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

Issue No. 4 - Evidence - April 14, 2016


OTTAWA, Thursday, April 14, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:30 a.m. to study the issues pertaining to internal barriers to trade.

Senator David Tkachuk (Chair) in the chair.

[English]

The Chair: Good morning, welcome to the Standing Senate Committee on Banking, Trade and Commerce. My name is Senator Tkachuk, and I am the chair of the committee. This is our sixth meeting on our special study on issues pertaining to internal barriers to trade.

We have before us, from Agriculture and Agri-Food Canada, Mr. Frédéric Seppey, Chief Agriculture Negotiator, Trade Agreements and Negotiations; and from the Canadian Food Inspection Agency, we have Richard Arsenault, Executive Director, Domestic Food Safety Systems & Meat Hygiene Directorate.

The way it is structured today, senators, is that Mr. Seppey will deliver remarks, and then both Mr. Seppey and Mr. Arsenault will take questions.

[Translation]

Frédéric Seppey, Chief Agriculture Negotiator, Trade Agreements and Negotiations, Agriculture and Agri-Food Canada: Thank you, Mr. Chair. My name is Frédéric Seppey. I am Chief Agriculture Negotiator and Assistant Deputy Minister at Agriculture and Agri-Food Canada. My responsibilities mainly involve managing international trade policy in agriculture but also include internal trade, as it is a key factor for the competitiveness of Canadian agriculture in the domestic market and abroad. Mr. Arsenault and I are pleased to be here today to discuss issues relating to internal trade that could affect the agriculture and agri-food sector in Canada.

A better integrated domestic market supports a competitive and innovative agriculture and agri-food sector and reduces costs of production while raising productivity. It is a natural complement to Canada's extensive involvement in international trade.

Trade between provinces and territories is an essential part of the Canadian economy. In 2014, the latest year for which we have data, interprovincial trade was worth nearly $400 billion, equal to one fifth, or 20 per cent, of Canada's GDP.

It is worth noting that 40 per cent of exports from provinces and territories remain in Canada. In fact, recent trends indicate that growth in internal trade is more stable than growth in international trade. This was clearly demonstrated in the last recession, when the decline in GDP owing to exports abroad was much more pronounced than the decline associated with internal trade.

As regards internal trade, interprovincial trade in agricultural and agri-food products was valued at some $40 billion in 2011, or 11 per cent of total interprovincial trade, the same proportion these products account for in Canada's total exports.

The fact that jurisdiction for agriculture is shared between the federal government and the provinces and territories plays an important role in any analysis of internal trade in agricultural and agri-food products.

Under the trade and commerce power, the federal government is responsible for interprovincial and international trade and, in some cases, the sale of goods within provinces and territories. The provinces and territories are responsible for the production and internal marketing of agricultural and agri-food products. For example, some products, such as meat, must adhere to federal regulations respecting registration in order to be traded between provinces or internationally. If these products are not produced in a federally registered establishment, they can be sold only in the province in which they are produced and only if they comply with the regulations of that province or territory.

Likewise, as regards food safety in general, the federal government is responsible for national regulations that apply to interprovincial and international trade, as well as the sale of goods within each province. In some cases, provinces have their own complementary regulations.

In this area, the government has created a number of mechanisms to ensure close cooperation and coordination with the provinces and territories on issues that concern the agriculture and agri-food sectors.

[English]

The internal trade of agriculture and agri-food products is largely governed by the Agreement on International Trade which came into effect on July 1, 1995. Overall, trade in agriculture is covered under the general rules set out in the AIT, such as reciprocal non-discrimination and transparency. In addition, beginning in 2008, a more robust chapter of the AIT was negotiated between the federal, provincial and territorial governments and came into effect on November 8, 2010.

This revised agricultural chapter ensures that technical measures adopted by governments do not restrict interprovincial trade more than is necessary to achieve legitimate objectives, such as the protection of human, animal or plant life or health.

While the AIT has achieved progress towards a fully liberalized agricultural interprovincial trade, a number of measures, such as regulatory differences and inconsistent standards, continue to impede the free flow of goods across interprovincial borders.

For example, interprovincial or international trade of meat products must satisfy federal regulations regarding registration of manufacturing establishments. Otherwise, the meat product can only be sold within the province or territory where it is produced.

Standards of composition or identity are another significant area of potential regulatory misalignment. It can be justified from a public policy perspective, but it may result in additional costs or complexity for traders.

In Canada, there are 511 federal standards of composition or identity for 27 different commodities, which may then be replicated province by province with subtle differences. This is the case for maple syrup. There are also standards that only exist at the provincial level, such as compositional standards for yogurt in Quebec. An alignment of standards of identity could be liberalizing in terms of movement of product.

If I move forward to the current process of renewal of AIT, with the recent conclusion of trade negotiations with, for example, Korea, the European Union, and most recently the Trans-Pacific Partnership, there have been calls from business associations, consumer groups and academics on the need to modernize the AIT and ensure that internal trade does not lag behind international trade liberalization, and that Canada's market should be as open internally as it is to our external trading partners.

As a result, in August 2014, the Government of Canada called for the modernization of the AIT through a policy document released by the former Minister of Industry.

In addition, at the August 2014 meeting of the Council of the Federation, all provincial and territorial premiers committed to renew the Agreement on Internal Trade, with the goal of concluding negotiations with the federal government in 2016.

As Minister Bains noted in his February 24, 2016 appearance before this committee, the Department of Innovation, Science and Economic Development is leading the federal government's initiative to renew the AIT.

Agriculture and Agri-Food Canada strongly supports joint federal, provincial and territorial efforts to address internal barriers to trade. Our department and our minister, in collaboration with other federal government departments and agencies, are currently working with the Department of Innovation, Science and Economic Development to further refine the government's approach for a modernized and ambitious Agreement on Internal Trade.

It is important to point out that most of the levers to further liberalize and facilitate internal trade belong to provinces and territories. In addition, the federal government does not maintain as many regulatory measures that could affect internal trade as the provinces and territories.

An example of a federal measure that was affecting internal trade was the Importation of Intoxicating Liquors Act. It was amended in 2012 to remove the federal restrictions on the importation of wine across provincial borders for personal consumption. This amendment was later extended in 2014 to include beer and spirits.

Despite the elimination of the federal restrictions, provinces still retain jurisdictional authority to set limits on permitted quantities and means of importation of alcoholic beverage products. Without corresponding changes to provincial or territorial legislation or regulations, realizing those gains to interprovincial trade may prove difficult.

[Translation]

Finally, I would like to reiterate that the agriculture portfolio, which includes the Department of Agriculture and Agri-Food and the Canadian Food Inspection Agency, strongly supports the federal, provincial and territorial governments' efforts to tackle the barriers to internal trade in order to further enhance the competitiveness of Canada's agriculture sector both in Canada and internationally while strengthening internal trade. Taking measures to reduce internal trade barriers can help create the right environment to increase exports, spark innovation and improve competitiveness.

Thank you for giving me the opportunity to discuss this important issue before the Committee. We are ready to take your questions.

