think that's where the enthusiasm comes from.

Second, if I may confess, they are excited about a government that picks up the phone, that is willing to engage with them, that is willing to speak to them and that is willing to listen to their concerns. We may not be able to address all of our challenges, but if we meet, talk and engage, we can find some very creative solutions.

Again, I want to reiterate the point that the Agreement on Internal Trade is an ambitious goal that we all share because of the work that has been done previously, but the meeting on innovation speaks to the desire for other jurisdictions that are dealing with serious financial constraints. We have seen deficits announced in different jurisdictions on an almost daily basis. I believe Alberta was announcing something today with respect to the update on their fiscal situation, their fiscal framework. I was in Atlantic Canada and the Premier of New Brunswick had just announced his budget.

All those stories are very similar. There are deficits and slow growth in place and innovation will be key. I think that's what is driving the excitement around the innovation agenda.

Senator Massicotte: If I look at the mandate that you received upon being named minister, one is to increase high- speed broadband coverage and working to support competition choice.

Mr. Bains: Correct.

Senator Massicotte: Again, another bullet we have seen for at least 15 years in our country. Everyone says we have to get high-speed coverage. It is fundamental to our trade and growth, yet we have been talking about it for a long time. In fact, there was a program this weekend where India, within two years, will have more broadband than Canada. Why can't we get moving on this stuff? And what will you do to make this happen?

Mr. Bains: One of the neat aspects of having your mandate letter public and as part of our government's objective of being open and transparent is there's a level of accountability. I'm glad you raised this point because this is the kind of accountability that I need and that the government is looking for.

We will be making significant investments, both in the short and long term. Some of those investments will be highlighted in the upcoming budget by the Minister of Finance. Some will require further collaboration and understanding with our provincial counterparts and with industry and territorial counterparts.

And some of them reflect some good programs that existed in the past. Connecting Canadians, for example, is a program established by the previous government. It's a program that looked at broadband connectivity in rural and remote regions, and it talked about the importance, particularly with the digital divide that's growing, to make these investments. We want to make sure we continue with programs of that nature that have made meaningful contributions in certain jurisdictions, but this would be part of an overall innovation agenda.

The point I want to make is that this is something important to us but it is not in isolation. It will be in conjunction with other measures that will reflect the whole-of-government approach when it comes to the innovation agenda. We will speak to all the different regions of the country and will speak to again — the term I keep using often is "our ambition.''

Again, it will not be the government alone that does this. Industry will have to play a critical role. Business will have to play a critical role.

When I talk about R&D investment, for example — and this is something that if you look at innovation as one of the metrics for R&D investment in Canada, it has been headed in the wrong direction. Businesses make those investments. How do we create an environment for them to realize they need to make those investments? Part of it is education as well.

Again, this is why I got involved in politics; I feel I can make a difference. I believe we have a Prime Minister that is very forward-looking, optimistic and determined. We want to set goals, we want to be held accountable, and we will do our best to achieve our goals.

Senator Massicotte: Thank you.

The Chair: Senator Ringuette, you had a supplementary question?

Senator Ringuette: Yes. With regard to innovation, for the last many years, there has been money for research and innovation. However, the biggest mistake was that there was no proper environment for that innovation to be commercialized. That is where we lack with regard to marketing all the different components and applications of innovation.

I hope that when you receive requests for innovation funding, that you will — I say "you,'' whatever entity — create a proper environment to make certain that the commercialization of these innovations will be done in Canada. That is a comment, but I certainly welcome your response to it.

Mr. Bains: Thank you very much. I am very passionate about our innovation agenda. It is something, as I've said from the outset, that is a core priority for me, my department and this government. It will be a key part of our growth agenda going forward as an investment. We have made significant investments in our platform that we plan to honour, commit to and follow through on.

But you raise a very good point, which is that we have done reasonably well on start-ups in Canada. We do reasonably well in helping companies get that initial funding. It might be modest, but to get that idea up and running. The difficulty is that we don't necessarily do a good job of helping them scale up, grow and commercialize.

Also, if you look at our funding for higher education and research development, we represent about 0.5 of the world's population, and the publication of our education funding is roughly around 4 per cent, so we punch above our weight when it comes to that initial, primary, basic research. The challenge is: How do you take that from the lab, commercialize it and maintain a strong Canadian footprint?

When Canadian companies do well in Canada, sometimes the challenge is that they get bought out. That is not necessarily a bad thing, because that is part of the market; you will have those types of mergers, acquisitions and takeovers. But how do we identify strong Canadian brands and companies that maintain their footprint in Canada, do their R&D in Canada, employ people in Canada and pay them substantial amounts of money to do so? That is core to our innovation agenda. It is really about how to create these companies that not only succeed themselves but create an ecosystem around them, with their suppliers, et cetera. If they create that ecosystem and environment for commercialization and if they do it well, they can mentor and replicate that.

Senator Ringuette: What you are indicating to us is that will be an integral part of the questionnaire or project submission?

