Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue No. 5 - Evidence - May 4, 2016
OTTAWA, Wednesday, May 4, 2016
The Standing Senate Committee on Banking, Trade and Commerce met this day at
4:20 p.m. to study the issues pertaining to internal barriers to trade.
Senator David Tkachuk (Chair) in the chair.
The Chair: Honourable senators, Ms. MacEwen has her little girl here
today. Her name is Anna. I want to make sure her name gets on the record.
Good afternoon and welcome to the Standing Senate Committee on Banking, Trade
and Commerce. My name is David Tkachuk and I am the Chair of the Committee.
Today is our ninth meeting on our special study on issues pertaining to internal
barriers to trade.
I am pleased to welcome the following on our panel: from the Quebec Employers
Council, Yves-Thomas Dorval, President and CEO, and Norma Kozhaya, Vice
President and Chief Economist, by video conference from Montreal; from the
Canadian Vintners Association, Dan Paszkowski, President and CEO; from the
Canadian Labour Congress, Angella MacEwen, Senior Economist; and from the Retail
Council of Canada, Susie Grynol, Vice President, Federal Government Relations,
and David Wilkes, Senior Vice President, Government Relations.
I will start with the Retail Council of Canada. I understand Ms. Grynol will
make the presentation. Please proceed.
Susie Grynol, Vice President, Federal Government Relations, Retail Council
of Canada: Thank you. Good evening and thank you for taking the time and for
having us here with.
The Retail Council of Canada welcomes this opportunity to provide the views
of the retail industry on the important issue of internal trade barriers.
The committee has heard from many witnesses about the challenges relating to
the current agreement on internal trade. Today, the Retail Council of Canada
will provide the perspective of the retail sector and will make recommendations
on the course of action to follow.
The Retail Council of Canada is comprised of small, medium and large
retailers from across Canada in the form of department stores, grocery stores,
retail chains, and online and independent merchants. Our members employ over 2
million Canadians, making our industry the largest private employment sector in
Canada. With 45,000 storefronts, retailers operate in every community in this
As a long-standing advocate for less red tape and increased regulatory
harmonization both domestically and internationally, we are delighted that this
committee has expended much time and effort examining the issues related to
internal trade. We are also pleased that Minister Bains has made this a priority
and that there is a commitment by the Committee on Internal Trade and, indeed,
the premiers, to reform the Agreement on Internal Trade.
The internal trade barriers that exist today for retailers create a
significant drag on resources, productivity and growth potential. Our members
are primarily affected in three broad areas: labour and employment,
environmental standards, and food and product regulations.
As Canada's largest private sector employer, retailers are significantly
impacted by the varying labour and employment laws across the country. There are
different store hours and stat holidays, different methods of calculating
overtime, licences are not always transferable, payroll systems are different,
and workers' compensation regimes vary from one province to another. It is
incredibly expensive and time consuming to understand and comply with all the
layers of regulation.
On recycling laws and regulations, there are over 100 mandatory programs
across the country that a retailer operating in more than one province has to
comply with. Let me briefly touch on the example of deposit systems for beverage
containers. In most cases, consumers are refunded the full amount of the
deposit, but some provinces only refund part of it. Other provinces have added a
separate, non-refundable container recycling fee on top of the deposit instead
of refunding only part of the deposit. Manitoba, by comparison, has only a
container recycling fee. In some provinces, the recycling fee not only requires
a separate line item on the customer's receipts but also warrants a separate
accounting and reporting structure with a distinct logic as to whether or not
GST or HST should apply to the container. It is easy to see that a considerable
amount of time and resources would be required in order to comply with the
varied programs across the country.
Concerning food and product regulations, we have numerous examples of
differing standards and regulations across provinces and territories. Labelling
requirements vary in many provinces. Unpasteurized products made in Quebec
cannot be shipped outside of Quebec. Multipacks of insect repellant can be sold
in every other province and territory except Quebec. Container sizes differ from
province to province. Provincial meat inspection requirements differ, not
because one is safer than the other but simply because they are different.
Most of the trade barriers that retailers face are the result of regulatory
inconsistencies. Our first recommendation, therefore, is that a
federal-provincial industry council be created under the leadership of the
Minister of Science, Innovation and Economic Development to identify and
eliminate regulatory inconsistencies that do not serve a legitimate purpose.
This council should be struck immediately.
Concerning the renewal of the Agreement on Internal Trade, RCC has two key
recommendations. The first is that the new agreement be based on the concept of
mutual recognition. Mutual recognition in this context is defined as an
agreement between two or more jurisdictions to consider licences and
certifications given by one jurisdiction as being valid in the others. This
principle has been centrally adopted in modern agreements both internationally
in the Comprehensive Economic and Trade Agreement with Europe and domestically
in both Australia and Switzerland. These international agreements should serve
as a model for Canada.
Let us be very clear. While most regulatory inconsistencies are unjustifiably
different, some have been established for good reason. This is why our second
recommendation is that mutual recognition should be paired with a negative list
approach based on the assumption that the trade of goods and services should be
allowed except where it is explicitly stated otherwise. This approach would
allow exemptions to be made where they are legitimate and appropriate, while
maintaining the concept of open trade as a foundation.
In this regard, RCC was delighted to learn from Minister Bains during his
testimony that a negative list approach will be used in the renewed Agreement on
Internal Trade. We applaud the minister and the Council of the Federations for
this important step forward.
Our final point on that, Mr. Chair, is that a good agreement must contain a
functional and accessible dispute resolution mechanism. This must also be
included in the new agreement.
Our final recommendation is that a task force be created to review the
Committee on Internal Trade's decision- making model. Currently, it does not
allow for sufficient stakeholder input; the yearly rotation of the chairmanship
is disruptive; and meetings cannot take place unless all parties are present —
100 per cent participation for every meeting is inflexible and hinders progress.
In closing, I would like to mention that the Retail Council of Canada is part
of a business coalition with the Canadian Chamber of Commerce; the CFIB, the
Canadian Council of Chief Executives, recently renamed the Business Council of
Canada; Canadian Manufacturers & Exporters; CPA Canada; the Dairy Processors of
Canada; and Restaurants Canada. Individually and as a group, we will continue to
monitor the progress and development of a more efficient trade system in Canada.