Senator Hervieux-Payette: Welcome. On page 3, in the second paragraph, you state that interprovincial trade in agricultural products was valued at some $40 million in 2011. Are you sure you have the right figure? It seems to me that $40 million is a very small number, especially when I have to pay $50 for a beef roast. I expected to see hundreds of millions of dollars. Do we do all these regulatory antics for the paltry amount of $40 million? It cannot be that low.

Senator Day: In the English version, it says "billion.''

Senator Hervieux-Payette: It says $40 million in the French version. That number makes no sense.

[English]

Sorry, but there is a big mistake in the French version, $40 million to $40 billion. Now I understand why I pay so much for my roast beef.

[Translation]

I have a rather boring question for you. Why does the government intervene in the meat products sector? What are you doing in Alberta slaughterhouses? Can they not regulate their own affairs?

Richard Arsenault, Executive Director, Domestic Food Safety Systems & Meat Hygiene Directorate, Canadian Food Inspection Agency: That is a good question. Federal regulations cover imports and exports and, by that very fact, interprovincial trade. The Meat Inspection Regulations were initially developed to authorize exports. For the purpose of international trade, the same standards must apply to both imports and exports. Therefore, that is also the case for imports. In short, we have a system that aims to maintain the trust of Canadian consumers and of the countries to which these products are exported. Nearly 50 per cent of the $20 billion of meat produced annually goes to the United States and some 130 other countries around the world. In order for a product to meet these countries' requirements, we have to apply some of the highest standards in the world. It is as simple as that. Nearly 95 per cent of the cattle and 90 per cent of the poultry raised in Canada are slaughtered in federally registered establishments. To do this, we need to establish a minimum standard.

The federally regulated slaughterhouses in Alberta do not have a problem. They are already producing at that level. Your beef roast probably comes from that province. However, some small businesses are not interested in exporting, because, for them, meeting all the export requirements is less rewarding. There is a cost to marketing a product, and it would go from $5 to $10 per pound, because the size of the business and its volumes are not the same; they are too small to cover the overhead. The costs cannot be spread over a broad enough base.

Since the system does not require businesses solely under provincial jurisdiction to meet the export standard, they can operate under the provincial rules. But they must operate only within their own province. Standards in Quebec are different from those in Ontario, and the same is true of Alberta and British Columbia. In some provinces, there are fairly significant differences. In an exercise in 2010, we inventoried our products. I have already mentioned the regulations in force in these provinces. Other provinces, such as the Atlantic provinces, are not subject to regulations. They planned to establish regulations, but this did not happen. They have other priorities. We created a standard to ensure everyone is at the same level in 2006, but it was never put in place. In 2010, we tried to standardize federal practices to increase flexibility and be more accessible to small businesses. We had some success in changing the meat regulations in 2011—2012.

Small businesses face a dilemma: the implementation of world-class traceability, identification and preventive control systems. Most Canadian consumers support this, but these systems cost money. When we propose that small businesses with two or three employees implement a quality control system, we know this has costs. They have been making their products for 40 years without these systems. I am not ready to tell them that their products pose a problem. On the other hand, without these control systems, I cannot gain the trust of consumers. That is the dilemma. We are trying to make the system more accessible to these people. We are working tirelessly to obtain compliance elements to give them the tools to make their work easier. But the industry also has a role to play in equipping these businesses.

Senator Hervieux-Payette: In the case of maple syrup and yogurt, do we need 10 sets of regulations? Are there federal regulations for yogurt and maple syrup as well?

Mr. Arsenault: There is a safety standard for yogurt that allows us to ensure the product is safe.

Senator Hervieux-Payette: Which one?

Mr. Arsenault: As part of the Dairy Products Regulations.

Senator Hervieux-Payette: Are these federal regulations?

Mr. Arsenault: Yes. They provide for safety standards. As for the composition of the product, the ingredients that are used to prepare yogurt, there is no federal standard, because we believe the industry and consumers will communicate clearly through market forces. Therefore, if I dislike Mr. Jones's yogurt, I will buy someone else's. We do not believe the federal government has a duty to impose standards and regulations in areas where public needs can be met otherwise.

In the case of Quebec, a different choice was made. So be it. I am not in a position to talk about the provincial situation. That is not my role. The province has jurisdiction, so it can make that decision and can implement it as it sees fit. The other provinces can do the same, if they wish to do so.

Senator Hervieux-Payette: In the case of maple syrup, what is the difference between a maple in Quebec, the Maritimes or Ontario?

Mr. Arsenault: That is another excellent question. Maple syrup is made in the same way it has always been made. When it is time to market it, however, there are differences in how it is categorized: the grade standard and a high quality level. At the federal level, there are still standards. We modernized this exercise with, I believe, Senator Greene's keen interest, and we made a lot of progress to enable Canadian producers to better market their products by cleaning up this standard.

But, as Mr. Seppey explained, the issue is that a province can decide to develop its own standard, and this standard can be the same or different. With maple syrup, the other provinces did not insist on establishing a standard, but one province decided to develop or keep its own standard.

We are working very hard with our provincial partners in our committees and in discussions to ensure good communications so that people can make decisions and we can move forward together. We can hold these meetings, but we cannot guarantee or force an outcome.

Senator Hervieux-Payette: So there is no harmonization?

Mr. Arsenault: That is our goal, but it is up to the provinces to decide what they want to do in their own jurisdiction.

[English]

Senator Black: Thank you both for being here, and thank you both for the work that you do on behalf of all of us. It is appreciated. I have two questions for you, for me to understand a little bit better a couple of issues.

First, I'm interested in your comment on this: We've heard from a number of witnesses that the correct way, in their view, to move this agenda in interprovincial trade forward is to develop a negative list. That is to say it is assumed that all products and services across Canada can be traded freely across the nation, unless they are exempted. Can you comment, please, as to whether or not you think that will be a satisfactory approach from the position of agriculture and agri-foods?

Mr. Seppey: Thank you for the question. Yes, the reference to negative list relates to how international trade agreements, especially those based on the NAFTA, which is the type of free trade agreement Canada is most familiar with, include this notion of negative list.

However, in international trade agreements, you have two types of obligations or principles. You have one category that is principles that are of universal application. That would not call for any exemptions.

I will take, for example, if I refer to the NAFTA, the obligation of non-discrimination or with respect to tariffs. In that case, in a trade agreement, it means that, if, for example, under the NAFTA you apply a tariff to the United States, you have to apply the same tariff to Mexico. This the concept of most-favoured nation.

There are no exemptions or reservations possible, generally, for that type of universal obligation. It is a basic principle of any trade agreement.

In other types of disciplines, however, for example, when it comes to disciplines on investment — the type of treatment we are according to foreign investors as compared to the domestic investor — in those types of disciplines internationally, it is fairly standard that we have negative list, by which you list a measure that you want to exempt from the application of these principles.

Doing the same thing in the Agreement on Internal Trade, when it is appropriate, depending on the chapter and the type of discipline, makes sense. One, the federal government takes the view that, for the reason that I mentioned, which is to best align the rules on internal trade with what we have accepted internationally, it would make sense that for those obligations internationally where we allow no exemption, for example, a non-discrimination for goods, we follow the same principle in internal trade.

But we know that many measures at the provincial level deal with either the trade in services or investment because, generally, the federal government has a responsibility, under the trade and commerce power, for international trade. So the trade in goods is generally regulated at the federal level.

