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.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
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
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?
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
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
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
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
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
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
Ms. Moreau: There is not a lot I can say to improve on that, so I will
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
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
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
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
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
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.)