The Chair: We will now hear from the Quebec Employers Council. Mr.
Dorval, please proceed.
Yves-Thomas Dorval, President and CEO, Quebec Employers Council:
Hello. Thank you for inviting me to appear before your committee. We will try to
keep our comments brief. You have received some notes setting out our position.
I would like to recall that the QEC, the Quebec Employers Council, represents
over 70,000 employers with operations in Quebec, the majority of whom have
operations throughout Canada. Our main mission is to create the best conditions
to promote prosperity. We are pleased to participate in this debate and in the
discussions among parliamentarians and senators.
These conditions for prosperity depend specifically on entrepreneurship,
productivity, wealth creation and sustainable development. These conditions
underlie the comments we would like to share.
According to the QEC, international trade contributes to economic prosperity
in Canada, as we have maintained many times, and the same is true of
interprovincial trade, which is equally if not more important. The differences
in regulation, certification and inspection standards, along with other
non-tariff barriers, can slow down and complicate trade and represent additional
costs that do not foster the best conditions for prosperity in Quebec. These are
not explicit attempts at protectionism among the various provinces but rather
are instances of overlap resulting from the sharing of expertise and preferences
of each administration. Since Canada is a federation, each province seeks to
retain a degree of autonomy, and cooperation is better than a top-down approach.
There are many benefits to reducing barriers to interprovincial trade in
Canada: reducing costs to businesses by eliminating unnecessary expenses; giving
consumers lower-cost options by expanding the range of products available and
encouraging competition; and enhancing labour mobility. Provincial licenses and
training equivalencies are very costly to qualified workers wishing to come to
Canada, even if their training standards are similar. We must increase the
overall productivity and competitiveness of the Canadian economy, among other
things, by allowing companies to expand and develop within Canada while
preparing to conquer international markets.
Research has shown that businesses that have dealings with other provinces
are more likely to expand and engage in international exports. There is no
apparent consensus on the real costs of interprovincial barriers. The short
brief before you refers to studies, specifically one by two University of
Calgary economists. In their view, internal trade barriers add a significant
percentage to the production costs of goods and services throughout the
provinces, and eliminating them could boost GDP by several billion dollars,
which would be a big gain.
There are various barriers, especially for merchandise. There are also issues
related to energy resources, financial capital, labour mobility and taxation. We
are encouraged by the progress we are seeing and the improvements made. The
provincial first ministers have made numerous undertakings in this regard
recently and progress has been made. Our brief provides various examples of
A good many initiatives have been taken, but of course more must be done to
improve the situation. These agreements are often based on universality with
lists of exceptions, but one of the key principles, as other witnesses stated,
is the mutual recognition of regulations. In our view, that is the best model.
The QEC recommends an interprovincial trade strategy based on mutual
recognition, as is the case in the European Union and in Australia. Mutual
recognition guarantees market access for products that are not subject to
national harmonization. It guarantees that any product or service that is
legally traded in one province can also be sold in another, as is the case under
the Quebec-Ontario Trade and Cooperation Agreement. A professional who meets the
regulatory requirements in one region should be able to practice or move
elsewhere in Canada without facing any additional barriers. This is the basis of
the external trade agreement between Australia and New Zealand. It is also the
basis of the Canada-European Union Comprehensive Economic and Trade Agreement.
This approach would work well for jurisdictions such as the provinces of
Canada, which have shared objectives with respect to food safety and important
issues such as environmental stewardship, security and so on.
Among the other recommendations, the concept of mutual recognition is also
fairly straightforward. The original agreements between Australia and New
Zealand were apparently only three pages long, although they have become more
complicated over time. This approach encourages competition with respect to
regulations and innovation in regulations. We must remember that innovation is
often born of regulatory pressure that one state exerts on another. Instead of
selecting the sectors to be covered by an agreement, an agreement should be
negotiated that covers all sectors, excluding the desired exceptions, in other
words, with a negative list.
Another approach would be based on the major issues. As regards the
regulation of financial markets, for example, the passport system works
relatively well in Quebec. A carbon tax is another issue that would have to be
agreed upon. Three systems are in place: in Quebec, in Ontario, and soon in
Manitoba. British Columbia and Alberta have implemented a carbon tax, but the
other provinces have not.
The harmonization of pension plans is another major issue. As the other
witnesses noted, however, there are also issues relating to sales taxes that
vary greatly depending on the application model, the administration model, and
the level of taxation in the various provinces.
Finally, environmental issues are also very important. Each state has its own
agenda, but our actions should be harmonized in order to create the best
possible conditions for prosperity right across Canada.
The Chair: Thank you very much.
We will now go to Mr. Dan Paszkowski, President and CEO of the Canadian
Dan Paszkowski, President and CEO, Canadian Vintners Association:
Thank you, Mr. Chair, and good afternoon.
As the national voice of the Canadian wine industry, our members represent 90
per cent of all Canadian wine production and are engaged in the entire value
chain, including grape growing, farm management, grape harvesting, wine
production, bottling, retail sales, research and tourism.
I am sure that you'll remember that many across Canada believed that the
Canada-U.S. Free Trade Agreement would be our sector's demise. It was industry
leadership and government support that ensured the wine industry's ability to
transition and build resilience in a changing marketplace.
Today Canada is a premium global wine producer, producing high-quality,
award-winning wines, and the industry contributes more than $6.8 billion to the
national economy, supporting 31,000 jobs and attracting more than 3 million
tourist visitors each year.
Canada is now the second-fastest-growing wine market in the world, with wine
consumption growing three times faster than the global average. We are also the
sixth largest wine importer in the world; and over the past decade, imports have
captured 75 per cent of Canada's 150-million-litre wine sales growth over that
period. Looking ahead, wine demand in Canada is expected to grow by 50 million
litres or 11 per cent by 2018, making our country increasingly attractive to our
For the Canadian wine industry to reach its full potential, decision makers
and political leaders must recognize that, unlike other sectors of the economy,
the Canadian wine industry's domestic market share is a mere 32 per cent — of
which only 10 per cent is represented by our premium 100 per cent Canadian
wines. At 32 per cent, we rank the lowest domestic wine sales of any
wine-producing region in the world.