But the provinces have rules on investment and services. So, in the Agreement on Internal Trade, when we have disciplines on investment and services, following the same approach as in international agreements to have a negative list, as you point out, is a concept that makes sense.

Senator Black: You agree with that approach?

Mr. Seppey: Yes, for certain disciplines, for the disciplines where, internationally, we also allow a negative list.

Senator Black: Specifically, with respect to agriculture and agri-food, you agree with that approach.

Mr. Seppey: Yes.

Senator Black: I'm going to ask a really dumb question. I just don't understand, so bear with me.

Senator Massicotte: It's not the first time.

Senator Black: He's my friend.

As to supply management in Quebec, how does supply management, in the various industries that are subject to supply management, play into a proposed agreement to eliminate interprovincial trade barriers in Canada?

Mr. Seppey: This is an excellent question. In fact, you mentioned supply management in Quebec, but each province has it.

Senator Black: Thank you for pointing that out. I appreciate that.

Mr. Seppey: It covers the dairy, poultry and egg sectors, so the five sectors. Supply management is a system that allows for control of production, price and import to ensure that at any given time producers and the value chain in those sectors know the quantity that needs to be produced domestically to satisfy the requirements of the market.

The fundamental elements of supply management are that to have an effective operation of supply management, you need to have a certain number of measures in place that structure the system, with marketing boards, et cetera.

Under the current AIT, and as envisaged in the reform, the disciplines are not intended to touch on these structural measures. They touch on measures that are restricting trade — either discriminating between the goods of a province vis-à-vis the goods of the importing province or in terms of the treatment of service providers or investors of other provinces.

The systems that exist to ensure the effectiveness of supply management are not measures of that nature. They are there to codify the production, and given that each province has their own system, the structuring measures of supply management do not constitute, in our view, barriers to trade.

It is not to say that you cannot have measures restricting trade that relates to dairy, poultry and eggs because there are regulations on dairy that may restrict trade, as it exists. We are mentioning the misalignment of rules on maple syrup, for example. But the measures that establish the supply management systems in the various provinces are not barriers to trade.

Senator Black: I just want to understand what you've said to me.

The Chair: Could I have a little bit of clarification on that point? There are barriers to supply.

Mr. Seppey: Yes, they are barriers to supply. In a non-discriminatory fashion, it applies —

The Chair: If you are a farmer and you want to have chickens, you can't have chickens. You can't sell eggs in the marketplace, right?

Mr. Seppey: Yes, but, actually, chicken is a good example. I will give an example of a measure that is a restriction to interprovincial trade in chicken.

The Chair: Oh, so we have one.

Mr. Seppey: There are some that exist. In response to Senator Black, I clarified that there could be measures, but it is not the measures that establish. For example, for supply management in chicken in Quebec, it's la Loi sur la mise en marché des produits agricoles. That piece of legislation is not, ipso facto, a barrier to trade, but there is a measure, for example, that restricts the movement of chicken between New Brunswick and Quebec. That measure may be considered to be a restriction on interprovincial trade. The fact that you have a supply management system in place in a given province is not a restriction to trade. In fact, there's movement of dairy and poultry products from one province to another even under a supply managed system.

The marketing boards are pooling their efforts. In dairy, for example, we have the five provinces east and the four provinces west that coordinate their efforts. So that's the distinction that I'm making; the measures that are required to be in place to establish a system are not intended to be covered under the discipline of this agreement and, therefore, they are not barriers to trade per se.

Senator Black: I hear you, but I want to drill down a little further because I'm presuming that a lot of folks who are watching this at home are asking the same question as I am, "What have you just said?'' This is what I want to understand.

I want to know if we should move towards free interprovincial trade in Canada, and if we adopt a negative list — poultry, dairy products, et cetera — from any province which currently manages the industry under whatever level, this will not be possible on a go-forward basis. Is that correct?

Mr. Seppey: Let me rephrase and try to be clear.

Senator Black: I agree it's complicated.

Mr. Seppey: It's absolutely complicated, but I will try to clarify.

It will be up to each party to the negotiations and especially the provinces to decide. It's not the case right now, but if there would be the possibility to inscribe exclusions to the obligation to allow the free movement of goods across borders, I don't think they will need to inscribe, for example, in Quebec, the Loi sur la mise en marché des produits agricoles; I don't think that they would have to put that piece of legislation on a negative list. I believe that such legislation doesn't concern trade; it concerns production.

Senator Black: It's a provincial matter, they would argue?

Mr. Seppey: Correct. I suspect that the other measure, which is explicit in terms of restricting the movement of chicken across a border, this is more the type of measure that would fall within the purview of the agreement. But the decision of each of the parties, what measures are required to be listed as a non-confirming measures, has to be taken, taking into account the exact wording of the disciplines.

That the purpose of the Agreement on Internal Trade is to regulate interprovincial movement and trade rather than codifying production is what is making the system not subject to the agreement.

Senator Black: Thank you very much, sir.

Senator Enverga: Thank you for the presentation you gave us. On page 5 you mentioned that ". . . the government has established a number of mechanisms to ensure close cooperation and coordination of efforts with provinces and territories on issues of interest to the agriculture and agri-food sectors.'' How successful are those mechanisms? What are the other mechanisms that you would introduce to ensure complete barrier-free trade between provinces?

Mr. Seppey: I will mention the type of mechanisms within the Department of Agriculture and Agri-Food, and Mr. Arsenault can add what exists at the level of regulatory entities.

With respect to agriculture, given that it is an area of shared jurisdiction, we had no other choice over the time than to establish a mechanism of collaboration and cooperation. In fact, we established more than 20 years ago an agricultural policy framework that is governed by federal-provincial arrangements.

You may have heard the terminology. The current policy framework, called Growing Forward 2, was established in 2013 and runs until 2018. We are already discussing with provinces the next five-year framework for policies.

Under this framework we have a series of financial programs that are either cost-shared or federal only, provincial only, but that framework also helped to coordinate our efforts when we have common goals.

To take the example of international trade, many provinces have cared for the competitiveness of their agricultural sector and conduct missions abroad. We do the same thing at the federal level. We have market development efforts. Under that framework, we have federal-provincial committees and regular interaction between officials to coordinate our efforts. For example, a number of provinces would be interested in promoting the export of cattle to China. We coordinate our efforts.

We do the same thing all along the continuum of policies that exist that govern agricultural, including policy on what our common objectives are in terms of food at the policy level, food safety, prevention of deceptive practices for consumers, et cetera.

These are all elements that may affect trade, but in the regulatory area, Mr. Arsenault can elaborate as to the mechanism that exists.

Mr. Arsenault: The role is essentially to have a convening function. As Mr. Seppey mentioned, there are federal- provincial-territorial processes that are in place for that, and they all flow from the top in terms of the ministers having their annual meeting and their associates having all their meetings.

The committee that would be most interesting to speak to would be the one on regulations. Every quarter folks at my boss's level get together and work through an agenda and have a work plan.

One of the items I'll point to that might be helpful is the present work we are trying to do in pathogen reduction, which is to try and reduce the load of bad bugs in raw products to have a better outcome and healthier Canadians.