Mr. Bains: Absolutely. Commercialization and revenue generation are very important. That is why we already have programs in place. The NRC is an example, and even through our regional development agencies we have innovation funds. It may be in ACOA or Western Economic Diversification. We actually have monies allocated for innovation.

Part of that allocation and part of the program requirement is really commercialization. It's saying, "Look, you have a great idea. We are willing to partner up with you. We are willing to make that investment with you. We are willing to work with you, but do you have the ability to commercialize this? Do you have a market for this?'' That is absolutely a key priority for us and will continue to be so on a going-forward basis.

The Chair: I was trying to keep to interprovincial trade. That was my hope.

Senator Black: Minister, when you went off the farm a little bit on your officials, I noticed they didn't flinch too much, and you talked 20 per cent to 60 per cent.

Mr. Bains: They didn't flinch?

Senator Black: Not at all, and I was looking for that.

Mr. Bains: Phew.

Senator Black: I don't know what happened under the table.

I would like to explore that because I think that's really ambitious and really important, but I want to understand. Were you saying that your goal is to move Canada from 20 per cent of services and goods moving inter-provincially to 60 per cent? Is that what you were saying?

Mr. Bains: Again, I must confess that there is no data to back this up. There is no index to back this up. There is no quantity analysis, but this is me posing the same question on multiple occasions to my officials and to others and asking, "Can you give me a quantitative barometer of where we are right now and where we would be if we were to negotiate this agreement on internal trade? Can you put a percentage on it?'' I think they reluctantly gave me this percentage. It is not an exact science, but it gives you an order of magnitude of the kind of opportunities that exist with this agreement on trade. That's the key point that I take away from it.

Senator Black: I want to move one step further for the benefit of this committee and for the benefit of people watching this.

What does that mean in dollars for the Canadian economy if you move from 20 per cent to 60 per cent? What does it mean in terms of dollars?

Mr. Bains: That is a very good point because that's what it boils down to: What benefits does this have for businesses? What benefit does this have for consumers who would have to pay a higher price because of these barriers?

There have been different reports. My former colleague, maybe to illustrate his point, mentioned $60 billion. I think that number may be too high because the number ranges from $3 billion to around $50 billion roughly. To quantify it, that would be the range. Again, it is a very modest amount relative to our GDP and to the size of our country.

But this is why we are very excited about developing this index because the index will give us an appropriate baseline, and then we can start quantifying it in a more accurate manner. But that would be the range.

Senator Black: Minister, I want to go one step further. A range between $3 billion and $50 billion is a pretty big range.

Mr. Bains: Absolutely; I agree with you.

Senator Black: Can you put a pin somewhere in there as to what your expectations are?

Mr. Bains: It is depending on the assumptions, depending on the model you create, depending on how you want to see it. I was an accountant.

Senator Black: This is why I'm asking; I saw that.

Mr. Bains: I know that, when I would present a balance sheet or an income statement, the methodologies you would use, the amortization rate you would use, the number of years you would use would have an impact on the bottom line. It is the same thing with the dollar figure. If I look at the model for $3 billion, it has a different set of assumptions versus the $50 billion. It really is a reflection of the assumptions that you use. But the bottom line is that it would have a significant impact.

If you look at the different business associations that have been engaged, from the chambers of commerce to the Canadian Federation of Independent Businesses, et cetera, they consistently said it would be a serious improvement and present serious challenges for businesses. My hope is that, once we have an accurate index, we can start quantifying it.

Senator Black: Thank you. That is very helpful, minister.

Senator Wallin: We'll try to get back to internal trade here. In an earlier life, I covered the endless negotiations on FTA and NAFTA, and one of the issues that was difficult throughout the process and remains such is the question of dispute resolution and the mechanism.

I am asking this out of ignorance in a way here. I know they have talked about imposing monetary punishments or penalties for noncompliance, but whose rules will determine what is compliant? Is there going to be a different set? Is there something that is a baseline somewhere? The problem was we ended up using American rules, essentially, for dispute resolution.

Mr. Bains: For me, I think the benchmark for dispute resolution is really the CETA model for dealing with this issue.

I must confess that, at the provincial level, it is not as ambitious. I must confess that this is an area that we need to do more work in. We did make some attempts in 2009 to improve the mechanism that exists, but it is not one of the six priorities that we have identified. However, I do believe that, going forward, it is an area where we have an opportunity to have a much more ambitious mechanism in place because, right now, that is a point of contention. So we are focusing on these six, but that is something that will come back to the table.

Senator Wallin: So, right now, they are saying there will be a penalty structure; we just haven't figured it out.

Mr. Bains: Yes, we do have a mechanism in place. I do want to assure the members here that we do have a dispute resolution mechanism in place. It's just not at the same CETA level that exists. My officials can correct me, but that's my understanding.

Mr. Knubley: To clarify the issue of monetary penalties, there are monetary penalties now of up to $5 million for government-to-government disputes. That was put in place in 2009. Then, in 2012, these same monetary penalties, the $5 million, were applied to a person-to-government dispute settlement.