Like most Canadians, I am sure that you will also be surprised to learn that
only two provinces in Canada have a VQA wine sales market share of just over 10
per cent. Further, five provinces have a VQA sales market share of 1 per cent or
less. Quebec, our largest per capita wine-consuming province, has a VQA sales
market share of 0.2 per cent.
As a young and growing industry, new wineries are opening each year, and
high-quality wines are increasingly available for sales in greater volumes.
This growth is very positive, but despite recent progress on liberalizing
wine sales in grocery, we remain severely restricted by limited sales channels
and finite shelf space in "brick and mortar'' provincial liquor board retail
stores. Our wineries, especially small wineries, need more options to get their
product to market.
The simplest and least disruptive way would be the complete removal of
interprovincial barriers to trade. This would stimulate consumer interest and
awareness in our products, resulting in greater wine sales for Canadian wineries
and, as evidenced by the United States, increased wine sales for provincial
liquor boards and retailers.
Senators, in preparation for my appearance, I looked back at my calendar and
was reminded that the last time I appeared before this committee was June 13,
2012, when you were studying Bill C-311 and its proposed amendments to the
Importation of Intoxicating Liquors Act of 1928.
As you may recall, on June 28, 2012, Bill C-311 received Royal Assent after
unanimous passage through both the Senate and the House of Commons. This was not
only a rare political event but a truly historic moment for the Canadian wine
industry. Yet, in two months, we will mark four years since Bill C-311 passed.
So what has been achieved?
Almost immediately after Royal Assent, both British Columbia and Manitoba
opened their borders to allow interprovincial wine shipments. In July 2015, Nova
Scotia opened its borders, but regrettably, the other provinces have dragged
their feet in various ways, most frequently by issuing "policy statements'' that
disavowed the permissibility of interprovincial courier shipments.
There have been a few positive steps in recent years to advance the issue.
In June 2014, the federal government amended the Importation of Intoxicating
Liquors Act to allow Canadians to move beer and spirits between provinces for
their personal use — extending the rights provided to wine in June 2012.
In 2014, the Saskatchewan government announced a reciprocity agreement with
British Columbia which permits up to nine litres of wine to be direct delivered
for personal consumption.
In February 2015, the federal government announced the creation of an
Internal Trade Promotion Office to support the removal of internal barriers to
trade. Wine has been included in the government's Internal Trade Barriers Index
to explore federal-provincial regulatory cooperation opportunities.
In June 2015, provincial-territorial ministers agreed to remove internal
barriers to trade, including laws that block wine from other provinces, with a
commitment to a new internal trade regime by March 2016.
In July 2015, the courts received details of the Newfoundland government
accusing FedEx that it broke provincial law by shipping "contraband'' wine from
British Columbia into Newfoundland. The provincial Crown dismissed the case
before a definitive ruling could be made.
In November 2015, the Fraser Institute released a report entitled Toward
Free Trade in Canada, which concluded that the federal government should
ensure that Bill C-311 is made visible to ensure that public and political
pressure build on removing all remaining barriers to interprovincial wine
Just last week, a New Brunswick judge ruled that the province's restrictions
on bringing alcohol into the province for personal use violate the
Constitution's free trade provisions. This case has raised significant media
discussion about the potential for a constitutional challenge regarding
interprovincial barriers to trade.
Bill C-311 set the stage to allow for interprovincial wine shipping and
provides a means to access consumers from Newfoundland to British Columbia,
providing the promise to cultivate a loyal client base and build brand exposure
through winery tourist visits, winery clubs and online sales.
Provinces and wineries have invested millions of dollars into tourism
infrastructure, but as you can see, with the exception of three provinces
representing 19 per cent of Canada's population, provincial policies and
regulations continue to block 81 per cent of Canadians from having their
favourite Canadian wine shipped to their out-of-province home for personal
Let me conclude by stating that when Canada signed the free trade agreement
with the United States in 1989, there were approximately 50 Canadian wineries.
Today there are 671 grape wineries operating across Canada. Times have changed,
and our future success remains intricately tied to our growth and success at
As we strive to ratify trade agreements with CETA and TPP countries, it is
vital to recognize that these countries already represent 89 per cent of total
wine imports into Canada and will benefit from the front-end competitive
benefits these agreements offer.
In 2005, the Supreme Court ruled in the United States that it was
unconstitutional to allow for wine to be direct delivered within a state but not
to allow wine to be direct delivered into a state from another state. Over the
past decade, 45 of 51 U.S. states have amended their state laws and regulations
to permit direct-to-consumer wine delivery. In 2015, small wineries represented
less than 10 per cent of U.S. wine production but 63 per cent of total direct
wine shipment volume and 73 per cent of direct wine shipment value. Not only
does interstate wine delivery offer these U.S. wineries a new and important
sales channel, where the average direct delivery price is US$38.40 per bottle,
but it affords small wineries a means to scale up and even explore export
markets — something many of our smaller wineries would like to consider.
Our industry is not scared of free trade and we're not afraid of competition,
but our domestic and export success depends heavily on free trade within our own
country. In a recent WineOnline article, François Morissette of the acclaimed
Ontario winery Pearl Morissette stated:
Unfortunately for us Canadians, buying Canadian wines in Canada is a pretty
complicated thing if you are not a restaurant. It is easier for us to sell
our wines in Hong Kong than in the rest of Canada, and Ontario is basically
my only big market. It's killing a market when it should promote it. Removal
of the remaining interprovincial barriers to wine trade will help the
Canadian wine sector adjust, take advantage and prepare for a new state of
The Chair: We now have Angella MacEwen from the Canadian Labour
Angella MacEwen, Senior Economist, Canadian Labour Congress: I
appreciate the opportunity to be here. The Canadian Labour Congress brings
together Canada's national and international unions, along with provincial and
territorial federations of labour and 130 district labour councils. Our members
work in virtually all sectors of the Canadian economy, in all occupations and in
all parts of Canada.
I feel like I am the dissenting voice here.
Mr. Chair, even though the labour movement is keenly aware that trade is and
always has been an important feature of the Canadian economy, we understand the
interest that all levels of government will have in fostering healthy trade
between jurisdictions, inside and outside of Canada.
Unfortunately, it is our position that trade agreements can unduly restrict
governments' right to regulate, give huge advantages to larger businesses and
rarely have effective protections for workers or for the environment. As such,
trade agreements themselves do not always increase trade, improve economies or
Our question today is this: What is the problem that an updated Agreement on
Internal Trade is meant to solve? Is it possible that there are better policy
tools available to solve those problems?