That's a project that, as we mentioned, the federal government has coverage for about 90 per cent of poultry, 95 per cent of beef produced in the country. To get to the rest of it and the smaller processors, we need help from the provinces to help manage and improve the situation in the rest of the continuum. That's a table where we're having discussions and working towards an action plan that will help get us to a better outcome in that space.

It's the kind of cooperation that is most important so that as we have those discussions, we learn more about each other's system, we break some of the myths, we have better trust, and we start working together towards better outcomes. That is really at the root of everything we're trying to do right here.

Senator Enverga: I asked this of Minister Bains: With all these mechanisms that you will be introducing, where are we now? How far away are we from achieving our goal of barrier-free trade in agriculture?

Mr. Seppey: The main vehicle to address the trade-impeding measures is the negotiations on the modernization of the Agreement on Internal Trade.

There was a notional goal of concluding these negotiations by the end of March of this year. This was not possible, but the federal and provincial and territorial negotiators are working in a very intensive fashion to complete the work, and they are very advanced and will complete that work as soon as possible.

Under the current Agreement on Internal Trade, there is an annual meeting of ministers responsible for internal trade that is usually held in the summer, and that could provide a goal for the completion of the current efforts on modernization.

I shall mention that as is the case with trade agreements, the purpose of the agreement is to set general rules and to set the right principles to guide the measures that either the federal government, in this case, or the provinces and territories are taking that could impede trade.

But it doesn't go into all the details of the regulatory alignment. This is left for regulators to continue to work together. But the AIT modernized would provide a strong impetus on regulators to coordinate their efforts. In fact, Mr. Arsenault was referring to what is taking place in meat, but you can extend on all the regulatory issues that govern, for example, animal health. You have chief veterinary officers at the federal level as well as in each province. They talk to each other often in order to align. If there's a problem of animal health that requires action at both the federal and the provincial level, they talk to each other and try to align their efforts.

This can cover measures that may or may not affect trade, but definitely this is an example of a mechanism beyond the general rules that are in the Agreement on Internal Trade that can facilitate further the trade across the provinces.

Senator Enverga: But the question is, where are we right now? Are we close by? How far apart are we?

Mr. Seppey: I must say that when the effort on the modernization of the Agreement on Internal Trade started, we did an inventory, and under the study that was done by other committees in either the Senate or the House of Commons on internal trade, we were asked to present an inventory of the measures. In fact, I think that between the perception and the reality of barriers, the magnitude of the barriers that exist, there's quite a difference.

It's difficult to identify exact measures that have an impeding impact on internal trade; however, we cannot judge or predict what the future will be. Each government may take under their jurisdiction measures that may have an impact on trade in the future.

That's the purpose of the modernization of the Agreement on Internal Trade. It's to ensure that we set principles that ensure the maximum freedom of trade within Canada, accepting, though, that there may be legitimate policy objectives that justify a measure to have an impact on trade. But the idea is always that we guide governments to take such measures only to the extent necessary to achieve their policy objectives. It's really to align the rules on internal trade with what exists at the level of international trade.

Senator L. Smith: When Minister Bains came before us, I think the question was asked: What percentage do you see of where we're at with internal trade? Did he mention 20 per cent? He wanted to see it go up to 60 per cent.

Listening to the witnesses that we've had to this point, people have talked about upgrading the AIT and negative lists, harmonization, the experiences from other countries throughout the world, and Australia came up.

You touched on the potential obstacles. I'm wondering what the obstacles are, from a macro perspective, of moving this forward so that we can get to a higher level. There are obviously all sorts of issues between the provinces. Are there provinces that are obstacles themselves because of protectionism for their particular area? What's impeding this movement forward? Or is it going to be in incremental steps?

What is the reality of the situation? Is it going to be that we're going to someday have this open market, or is it going to go from 20 to 25, 30 to 35 to 45, like a lot of the things in our country go? How can we open this thing up?

Maybe both of you could answer because one of the issues you brought up was the importance of regulations. But are regulations tied to red tape? The previous government was committed to reducing red tape. So how do we open this thing up so that you're going to have the quality control but you're also going to have the opportunity to get into markets?

Mr. Arsenault: To the regulation point, I think you're making a very strong case for why we don't want to start regulating in requirements here.

One of the objectives that we've been pursuing very aggressively — and you spoke to the red tape reduction — we're continuing to pursue this because having the right type of regulations in the right places for the right reasons is what's going to be successful for industry in general, and by extension, to increase the ability for small businesses to trade interprovincially.

The issue of getting it right is something that's focused, I think, on things that are less prescriptive, and we're not using tape measures and measuring sizes of drains any more like we used to. That was an impediment. People built it in a different way, they couldn't meet it, it cost a fortune to fix it, and to what end. We're not doing that any more.

Our work on modernizing our food safety regulations is really focusing on getting to the right outcome and doing those things that are essential to it that I mentioned earlier in terms of being able to identify where the product came from, who made it, having confidence that they have controls in place so that they know what they're trying to eradicate in terms of threats and hazards, and that they are doing it adequately.

We ran an outreach campaign last summer as part of our run-up for the regulations that we're trying to put forward, and hopefully they'll come forward this year. In the past three to four years, we spoke to over 14,000 people, but during the past summer, where we had 17 webinars, seven off-site things, we talked to a lot of small-business people across the country. One of the things we discovered was that they didn't understand what the regulations were, so there was a lot of fear and concern.

One thing we need to do in a regulatory system is to make sure people understand what the rules are and that we write clearer rules. We're working hard at that. When we put this thing forward, hopefully people can appreciate it. They are regulations nonetheless; they are going to be complicated in some ways, but we're making them simpler, and giving tools in the sense of compliance promotion, which I alluded to earlier.

One of the difficulties with that space is that in a number of cases people have been manufacturing products for many years without doing some of the things I described earlier. They'll need to do more. And that's a business decision, and there's a cost to that. Do I want to take advantage of more opportunities, but I have to hire four people, or am I happy with the size I am?

One of the challenges is small business needs to know what those challenges are more clearly, so that they can make informed decisions. Right now there's a lack of information and therefore fear and hesitation. I wouldn't want to take the jump because I don't know what I'm jumping into.

We want to work towards that in the regulatory space, and that's a theme that I see continuing to progress over time.

The other point is we talked about other types of regulations, compositional standards, and I think Mr. Seppey mentioned the 500-plus standards that have a variety of things. We're starting a process to take a strong look at which of these do we really need, because I'm sure that of that list there are many we don't require.

The difficulty in that space, quite honestly, is that there are vested interests that are very comfortable with the status quo, and when we did the work to try and eliminate container size requirements a number of years ago, we've been able to progress with those sectors where there was a consensus. We're still working very hard and diligently to resolve and get success in those other areas, where that wasn't quite the case.

So it becomes a question of having a collective will around the table and the interests all being in alignment. Sometimes that window is open and sometimes that isn't quite the case. So to get back to the other point, how quickly can this all come together, I think it's important to have a vision, it's important to keep working towards that, and we're doing that at the federal level. In terms of being able to predict that we're going to get this vision implemented in five years, in five months, I don't think that is a realistic thing. It's to have reasonable milestones to commemorate those successes and to progress continuously and relentlessly to that end, which is what we're doing.