Senator Wallin: To what?

Mr. Knubley: If a person wants to come forward and pursue a dispute settlement, they can do that as well.

Senator Beyak: My question is a follow up to Senator Massicotte's. With the talk of debts, deficits, spending and infrastructure and everybody getting together to talk, I am interested in knowing how your approach will be different.

Prime Minister Stephen Harper met, between 2010 and 2015, 74 times, individually, with provincial premiers, something not often reported in the press. He did that because, when they're all together in a group, it's just a competition for more money and who's going to get the most. How do you plan to handle that?

Mr. Bains: I think that the power to convene is a very important mechanism that exists at the federal level. I think we have to recognize that these are big challenges. It may be the environment; it may be the economy. We need to recognize that this is a collective area of responsibility, that there is one taxpayer and that they expect us to work together. They expect us to find solutions. I think we have demonstrated a model. We may have disagreements, and I suspect we have disagreements. I suspect there will be competition, but I learned the lesson a long time ago to build consensus, to work together, to look at each other face to face, to sit together at the table and not have private conversations but be open and transparent. You can accomplish a lot more.

I think this model may not be a perfect model, but I do believe it presents numerous opportunities for us to be able to advance some of the key agendas around trade, internal trade, the environment and the economy.

Senator Beyak: A further supplemental question. History shows that that doesn't work. It is a nice idea, but, when you get them altogether, it doesn't work. It is better to meet them individually, find the need and deal with it at the cabinet table, according to history. I wondered if you had a different approach.

Mr. Bains: No, I think history has been very kind to Canada. We have a really great model here. This federation is really the focus for many other jurisdictions in the world — something we should be proud of. I think that our Constitution creates that framework and that we are able to deal with these complex issues.

I am very confident in the leadership of our Prime Minister. I am very confident in his approach. I think collaboration and convening and dealing with problems in an open and transparent way does, on balance, provide better results. It is great to have those diverse viewpoints at the table as well because each region has their unique issues and that diversity of thought is very important to come out with the best possible outcomes.

The Chair: I have a question on your "everything in one pile.'' You call it the negative approach.

Mr. Bains: The negative list approach.

The Chair: Yes. Could you tell me if beer, wine and spirits are in that bucket?

Mr. Bains: Somebody said negative. Just for the record, chair, I don't consume alcohol.

The Chair: No, neither do I.

Mr. Bains: It is not a topic of conversation at home. But many of my colleagues and friends do, and they do raise it with me. We are definitely looking at this issue. This is an issue that has been brought up in the House of Commons as well, through private members' bills. The issue, again, is not necessarily an agreement through those bills, but the issue is having the provinces and territories agree on it. This is something that we are currently in the process of negotiating.

The Chair: Are there any more questions? How are we doing for time?

Mr. Bains: I am cutting it pretty close, but I can take another question.

Senator Massicotte: Some time ago, one of the ministers responsible for trade said that in his opinion the Constitution makes it clear that interprovincial trade is within federal jurisdiction, which has the authority basically to make a decision and make it stick. Do you share that opinion? Is that a hammer we can use?

Mr. Bains: One could argue that. I know my predecessor argued that point. I don't know if he did so in public so I don't want to put him on the spot. That is not the desired approach in this environment to get the desired outcome.

We have a table, a process, a platform, the political will, negotiators, the desired outcomes, and the shared objectives in place. To take that other approach and go down that path might not necessarily result in the ideal outcome. I firmly believe that a working collaboration with my provincial counterparts will result in much more fruitful outcomes in the shorter term. This other approach may ultimately cause some long-term challenges for us and may not give us the desired outcomes.

Senator Massicotte: I fully agree with you on the approach. In actual negotiations, real life is such that we do get influenced by positions of power, but I agree with the approach.

Mr. Bains: Thank you kindly, sir.

The Chair: Colleagues, after the minister we have an opportunity to ask officials questions.

Minister, I've got to say that you're definitely up on your files. We have really enjoyed this.

I am not sure if there are questions for officials and I don't want to have the officials hang around if in five minutes we say, "We don't have any questions so go home.'' Will there be any questions for the officials? I take it then that we are done.

With that, I wish to thank you and say that we appreciate your coming here to kick off this study. Canada needs to do this. We have been through this discussion many times before and we will do everything we can to assist you in moving this file and agenda forward.

Thank you again, minister and officials, for coming. Sorry we will not be keeping you but it is snowing outside. So at least you will be able to get home in time for dinner.

Mr. Bains: Thank you very much, honourable senators, for this opportunity. As I said, I appreciate your engagement on this file and thank you for proactively reaching out and being willing to assist us. This will be helpful going forward, and I look forward to continuing to engage with you on this file. I welcome the opportunity to appear before the committee on any subject matter where I might add value.

The Chair: We'll keep you informed. Thanks again.

(The committee adjourned.)