Since 1995, many of the impediments to internal trade have been addressed.
Most empirical studies have found that the costs of remaining internal trade
barriers are quite small and that the benefits of expanding the Agreement on
Internal Trade have been grossly exaggerated. Most often we hear about the
movement of alcohol or the movement of trained workers.
On the labour front, I can tell you that considerable gains have been made in
recent years, for example, with the Red Seal Program, which sets a high standard
that's accepted in all provinces. We are confident that provinces are moving in
the right direction on labour mobility and on harmonizing training, as well as
Do we need to re-open an existing agreement to deal with one-off issues that
could more appropriately have experts convened to deal with them?
As Scott Sinclair recently told this committee, it would be an incredibly
useful exercise to list and estimate the cost of specific trade barriers between
provinces. Provincial governments could then cooperate to remove any costly
barriers that do not serve a useful purpose, and that would be better than
signing on to a far-reaching agreement that may have serious unintended
Another reason that we are talking about changing this Agreement on Internal
Trade is to make it compliant with international trade agreements such as the
Trans-Pacific Partnership or the CETA.
The labour movement has serious concerns about those agreements. They are not
yet ratified, and the TPP is still undergoing negotiations and consultations
across Canada. They contain elements that we feel are harmful to workers, the
environment and local economies. Particularly, we want to preserve local
governments' ability to deliver high- quality public services and to use
procurement policies to promote local economic development and environmental
We know that public procurement policies can have broad benefits, such as
reducing waste and energy consumption, developing economic capacity among
underserved populations, supporting smaller suppliers and suppliers that have
sustainable and ethical business practices. Expanding the Agreement on Internal
Trade will make it more difficult for provincial and local governments to
In terms of protecting public services, the drive to switch to a negative
list in the Agreement on Internal Trade is very worrisome, particularly in light
of potentially expanded investor dispute settlement mechanisms. A negative list
means that any service goverments wish to be kept out of a trade deal, such as
health care or education, must be specifically named. If new areas of service
emerge or if there is a public consensus that new programs such as pharmacare
should be brought into the public sector, then these services are automatically
subject to the trade agreement. This is privatization by default.
A positive list gives all governments and their residents the chance to
decide if they want to protect new areas of public service delivery. Even for
those areas that have been protected in an agreement, stand-still and ratchet
clauses effectively lock in the current level of privatization and only allow
increased privatization rather than increased public- sector delivery. For
example, if a hospital has outsourced meal, laundry and cleaning services but
finds that they are getting substandard service for higher prices,
decision-makers subject themselves to an ISDS complaint and a potential fine if
they change their mind and want to bring those services back in house, even if,
by all evidence, it's the best decision to make.
As it stands, the Agreement on Internal Trade prohibits adopting or
maintaining even non-discriminatory measures that restrict or prevent the
movement of persons, goods, services or investment across provincial boundaries.
Moving from a positive list to a negative list would have wide-ranging
consequences on the abilities of local governments to implement and to regulate
in the public interests. This seriously ties the hands of elected officials at
all levels of government in an unnecessary way.
We feel that Canada has followed the policy prescriptions from the OECD and
IMF that we have been given from the 1980s and 1990s in terms of privatization
of public services, trade liberalization and lowering corporate taxes, and we
haven't seen the economic benefit that we were promised as a result. We would
suggest to you that it is time to try something new rather than rehash old
The Chair: Thank you, Ms. MacEwen. We will go to questions.
Senator Black: Thank you all for your presentations. It's fabulous
work, and the committee very much appreciates the depth that you have gone to.
If I could, Ms. MacEwen, I would like to direct my comments to you, because
it is always important to understand dissent. I presume that you have reviewed
the evidence presented here over the last nine hearings, and you have certainly
heard the evidence given today. You are clearly on an ice floe of your own. I am
not saying that is good or bad.
Ms. MacEwen: Not by myself, but I am in the minority. Scott Sinclair
would agree with me. He has presented here.
Senator Black: Very well. I am not criticizing; I just want to
understand, because dissent is important. Conversation is important.
Ms. MacEwen: I agree.
Senator Black: I am interested in your response to the overwhelming
evidence that we have received that there is a financial benefit in the billions
of dollars to Canada and our provinces if we eliminate existing trade barriers.
You have heard that today, and we have heard that consistently. What do you say
Ms. MacEwen: I say there is other evidence out there that shows that
the benefits are quite small, actually.
Senator Black: Could you draw our attention to that?
Ms. MacEwen: Absolutely.
Senator Black: That would be helpful.
Ms. MacEwen: One of the ways that these benefits are normally analyzed
by economists is that you make certain assumptions. You assume that employment
will not change, you assume that the amount of trade and imports and exports
will grow hand in hand so that growth will be balanced, and you assume that
there are no negative impacts in areas where we are quite concerned that there
might potentially be negative impacts.
If you use a different model to analyze trade, you see a different outcome.
For example, instead of assuming that allowing shipment of wine directly to
households would be an additional benefit to the economy, I would argue that
that's probably just replacing other purchasing of wine. While his industry may
benefit from being able to do that, it certainly won't grow the economy in any
real way. Do we think that Canadians aren't drinking enough wine?
Senator Black: The suggestion is that Canadians aren't drinking enough
Canadian wine, which would employ more Canadians, which I would have thought
would be of interest to your organization.
Ms. MacEwen: Absolutely, but the benefit to the Canadian economy is
likely to be quite small from that.
Senator Black: Certainly, that is not the evidence we just heard, but
nonetheless, what would be helpful —
Ms. MacEwen: You didn't hear evidence; you heard assertions.
Senator Black: I heard assertions.
Ms. MacEwen: Yes.
Senator Black: Thank you. It would be helpful if you could provide to
this committee the assertions that you have —
Ms. MacEwen: Even the C.D. Howe Institute has looked at the benefits
from trade and determined that they're quite small. I think Scott Sinclair gave
you that study, so I'm sure it's in the record already.
The Chair: I don't know if the study is in the record, but I think it
Senator Black: We will have a good look at that.
Ms. MacEwen: Sure.