I don't know if you'd like to complete that thought, Mr. Seppey.

Mr. Seppey: If I move away from the regulations to the more traditional prevention of the movement of trade across borders, the situation varies enormously from one committee to another. In grains, farmers in Quebec can import from wherever, and in that area the trade occurs freely.

In other areas traditionally well regulated, such as alcoholic beverages, it is very different. That's why I mentioned it in my introductory remarks, that it's an area where there's jurisdiction, there's a role for both the federal and each of the provinces, and in that regard we removed the restrictions at the federal level, but it's not sufficient in itself.

Perhaps, given the mandate of this committee, it may be an area that you want to look at specially. When it comes to the barriers to trade in alcoholic beverages, often in provinces it is not the department or the ministries of agricultural that are responsible for those issues; it is generally the treasury because it's a very significant source of revenue. In Quebec, for example, it used to be the Ministry of Public Safety.

Therefore, to make progress you need to get a number of players from each government around the same table to create the dynamics to encourage change. That's where the AIT, with a new set of rules and engagement by the premiers of provinces and territories, can provide momentum in that regard.

Senator L. Smith: You talk about political will. A quick question for each of you: Could you give me one item, from a regulatory perspective and then from a goods and services, product perspective, that you would implement right away that would help to improve the situation, because it appears you're talking about incremental changes as opposed to immediate global change?

Mr. Arsenault: I'll give you two from the regulations because we're working to put modernized food safety regulations in place that are simpler and more outcome-based. We are very hopeful of having something successful and of rolling that progressively out over the coming years, because we'll give people time where they're not ready yet.

On the labelling side, the modernization that we're trying to put in place is one where, like I said, we want to make the rules as simple and appropriate as possible to give consumers confidence that what they are buying is what they are paying for and to use a place and a system that will allow for accredited and reliable and trustworthy third parties to manage those standards, as opposed to having bureaucrats trying to decide the size of the container or how much per cent of this or that ingredient is going in there and to step back from that kind of regulation, which is an impediment to trade, in many cases, to one that will allow for freer trade to take place.

Mr. Seppey: On the goods side, I would say that, again, the federal government doesn't have that many levers or measures remaining. The one that I gave that we modernized — on the alcoholic beverages, the two amendments — that was probably a key step that we could take to help, but it needs to be supplemented by measures at the provincial level.

Another example that I would give is on organic, where there's a federal standard. This is more an area that is in its infancy in terms of development. We have a standard at the federal level, but provinces are also developing their own standards. Because of its novelty, it's not informed by a long tradition in each province. Maple syrup, for example, has been regulated for many years in Quebec and at the federal level. In organics, it's more recent. It provides more opportunity to do it in a harmonized way from the start.

That being said, we have strong regional differences across the country in terms of consumer preferences, and one government, one jurisdiction, may want to say, "Well, for us, in organics, we think that the federal standards don't go far enough in that regard. We would like to have our own element.'' That's something that is probably quite tempting for some jurisdictions.

Senator L. Smith: A quick definition of organic, and that's it for me.

Mr. Seppey: Oh, that could be long.

Senator L. Smith: Is there one?

Mr. Seppey: I'm not a specialist, but yes. I think there could be different interpretations and different standards, different definitions.

I'm giving that example because that's an area where there's an interest across the country to develop standards, and there's a potential to do it in a harmonized way from the get go.

Senator Greene: I initially had a bunch of questions, but Senator Black asked those. Then, I formulated some more questions, and Senator Smith asked those. But I do have a question on an issue that I think hasn't been explored yet, and that is the barriers to trade established by provinces that don't produce a particular good.

For example, there is no product in Canada more emblematic than maple syrup, which you mentioned. It's produced in only a couple of provinces, Quebec, Ontario, New Brunswick maybe, and then in New York and a few states.

Are there any barriers to trade from provinces that do not produce maple syrup, or is that a good example? Are there other examples that are better?

Mr. Arsenault: There may be other examples because, for maple syrup, currently, there are only provincial regulations in place in Quebec. So there aren't any other provinces that —

Senator Greene: There aren't the rules, so it's not a good example of that.

Mr. Arsenault: It's a good example of where there's a difference between a federal and a provincial one, and there is a question that was brought forward: How come we have two different standards, and how does that get in the way? I think simplifying those two regulations, as in the example of organics, where we work together to a common goal, as opposed to a part, is again another illustration. I like it in that regard.

In the regulatory context, we mentioned earlier the standard on yogurt, where there's one province that has a standard and other provinces that don't. So if someone in Ontario wants to move product into that province, they have to take additional steps to make sure that what goes into the making of that thing complies with the Quebec rules if they want to put it on the shelves in Montreal.

The fundamental question is: Is it safe? It meets the federal standards, yes. Does it meet the federal labelling requirements in all other regards? Yes. What's the value added of having that rule in place? It goes to what Senator Smith said earlier as regards the value of being smart about when you put things in place and having legitimate objectives. Without a negative list, without a process in place, without the will to be deliberate about that, there's a risk that we'll always see one-offs that will get in the way of trade as opposed to things that will build the confidence that we need to expand our markets.

Senator Hervieux-Payette: Can I have one explanation of that since I'm the one doing the shopping?

The Chair: Sure. I do the shopping, too, I might add.

Senator Hervieux-Payette: On the question of yogurt, it is cutting off all of the small producers, even the Quebec ones. You never find them in the supermarket. They might be in little stores, but we just have multinational corporations. You go to Montreal, Toronto and Paris, and you eat the same product from the same company. So they are all big players. They are not small players, so, in the question of regulation or no regulation, you're talking about billion-dollar companies.

When you want to have the real product that you would find in Greece, for instance, I can tell you it's very hard to find the real product because even our own, in our province, cannot even have access to the client.

But we also have some Ontario products. But you have to have the right size, and it's relating to this question of the regulations, whether they can afford it or not.

I think it's a good idea.

Senator Day: Just a brief question: I think we are all thinking that the provinces' reluctance, in a lot of the instances, is, as you pointed out with respect to alcoholic beverages, due to a financial reason that they don't want to give up some of this jurisdiction. They may also be protecting an industry and employment in the province.

Is enough work being done on analyzing the benefits to a province that would entice that province into giving up some of that jurisdiction for the better global good?

You talked about agriculture being 20 per cent of the $40 billion internal trade. If there were no impediments to internal trade, can you tell me how much that would go up?

Mr. Seppey: I don't have in mind right now any study that has been done in this area that would quantify what could be the potential. If we take, for example, alcoholic beverages, the potential increase and each of us, as consumers, personally, I've been trying to import. The word import sounds strange when we talk about products coming from another part of Canada, but I live in Quebec. I would like to have more B.C. wine or more Nova Scotia wine, but I have to comply with the regulations of the Société des alcools du Québec and the Régie des alcools. It's the same thing in many provinces.

This is an area that is perhaps under-documented, from a consumer perspective. In general, we see the same thing when we look at the impact of international trade agreements. Academics have paid, perhaps, less attention to the benefit from a consumer perspective, but it's clear that there are a number of advantages in terms of increased trade from a consumer perspective. I think we can all figure that out for ourselves.

Senator Day: The other piece of that is the employment and the money to the provincial purse. You say there could be consumer pressures on the province to make concessions, but the provinces could also make concessions on their own, if they felt they weren't giving up too much or they had a chance more likely to win something.

Mr. Seppey: If we look at wine, we don't have all provinces producing wine. When there were consultations a few years ago from the federal Minister of Agriculture to his counterparts on taking additional steps at the provincial level on the freer movement of alcoholic beverages, he got replies from various treasuries or public safety departments, and I think it was largely driven by concerns in terms of how to manage the taxation coming from these elements. It was not driven, I think, in most cases by what we could call protectionism or protecting a domestic sector.

Even in wine-producing provinces, the presence of foreign wines is significant, and you need only look around any branch of the LCBO for the strong presence of foreign wine. So the issues are at different levels, and that is, perhaps, making it difficult to study.

The Chair: On the regulatory side for meat products, there are federal regulations for registration in order to be traded between provinces internationally, and then there's your domestic for local slaughterhouse or whatever. Is there a big difference or are there safety problems with provinces, or are the provinces basically adopting the federal regulatory standards anyway? Is there a big process to register federally? Is it expensive?

Mr. Arsenault: There are differences in some provinces that are more significant than others. As I said at the beginning, in some provinces there are regulations that are very close to the federal ones, and in other provinces they have yet to come out with regulations. They use general food inspection requirements.

The delivery of the system is also somewhat of a patchwork. It is difficult to give you a categorical yes or no. The truth is that we have been working very hard with the provinces for many years. When we modernized the regulations in 2011 and 2012, it was working closely as a task force with representatives from all of the provinces, and with the help of Agriculture Canada we were able to work with small businesses to see what that difference looked like.

As it turned out, the technical things, in terms of the building structure and whatnot, weren't altogether that huge. The big challenge these people faced was the human resource size, the lack of quality control systems that were comparable to preventive control systems that the federal system does have, and which are the international standard. It is not like we're asking our people to have more than the importers.

The question that emerged was the need for these people to make decisions about staying a small business or to grow the size so that they can distribute those additional costs on a large enough volume to be competitive in the marketplace.

That goes back to some foundational questions about whether I want to grow my business or I am happy with the size I have right now. Most of the businesses still aspire to become federally registered someday, but five years in there are only a handful that have crossed the finish line. So it gives you a little bit of an indication of that delta.

The Chair: Thank you, witnesses; it is very much appreciated. It was a great session. We learned a lot. Thank you for your testimony.

For our next panel, we have Kathleen Macmillan, the President of International Trade Policy Consultants, Inc. She is an economist and frequent commentator on trade, industrial policy and regulatory reform. She is a former Vice Chair of the Canadian International Trade Tribunal and has worked as a policy analyst for the C.D. Howe Institute and Canada West Foundation. She has written extensively on internal trade matters for organizations such as the Canadian Chamber of Commerce, the C.D. Howe Institute, the Conference Board of Canada and the Public Policy Forum.

Kathleen Macmillan, President, International Trade Policy Consultants, Inc.: Good morning. It is fair to say that our trading partners have generally done a better job of addressing internal barriers to trade than Canada. In work I have done in the past, I have had a chance to examine trade regimes in the United States and Europe, Australia, New Zealand, as well as Switzerland. I think there are important examples that Canada can learn from, despite the fact that these all have quite different jurisdictional setups, architecture, et cetera.

As you heard from many witnesses, there's been some progress made with the Agreement on Internal Trade over the past 20-plus years, notably in the area of government procurement and labour mobility. But there is still a persistence of divergent product standards and overlapping regulations.

I am going to suggest three main reasons why we have had generally unsatisfactory progress. I'm going to cite some of the examples from these other four jurisdictions as a way of underscoring what we could maybe achieve.

First, in the AIT we have the wrong model for addressing barriers. Other countries have adopted a more efficient approach with better results. Second, we lack the kind of judicial oversight that exists in other nations. As well, we don't have the institutional support that would create ongoing success with our economic union. Finally, it seems to me, based on what I learned from these other jurisdictions, that they were better motivated by crises, whether economic or political. They were able to capitalize on that as a way of motivating them to address the barriers.

First, the architecture of the agreement, because I have looked at the testimony you have heard in the past; you have spoken extensively on the concept of positive and negative listing. You are well aware that in most cases the elements in the AIT arrived there as a result of a consensus among provinces and the federal government, and that they were explicitly included. It was a painstaking approach. It goes a long way in explaining why progress has been as meager as it has been.

The European Union pioneered the concept of "mutual recognition'' many years ago. Now, the European system, as you are aware, is very complex and in many respects would be unpalatable to Canadians and to Canadian governments. There's treaty law, admin directives and a host of supranational institutions that provide oversight.

The one brilliant innovation the Europeans were able to introduce was that of mutual recognition. In listening to the previous witnesses today, who were excellent, I found myself thinking about business trips where we could take a plane and go to a province across the country; we can hop in a local taxi; we can go and have a steak that was really inspected provincially; we could have a glass of wine from a bottle that we couldn't buy in our own province. It sounds like we could even douse the whole thing in maple syrup, and that would be fine for us but would not be acceptable for regulators. It underscores the whole notion of mutual recognition.

Simply put, the concept is that if a product — a person, a professional or a service — has satisfied the regulatory requirements in that particular jurisdiction, it should be able to operate in or move to another part of the union without encountering any additional impediments.

It is a basis for what the Australians did with their internal trade accord and with their agreement with New Zealand. It also is the basis for the TILMA, which later became the New West Partnership, and the European CETA.

It works well for jurisdictions like our provinces that have common objectives with respect to food safety, important things like environmental stewardship, security, et cetera.

It is a brilliant way of overcoming the scourge of what I call "separate rule making,'' because so many of our barriers really are the result of that. They're not explicit attempts to be protectionist; there is simply overlap that arises from shared jurisdiction.

The thing I like about the concept of mutual recognition is it is brilliantly straightforward. In the case of the two first Australia-New Zealand agreements, they were three papers long. Now they're longer because they have gone on to harmonize. But it is a very straightforward way of addressing things.

It allows for regulatory competition. It is not saying there's one jurisdiction that has solved all the problems. Innovation with respect to regulation is tremendously important because our economies, industries and situations evolve. So that kind of tension that comes from having joint regulation but still allowing for trade between jurisdictions is very important.

I want to emphasize that we're not talking race to the bottom. I am not a believer that we should wipe out regulation. Our banking sector in Canada is testimony to the fact that you can have high levels of regulatory oversight and still have high rates of economic growth and successful industries.

I know you talked with Jack Mintz about this last month, and I'm going to refer you to the U.S. example. Article 1 of the U.S. Constitution gives commerce the right to regulate internal trade in the U.S. I am not going to hold the U.S. out as an example of a great functioning internal market. They have very protectionist procurement policies. They also do a lot of poaching using their tax and subsidy systems; so in many respects, they're not great.

Article 1 of the Constitution and something legal scholars refer to as the "dormant commerce clause,'' has allowed Congress to overturn a great many state measures that are discriminatory. It has also allowed Congress to pass all- encompassing economic-type legislation that has been tremendously helpful in the functioning of the economy in the U.S.