Senator Black: I have a second question: You said that the principle
buckets of your concern with us moving forward with eliminating barriers in
Canada would be that environmental regulations and worker protection would be
potentially adversely affected, and local government autonomy would be affected.
Ms. MacEwen: It is interesting that you phrased the question that way.
I am not opposed to removing barriers. I'm opposed to removing barriers in this
way, because I feel what you are doing is too broad and will have negative
implications. If you did what I suggested, you'd make a list of what the
barriers are, what a reasonable estimate of the cost of those barriers is, and
whether we feel that they actually are barriers or if they are beneficial and
Some of the examples that the Retail Council gave are excellent in that there
is no reason why it's this size in this province and that size in that province;
it just happens to be that way. Let's get together and make that simpler. I
think there are real things we can do that would be beneficial, but we don't
necessarily accomplish that if we go to a negative list.
Senator Black: Do you like that thought of the Retail Council whereby
there would be a small group of people brought together to vet regulations
across Canada to basically eliminate those which are barriers to trade?
Ms. MacEwen: Absolutely. I think we had something in place like that
when we had sector councils, where we could raise issues that were being seen by
people in the retail sector. They could say, "Look, this makes no sense. I am in
Ottawa and I can't ship into Quebec, and it makes no sense.''
There are barriers, and where there are real barriers like that that don't
make any sense, we should absolutely move to address those. That could be better
served perhaps through a sector council system rather than through a negative
Senator Black: That's very helpful. In your view, are there any no-go
areas that this group could not or should not look at?
Ms. MacEwen: "That they could not or should not look at''?
Senator Black: And potentially eliminate. That would be the
consequence of looking.
Ms. MacEwen: I would never want such a group to override the right of
provincial governments to regulate within their authority. I would think that
what you would do is have that group make recommendations and work with the
provinces to find solutions that worked.
Senator Black: Isn't that the very problem; namely, that we have too
many chefs in the kitchen? Isn't that the very problem?
Ms. MacEwen: Actually, for what a lot of people list as barriers,
maybe the province has a reason for putting that in place. Maybe that regulation
is there for a good reason and, if you sit down and talk to each other, you can
find another way around it.
Senator Black: Thank you very much. Your daughter should be proud. You
did a very good job today.
Senator Wallin: We have heard from a long list of witnesses on this
topic. We have also heard — sometimes amusingly, but we know it comes at a cost
— a long litany of bizarre anecdotes that speak to what happens when you have
all this resistance to free trade within our own borders. We heard from you
today, Ms. Grynol, about needing a task force to look at the decision-making
process of this group of premiers and leaders, and that they require 100 per
I am wondering whether at some point you folks in your individual
organizations, or maybe collectively, might think that it would just be faster
and wiser to go to the Supreme Court of Canada and get some kind of a ruling
rather than coming and telling us repeatedly that this is really important,
which you've done. We kind of agree; it's just that we don't see a path to get
there. Who would like to take that on?
David Wilkes, Senior Vice President, Government Relations, Retail Council
of Canada: That's a very interesting option, Senator Wallin. I think we look
at experience we've seen internationally. Today, in Washington, the Regulatory
Cooperation Council between Canada and the U.S. is meeting and looking at making
changes to specific regulations, some of which the Retail Council of Canada has
put on the agenda.
I'll give an example to illustrate: Car seats. There are different testing
regulations in Canada and the U.S., but there are not different safety outcomes.
I could go into differences in the density of foam as an example.
But we see that process working and making headway. I truly do believe,
Senator Wallin, that this is more something that requires political leadership
and a will to eliminate the barriers that our colleague from the vintners
association talked about. That would send a message to Canadians that we want to
have internal trade as free as international trade. We believe that that also
allows for the type of commentary, on an ongoing basis, that the labour congress
has talked about, as well, in discussions.
I would argue that the Supreme Court may provide a ruling, but I do believe
that this is more of a function of democracy than legal proceedings.
Senator Wallin: I couldn't agree more. We just don't seem to be able
to find that route or the political will, despite all the public protestations.
Mr. Wilkes: I believe if we can find the political will in our largest
trading partner — the U.S. — the same political will can be found here.
Senator Wallin: An optimist. Mr. Paszkowski, would you like to add to
Mr. Paszkowski: The United States followed the Supreme Court ruling
and found that disallowing direct delivery in the U.S. was unconstitutional. It
took 10 years, but now almost all states have amended their rules to allow for
it, and the industry is benefiting from it. They don't have many liquor control
states any more in the United States, so it's a different model than we have
We'll have to see what happens with the ruling in New Brunswick and whether
or not there's an appeal and, if there is an appeal, whether it's successful.
I'm not a lawyer, and section 121 is complicated. I find it hard to believe,
with the Constitution being in place for so long and that section having been
abused for so many years, that if that decision is correct, that it could be
overruled. But it may be.
I think the political will has to be there. We have had three provinces now,
in the case of wine, amend their rules. We believe that the fastest track would
be to amend the federal law. We did that, but the provinces didn't follow the
spirit of the law. Our hope is that the IT process will get us to where we want
to go, and that having Liberal governments in most wine-producing jurisdictions
may be what's required to get over the logjam that's been in place. If the
appeal is successful or the ruling goes to the Supreme Court, we'll follow that
track as well, but that would be a lengthy process for us to follow.
As we sign these trade agreements, it's not that we're scared of them, but we
need to be able to grow in Canada to be able to export abroad. In the United
States, those small wineries are growing; they have more margin and are
succeeding, and they soon will be entering into Canada and taking market share
away from us, so the fastest method is the one we would prefer.
The Chair: Do you wish to comment, Mr. Dorval?
Mr. Dorval: In our presentation, we clearly state that it is
understandable that provincial jurisdictions wish to establish regulations and
make decisions based on their citizens' needs. This is why a bottom-up approach
is preferable to a top-down one. We salute the first ministers' efforts to find
solutions to this problem. Through awareness raising measures, each province
must come to understand the importance of eliminating interprovincial barriers
in Canada as quickly as possible. Mutual recognition is an excellent example: we
recognize that there may be differences among jurisdictions, but when a decision
is made in one province, it automatically applies in the other provinces. This
would eliminate many barriers. This is a political rather than a legal decision.