For example, they have a surface transportation act that prohibits discrimination in trucking standards between states. They have got securities and insurance regulations. In Canada we have a patchwork of trucking regulations, a patchwork of environmental regulations, and we don't have a single securities regulator.

That kind of judicial power has been tremendously useful. Our courts, as you know, have taken a very deferential view of provincial rights. They have narrowed the scope of our government's trade and commerce power under the Constitution. As Brian Lee Crowley told you when he spoke to you a couple weeks ago, the AIT is not enforceable by the courts.

If our Constitution doesn't give our federal government the power it needs to address barriers, are there other ways that our federal government can make progress in this area? I think there are, and I believe that the federal government can act more than merely as one government among 11 in addressing this issue.

With respect to governance and architecture, trading partners provide more institutional support toward the cause of advancing the common market. The Australian Productivity Commission kicks out annual reports and itemizes barriers, and these things are taken very seriously.

The European Commission also produces reports which itemize barriers, but they also require member governments, prior to passing any regulation, to submit a draft copy to the commission so that other entities can comment. In addition, the commission acts on behalf of individuals in cases where state barriers are challenged before the European Court of Justice.

The Swiss competition authority does the same thing — monitoring role, reporting role, and acts as intervenor and complainant in cases before Swiss courts on discriminatory barriers.

The last thing is the question of motivation. What was it that spurred others to address barriers in a more serious way than we have? In the case of Europe, their 1957 Treaty of Rome was crafted in an attempt to create the kind of economic linkages that might prevent a further outbreak of political unrest.

Switzerland instituted its legislation and changed its constitution in the late 1990s because they worried about being overwhelmed by a very powerful economic agent in Europe. The Swiss are not members of the EU, and they have sort of a dual economy. They have an excellent set of export industries, but they have a high-cost, highly protected local economy. They unilaterally harmonize their barriers with those of the EU in all their standards and then apply that to trade within the cantons as well.

I love the Australia-New Zealand example. I think it is very relevant for Canada. In the 1980s, Australia suffered a currency current account crisis which had a detrimental effect on their standard of living. They got seized with this productivity imperative. The central government decided it was going to institute negotiations with the state and territorial governments, developed a mutual recognition accord, and that subsequently has evolved and been extended to include New Zealand. They're now engaged in a comprehensive regulatory reform exercise.

The Australian example is an interesting one. It is distinguished by a high degree of intergovernmental cooperation. It is also refreshingly pragmatic.

I know you were talking a couple of weeks ago about driver's licences. To illustrate the pragmatism that the Tasman countries have, they decided to adopt or recognize driver's licences from all of our Canadian provinces, and they don't require any additional testing. This has been done, in their mind, as a way of contributing to the mobility of professionals between our two countries and commercial links.

It would be wonderful if our government was seized with this kind of commitment and sense of urgency. We seem to be bogged down in efforts to understand the size of the problem. We seem to think that if we can calculate a big enough percentage of GDP, then it might be worth policy-makers' attention to address this, as if we don't know that barriers increase cost to consumers and businesses, they reduce our choice, and they deter investment, and as if some of these dynamic costs can be accurately, precisely estimated in any event — and I say that as an economist.

The way I see it, trade liberalization within our country is a completely made-in-Canada situation. That is unlike the other problems plaguing the Canadian economy: low commodity prices, weak export demand from China, et cetera. It is something that is entirely within our power to address, and I think there are interesting examples of how other countries have done a good job of that. Thank you.

The Chair: Thank you very much, Ms. Macmillan.

Senator Tannas: Thank you very much for being here. It is lovely to have somebody who has significant independence, who maybe doesn't have to worry about their job, necessarily, to give us their opinions.

We have been down the road on issues with provinces where we seem to very quickly get two thirds or three quarters of the provinces on side for something, and it is the last three or four, or two, that hold out on stuff and it hijacks everything. A great example, of course, is a securities regulator. I'm from Alberta and I don't happen to agree with my government on it, but it is a great example.

Have you been able to identify, if there are some, provinces that, in your view, would be the holdouts for this idea of complete free trade, with the negative list and so on? If so, what would you characterize the holdout to be? Would it be jurisdictional assertions — sovereignty, if you will — around things, just protecting the province-ness, if you will, or would it be some provinces with potentially naked protectionist barrier erection to protect small local, provincial industry?

Do we face that problem? I have asked this a couple of times, and folks have shifted in their seats and not really answered. Are we going to get down to some identifiable provinces that just, frankly, won't sign onto this because it is not in their DNA?

Ms. Macmillan: That is a really good question. I have looked at internal trade matters for years, and it changes all the time with respect to provincial holdouts. When the AIT was first brought into force in the mid-1990s, British Columbia was a very uncooperative province. The government took a dim view of it, and it handicapped progress in a lot of ways; a change in government, complete change in orientation.

So there have been some provinces that have always been receptive to the idea. Manitoba has always been, and I think that's part of the reason they located the Internal Trade Secretariat there. But when it comes to particular industries and particular situations, the decks get rearranged. Issues of energy, for example, there's a big dispute which has held up progress in the energy chapter between the Government of Newfoundland and Labrador and Quebec. So it is really difficult to say.

It underscores the reason why there has to be a little — and I'm not trying to be a progress-oriented sort of person. I'm not trying to create a whole bundle of more bodies. But I honestly think the AIT suffers from a lack of institutional support. The Internal Trade Secretariat is really just an administrative body. It doesn't even have a fact-finding mandate. I know that was done intentionally because people didn't want to have any kind of oversight. But if a catalogue, if a detailing and a monitoring of progress resided somewhere with some arm's-length organization, and take it out of a cycle which is annual meetings of the trade ministers and get it onto a more substantial footing, then I think we would alleviate a lot of this coming and going from provincial governments.

Senator Tannas: You mentioned Mr. Crowley, Brian Crowley, and his solution — I think we called it the nuclear option, or maybe I did. What do you think of that, and how practical is that?

Ms. Macmillan: One thing I thought I liked — I think he called it an economic freedom commission or something like that, which would be akin to this Australian Productivity Commission. By "nuclear,'' you meant the federal government —

Senator Tannas: I'm talking about the federal government just saying, "Constitutionally we rule this roost, and this is the way it is going to be.''

Ms. Macmillan: I think that is a bit too nuclear for me. The problem is — and we encountered this when even the recent reference to the Supreme Court on the issue of securities regulation — I'm not a lawyer, but I don't know that we have the legal basis for that kind of assertiveness from the federal government. Perhaps we could be testing that a little bit in a creative and experimental way, but I think there are other powers the federal government has that it could bring to bear on these things. It has vast spending powers.

Senator Tannas: Or, like Senator Campbell said, we just encourage it through money.

Ms. Macmillan: Yes. If you want a new whatever, let's see if we can have a look at coming to some kind of agreement on maple syrup standards or whatever it is. I think there's a way of doing that. I think the federal government hasn't really shown the kind of determined leadership that it could in this way.