There is always a way of reaching an agreement. We have seen steady improvement
over the years. All this work takes time of course, but this is the basic
principle of a federation. By working together and in particular thanks to the
work of the House of Commons and the Senate, and by raising awareness of the
impact of these issues on our national prosperity, we can get results. As the
groups around the table know, prosperity spells a better quality of life for all
citizens and workers.
The Chair: Does anybody else want to say anything? I'm glad there's no
great enthusiasm for the Supreme Court. It would make me very sad.
Senator Campbell: I hate to burst the bubble, but I believe that this
should be going to the Supreme Court. We keep talking about section 121. What
does it say? It says that:
All Articles of the Growth, Produce, or Manufacture of any one of the
Provinces shall, from and after the Union, be admitted free into each of the
That's from 1867. Mr. Paszkowski said that that section is being abused
because we don't have interprovincial trade. That's not exactly true, because we
did have interprovincial trade until 1921. When we took this to Britain, which
was our high court then, it was called the Gold Seal case. That court
said that provinces can literally prohibit certain products from entering a
province. There is this trail of judicial decision-making that's gone on. It's
been 100 years since that decision.
I would ask each of you: Do you want to fool around here and come back 10
years from now and sit here discussing the same topic, or should we take it to
the place where we will have a decision once and for all and then let the
provinces figure out what they're going to do with marketing boards and about
this? I would like your opinion on that, because we will be back here in 10
years. You're never going to have 10 provinces agree on anything. That's the
problem we have. It's time for the federal government to put on its big-boy
pants and go out there and actually lead this country in an area that must
mystify anybody watching this broadcast. What do you think about that?
Mr. Wilkes: From a retail perspective, it's rather a unique challenge
we have, as Ms. Grynol indicated. It is more inconsistent regulations that we're
trying to manage and the cost of compliance in Ms. Grynol's examples, as opposed
to the movement of products and interprovincial trade as it related to section
121, which you mentioned, senator.
That's why we made the recommendations that we made, based on examples that
we've seen internationally of the appropriate and direct ways to deal with those
inconsistencies. Our challenges are somewhat different and might not benefit
from a ruling of the court.
Senator Campbell: We keep talking about international, but this issue
isn't international. This is our country. We all live here in the same spot,
we're all governed by the same rules, and yet for some reason — we know many of
the reasons — we can't move it. I don't know why we keep going to a U.S.-Canada
deal. From my point of view, I don't see that as consistent. I agree with Ms.
MacEwen. Some of these trade agreements scare the living hell out of me. Why
can't we have a Canada-made solution for what is clearly an unconstitutional
Ms. Grynol: Maybe I can talk about that one. We haven't lost all hope
just yet. We've seen in the last 6 to 18 months more political will than we've
seen in a long while. We have a commitment from the minister and a commitment
from the premiers. The Committee on Internal Trade is meeting shortly and, as we
understand it, will be coming forward with a new Agreement on Internal Trade.
There are still issues with regard to the decision-making process. You are
quite right: We could end up back at this table five years from now having this
same discussion, which is why our recommendation Number 1 is so important. If we
create a council, a committee, or whatever you want to call it, with provincial,
federal, and appropriate industry and worker participation, we can sit down and
have a look from a bird's-eye view at what is being created across the country.
We take your point; there are regulations that exist for good reason. Tthere has
to be an inventory from a bird's-eye view where we can say, "This one is being
created in one province, and it is unnecessarily different than another
province, but that one is being created for a good reason.''
The next question you're probably going to ask is: "Where do we start on
that?'' In 2014, the minister commissioned a study, currently taking place by
Ernst & Young. It is an index of the significant regulatory barriers in Canada.
That, in our view, would be a very good starting point. That is going to come to
fruition at the end of this calendar year, and it will identify the largest
trade barriers. Presumably there would be some costing associated with that as
well. That group could look at it as a starting point, at least to examine the
In our view, that group would have two functions. One is a forward-looking
function where the regulations to be created need to be done either jointly or
harmonized, and the second is a backward-looking approach where we examine
regulations that exist. They're probably going to fall into four different
categories. First, they could be mutually recognized; second, they could be
harmonized; third, they need to stay different; and then I suppose in the future
they would be jointly developed.
The Chair: Could someone tell me a good reason for something? You just
said that in some cases there are good reasons that regulations prevent trade.
Give me a couple of examples.
Ms. MacEwen: This is an example that happened in Canada. One
provincial government maybe leads other provincial governments in identifying
harmful toxins in additives in gasoline. This happened in Canada where one
province banned an additive to gasoline, and they were sued under the Agreement
on Internal Trade, saying it was harmful to businesses because they wanted to
sell products with this harmful additive in it. It resulted in a NAFTA chapter
11 lawsuit where we had to pay quite a bit of money so that we could avoid
having the additive in our gasoline, which had been a proven toxin.
That's mainly the kind of example I'm thinking of, where one province is
leading the way — one province has higher standards in terms of labour law and
environmental law, which very often happens. We know that different provinces
have different standards, and very often they will catch up. With minimum wages,
we know one province will lead the way, one province will fall behind for a
while, and there will be considerable pressure for them to catch up. If we had
to harmonize that all the time, the fear is it would be harmonization downwards
rather than allowing individual governments to lead the way, especially on the
The Chair: Do you think minimum wage is a barrier to free trade?
Ms. MacEwen: It could be.
The Chair: Give me an example. Why would it be a barrier to
interprovincial free trade?
Ms. MacEwen: If you had a trucker and you needed to pay them a certain
amount of money to stop in Alberta and Saskatchewan, you would need to pay them
the highest minimum wage of those two provinces. It now becomes difficult to
sell your goods between provinces. Wages are often raised as trade barriers, as
are benefits. Quebec has a fantastic agreement around protecting the rights of
women on maternity leave. There's actually a bill on this right now. If you're a
woman and your work is hazardous to your health or the health of your fetus, in
Quebec they have a program whereby the employer has to find other work for you
or pay you 90 per cent of your wage to go home. In Ontario, that's not the case.
That program could potentially be raised as a barrier to trade because it makes
it difficult for someone to set up shop in Quebec.
The Chair: That's a long way from shipping a bottle of wine from
Kelowna to New Brunswick.
Ms. MacEwen: Absolutely, but if you introduce a negative list, that's
the consequence. That's why we think it's better to deal with specific issues as
they're raised rather than have this far-reaching, broad list.