Senator Hervieux-Payette: We are talking about the provinces and the federal, but there are many players who are being affected. From the appearance of yesterday with the Canadian Federation of Independent Business and the Canadian Chamber of Commerce, I even have the impression that the two groups, representing different business, are not looking at this the same way. If you are a big one, you protect your territory as much as you can, and you don't pay for those who are smaller and cannot afford it. I feel this is a dilemma everyone faces. Of course, maybe multinationals have more weight in our system than small producers.

We also have local chambers of commerce, one for Quebec, one for Ontario, et cetera. But I think the people directly affected should be the ones making these decisions.

Ms. Macmillan: I couldn't agree more. I've done work with the Canadian Chamber of Commerce. Patrick Grady and I many years ago did a catalogue of barriers. I think there's no doubt that this is something that has to be done in concert with the players, and I completely agree that many of them are very attached to the barriers that exist.

I guess what I'm thinking, which I found so appealing about this negative listing approach, is that there's a lot of plain divergent product standards and overlapping regulations that people don't even intend to be protectionist about. If we could find an architecture or a framework that would allow us to make sense of those, I think it would be really desirable. Then in concert with the people who are really affected by barriers, address them on a case-by-case basis.

Senator Hervieux-Payette: How do we get the two types of businesses on board? We can make all the recommendations we want, but one of the best recommendations would be that the players should be the ones driving this question and solving the problem. If they don't complain and are not in the public arena, I don't think they will go anywhere.

Ms. Macmillan: That's a really good point. I think that perhaps information helps. I think it would also help if responsibility for the internal market resided somewhere so that there could be some body that could receive this kind of information and attempt to make the kinds of compromises that would be necessary to advance this. Right now it's a shared responsibility. The trade ministers have other things to do. Maybe we need to dedicate an organization and make this their responsibility.

Senator Day: Just on that last point, this is similar to the Australian and the European situations you've described to us, pointing out what the barriers are on an annual basis.

Ms. Macmillan: Yes.

Senator Day: I'm struggling, as I guess we all are here. Senator Tannas just asked the question about how we get out of this rut. How do we move this? Everybody recognizes that we should be doing it, but it's still not happening.

You gave some good examples of other jurisdictions and what pushed them along, and it was basically some sort of a crisis that happened that helped them rally around, and they achieved what they probably wanted to achieve for a long time before that but weren't able to.

Do we have to wait for a crisis, or is there some other incentive? Looking at the possible agreement with Europe and the federal government saying if there's an impact with respect to cheese in Quebec, then we'll compensate if you can demonstrate a loss due to this international agreement. That's a federal government initiative, and maybe we should be looking for more initiatives like that.

I look at the accounting and auditing profession and lawyers and engineers. Self-regulating groups have seen the light, have moved and have allowed for mutual recognition, which is one of the solutions that you have proposed.

I'm wondering if some of these international agreements the feds want to enter into are going to force a look at some of the provincial things and require the federal government, if they want the international agreement, to get the provinces on side in some manner. Do you see that as being maybe the crisis that we're looking for?

Ms. Macmillan: Definitely. I completely agree. I think it was really helpful that the provincial governments were as actively involved in negotiations on the new trade agreement with Europe. I think it demonstrated first of all a spirit of cooperation, but it also probably enlightened them about the kinds of costs and benefits that can result from this kind of thing. Yes, definitely.

Senator Enverga: Thank you for your presentation. We learned a lot from you.

You were saying there is no strong legal support for internal trade. You also mentioned that the Internal Trade Secretariat is essentially an administrative body with a fact-finding mandate.

Assuming the federal government can legislate to make it stronger, what is the first thing you would like them to do? What kind of legislation do you want us to create? Or do you want this new Internal Trade Secretariat to be a stronger body? What do you want them to do to reduce barriers?

Ms. Macmillan: It think it might be useful if we made it a more substantial entity and gave it, at a minimum, some kind of research capacity that would allow us to keep track, have an inventory of what remains to be done with respect to addressing barriers, and it could release public reports. That's somewhere to start so that there would be some information out there about the job that needs to be done. I think the federal government could assign a special unit and give it the kinds of political access that it needs to champion this idea to a greater extent.

With respect to legal changes, senator, I think it's a matter of changing the Canadian Constitution, which is something we don't really have a great appetite for, for good reason. Perhaps there are some selective incursions into this area that the federal government could take and just test the waters from time to time on important matters that relate to barriers that we know to exist.

The federal government also has its own set of skeletons in the closet that it could deal with. We heard a little bit about labelling regulations. There's a tremendous amount of regulatory overlap with respect to the provinces, particularly in the agricultural area.

There's a group of provinces that signed something called the Interim Agreement on Internal Trade in Agriculture and Food Goods, the generally non-supply management provinces. The federal government hasn't signed that agreement. It could sign that agreement.

There's a catalogue of things that the federal government could do, not only in creating the kinds of infrastructure we need to really pay the kind of attention we should to our economic union, but also selective barriers and perhaps some judicial incursions.

Senator Enverga: Being on the outside, we're always talking to government bureaucrats or people from the government.

In your view with regards to internal trade, where are we right now? How far apart are the provinces from achieving internal trade? Are we really that far, according to the previous witnesses? Is there some light at the end of the tunnel?

Ms. Macmillan: I think it's tremendously frustrating for businesspeople that we have a fragmented insurance industry and a fragmented mortgage licensing industry. We have different product standards across the country.

We are at the point — and I think the Statistics Canada people told you — that 67 per cent of what's traded internally in Canada is actually intermediate goods, so in global value chains. This is a new reality, and these kinds of impediments that make it difficult to do business from one province to the next are just ridiculous.

The New West Partnership has addressed a lot of these things. Things like corporate registration are not intended to be protectionist, so why wouldn't we say that if you've registered in the province of British Columbia and satisfied all their requirements, then you can do business in the province of Ontario?

I think there are some areas of provincial jurisdiction where, rightly so, they want to do things a bit differently. For businesspeople, I think there's still a lot of work that we could do here.

Senator Enverga: On a scale of 1 to 10, compared to Australia and New Zealand, where are we right now?

Ms. Macmillan: Oh, we're way behind Australia. I don't want to hold the other countries up as stellar examples.

The U.S. has got blatant: Buy America, buy local, buy Nebraska. There are blatant policies out there that impede that. We have no single securities regulator. It's difficult for me to assign numbers. We're probably about halfway to where Australia and New Zealand are.

The Chair: I'm not a guy who likes to see more government. I do like the idea of publishing annually because consumers and voters must be involved in this. Most Canadians don't know that they're paying more for product than they really have to because of these impediments. Embarrass some of the provinces and show the ridiculous.

We are discussing the purchase of a car and the way provinces control how you have to check for safety standards. So a guy buys a car in Alberta. He was going to the States. He traded his car. He had to drive all the way to Saskatchewan to get it done, and then had to drive all the way back to Calgary and then continue on his trip. Basically, his car was a problem. So he decided to trade it in right there on his way to the States. Those things are ridiculous. I said, "Couldn't you take it to the one in Alberta?'' He said, "No I can't because I need a Saskatchewan driver. It was a disaster. But that's a trade impediment of some kind that doesn't make any sense whatsoever.

Ms. Macmillan: Yes.

We thank you very much, Ms. Macmillan, for your testimony, and the meeting is adjourned.

(The committee adjourned.).