Mr. Dorval: The basic principle was the way things were in the past.
Now the provinces agree to foster the best conditions possible for trade with as
few barriers as possible, and therefore to work towards agreements or mutual
recognition. The principle now is that the provinces are in favour of a steady
flow of interprovincial trade, with the minimum difficulty.
Since you raised the issue of regulations, there is another principle at play
that is becoming increasingly important: social acceptability. In each province,
social acceptability is not simply a question of the environment. It also
entails a decision in which the lawfully elected governments of each province
engage with their citizens. Perceptions can differ on various issues from one
region to another, whether the environment, taxation or regulatory issues et
cetera. The provinces are also faced with specific conditions. Consider
transportation: the vision in British Columbia differs from that in a more
Nordic climate, such as in Quebec.
Fundamentally, I think elected officials strive for decisions that might be
slightly different, but that are all guided by the desire to improve the
conditions that foster prosperity, and thus to reduce barriers or, if not
possible, to opt for mutual recognition.
Even though the process is time-consuming, I think we are on the right path.
In our modern era, we cannot think about the way things were 50 or 100 years
ago. I think we should look ahead to the future more optimistically.
That being said, since the witness before me talked about the favourable
conditions involving benefits in Quebec, I would point out that, although Quebec
employers pay $225 million, or rather $231 million now, for the safe maternity
program, there has been no indication of improved conditions, reduction in low
birth weights or premature births, and so forth. We have to exercise caution
therefore since the generous social programs in Quebec do not necessarily
produce such striking results as compared to other provinces. It is very
important to look at the results, not just the fine principles and good ideas.
That said, we believe that barriers still exist, which is why we are in
favour of promotion and awareness. Canadians right across the country are truly
in favour of more effective interprovincial trade. At the same time, the
citizens of each jurisdiction also favour certain provisions that best address
their concerns, while also recognizing that interprovincial barriers must be
eliminated as much as possible. We are also proceeding in that direction.
Ms. Grynol: We would have used the example of minimum wage but from a
different point of view. Minimum wage would be an example of where a legitimate
difference should exist. In Alberta versus P.E.I., there should be a difference.
That is not a barrier, in our view; that is a legitimate difference.
Where it could be a barrier, though, is the method of calculating overtime is
different in many provinces. Perhaps we could agree on a method of calculating
overtime and agree that the difference would be the minimum wage.
The Chair: That's a good idea.
Senator Enverga: Thank you for all the presentations and all the
comments. It's been so interesting.
My question is with regard to jobs. The Retail Council members have 2 million
jobs for employees. The vintner sector would have at least 30,000. When we
eliminate these provincial trade barriers, what will be the effect? As soon as
you remove these trade barriers, we will be streamlining operations somehow,as I
see it. What's the effect on these job numbers?
Mr. Paszkowski: It won't be a panacea for the Canadian wine industry,
but it will allow us to reach our consumers across the country, identify with
the Canadian brand and ultimately will result in more wine sales. We don't
anticipate that it would be significant wine sales, but it would be of our most
premium, highest-priced wines that would access to high-income Canadians that
will help grow the small wineries into a bigger business.
Over time we believe it will help us with our tourism industry, because right
now, if a tourist comes into our winery, if they're from Ontario and you're in
Niagara, we can ship the wine to you in Niagara. If you're from Texas, we can
ship the wine to you in Texas. But if you're in Saskatchewan, sorry, you can't
purchase the wine. You'll have to bring it on your person and, by the way, you
can only bring nine litres, otherwise you're violating Saskatchewan law and you
can be fined or thrown into jail.
It will help the industry grow — the smallest industry at best. They will be
able to use social media, Facebook, sell wine online, have wine clubs and that
type of thing. It will help the small guys grow, as it did in the United States,
where the vast majority of the volume and the value goes to the smaller wineries
who don't have access to a distribution system.
A small winery in Ontario may have access to the LCBO but really not play in
a bigger field outside, because the margins on your sales will be too low and
you really have a small workforce. By allowing direct delivery, you're now going
to provide access to all Canadians. That winery now will be able to build that
loyalty, maintain that loyalty and grow their winery and over time hopefully
you'll be in a position to have enough wine to sell into the LCBO or maybe enter
into the SAQ in Quebec.
The Chair: Senator Enverga, there's a short supplementary by Senator
Senator Ringuette: I haven't yet heard any of our panelists, today or
at other times, talk about the issue of the impact on provincial income. When
you ship wine to another province, who pays the provincial sales tax?
Mr. Paszkowski: If you purchase the wine in Ontario, you're at the
winery. The out-of-province consumer will pay Ontario sales tax, levies,
markups, et cetera. In the case of British Columbia, they've opened up their
market to direct delivery. It would be the same circumstance there. The consumer
will pay the Ontario taxes, for example, versus British Columbia.
Senator Ringuette: That is a major issue.
Mr. Paszkowski: There is a way to address that. That is the concern of
the liquor boards and the provinces, and we've always argued tha.t in a
permanent reporting system. that could be easily taken care of and the revenues
could be transferred to the home province where the wine is being delivered.
It's not that difficult to do with today's technology.
The issue is that when you use the liquor board system, for example, in
Ontario, it's 66 per cent markup. They're providing you a service. If you're not
using that service, should you be paying a 66 per cent markup when the winery is
doing all of the work? They're doing the paperwork, they're doing the tax
collection, they're organizing the courier — they're doing all of the work.
That's what the issue becomes.
Underneath the AIT and all trade agreements, there's an audited cost of
service where the service actually matches up with the cost, the cost matches up
with the service provided, and that should be the same case. There should be a
lower markup on that particular wine and all other taxes should be paid.
Senator Enverga: Do you have any comments?
Ms. MacEwen: Yes. I just wanted to say, as an economist, the theory is
that you try to reduce some of the costs from the headaches that they're talking
about and the basically unproductive work that's being done. If you're doing
that work, it's not productive, but you can then shift resources and invest it
into more productive areas that will grow your business and create better jobs
hopefully. Under ideal circumstances, that is what you would be able to do, and
you would have more resources, again, hopefully to innovative or to invest in
other technologies or research that would help you grow. That's the ideal but we
don't always see that happen.
Ms. Grynol: That is exactly what I was going to say, and potentially
in addition better jobs and more jobs. As the retail sector, we are the largest
private sector employer. Any time you can reduce cost and make your business and
your retail organization more productive, you can hire more people and you can
The Chair: Mr. Dorval, did you want to comment on that? If you don't,
I'll go to Senator Smith.
Senator L. Smith: The various witnesses that we've seen over the past
few weeks have brought up similar points: mutual recognition, federal-provincial
industry council, looking at regulatory issues, negative lists, review the AIT
decision-making process, and we heard social acceptability today from Ms.
Here we are going back to Senator Campbell's question and then, Ms. Grynol,
some of the responses you've had, but I'm asking each one of you: Where will we
be five years from now? Is it going to be incremental growth or change, or is it
going to be major? What steps will lead us to just incremental change, and what
steps would lead us to a major change? If I could ask each of you to give me
your opinion without having to go through the whole answer, what would be the
key to each of you to either have major change or incremental change, and
either/or. Do you understand the question?
Ms. Grynol: Yes.
Senator L. Smith: It's a magic wand question, but I just want to see
where your heads are at.
Ms. Grynol: I suppose there are no guarantees for change with respect
to the Agreement on Internal Trade, because it is subject to every party coming
to the table and agreeing on it. We're optimistic, but there are no guarantees.
Where there is a guarantee is for us to create a group immediately outside of
the AIT, though it would be great if it was included in that as well, where we
had decision makers come to the table, provincial, federal, and appropriate
industry consultations, to examine the existing regulatory barriers to identify
the ones that are the highest priority, and that's where you're going to get
your high-yield results that you're asking about.
Senator L. Smith: Are those priorities defined at this particular
Ms. Grynol: The study I referenced earlier being conducted currently
by Ernst & Young I think will form the foundation of that. That study could form
the basis of this entire exercise. If we can identify the top 10 and deal with
them, in our view, that is your best chance of getting any change immediately,
and that would be a significant chance.
Senator L. Smith: What's the definition of immediately?
Ms. Grynol: As quickly as we can get people together.
Senator L. Smith: When will the study be accessible?
Ms. Grynol: At the end of this calendar year.
Senator L. Smith: You mentioned that.
The Chair: Go ahead, Mr. Dorval. Do you want to take a crack at this?
Mr. Dorval: First of all, we think the global context plays a key
role. There are international free trade agreements, such as with Europe or the
PTP, that will lead to a greater emphasis on trade effectiveness in Canada in
all respects. There is global competition and we are fortunate to be in a
country that can improve its effectiveness. Some things will happen at the same
time over the coming months.
There are very important discussions about access to energy resources that
located in certain provinces and about the possibility of making greater use of
Canadian products in the Canadian economy which will raise awareness of the fact
that greater cooperation among the provinces, especially on energy matters, will
lead to greater prosperity for Quebec. There are certain conditions at present,
be they in the external environment or the domestic environment, which will lead
to decisions in this regard.
We have talked a lot about trade, but very little about e-commerce.
E-commerce has probably the fastest growth rate in the world; in Canada, it
impacts the perception of sales taxes from one province to another if not
internationally. Once again, if we want to resolve problems relating to equity,
taxation between the provinces, rather than between Canada and other countries,
we will have to start resolving these issues in Canada and ensure that the
perception of sales taxes from one jurisdiction to another is correct,
especially as regards e-commerce.
The issue of capital brings us to the debate over real estate commissions in
recent years. We have a passport system, which also has positive sides.
Beyond that is the issue of labour. In Canada and in Quebec in particular, a
large sector of the population is aging, and we are seeing changes in the need
to match qualifications with labour market requirements. This will increasingly
lead jurisdictions to vie for better ways of attracting the best human resources
in order to achieve the best match as regards quality and skills recognition.
Canada has a Red Seal system. This is a problem for Quebec, however, because
we do not recognize the same skills as under the Red Seal. Some of the skills
recognized in Quebec are not included under the Red Seal, but they might be of
interest outside Canada.
There are issues to be resolved, but I think international market forces and
domestic considerations, be they e- commerce, energy resources or access to
quality labour, will accelerate shared decisions. That is why I am optimistic
that we will certainly have made a lot of progress on these issues in five years
from now. We are in agreement on several points presented here by the Retail
Council of Canada, and we share many of their views and solutions.
Mr. Paszkowski: In terms of five years, my hope would be that the
political will would be there to address the low- hanging fruit. Wine has been
identified as a low-hanging fruit issue that could be addressed relatively
simply by putting in place a permanent reporting system or something of that
nature to attract wine delivery and collect taxation — yes, actually collect
taxation as opposed to what the liquor boards did after the passage of Bill C-
311, which was to allow a consumer to bring in one nine-litre case every time
they leave the province. As long as it comes back on their person, no tax is
collected on that product. If the political will is there, I think we could
If it is incremental, in the next little while I could see liquor boards in
Ontario putting in place an electronic commerce system where you could go online
and order a case of wine that will arrive at your doorstep in four to eight
weeks, which isn't sufficient. You will be paying full markup on that product.
It has no additional benefit to the winery or to the consumer. New Brunswick, if
they are not threatened by the decision on Friday, may decide to put in their
nine-litre allowance as every other province did to obfuscate what happened
after Bill C-311 was passed.
On the other side, if nothing happens under the AIT because the provinces are
told by the liquor boards that no action is required, then there is a
possibility that the Supreme Court route would be the one that would ultimately
be followed. We will wait to see what happens and hopefully benefit from the
In our case, it's simply political will. Three provinces have acted; we are
waiting for the other seven to move forward.
Ms. MacEwen: I will be absolutely hopeful in my estimation of what
will happen in five years.
I'm going to say that Canada and the United States will have rejected the
Trans-Pacific Partnership and that we'll have been able to amend the CETA to get
rid of the negative lists and investor court system that is basically the same
thing as the ISDS. We will have established the sector councils that the Retail
Council talks about, and we will have identified clearly list of the actual
trade barriers and what their costs are, and we will be able to sit down and
talk about them in a concrete way.
This is what we have already done on the labour front. The question presumes
that we have made no progress since 1995. We have made considerable progress
since 1995. We have made progress since 2008.
On the labour side, we have absolutely made progress. Registered nurses can
now move from province to province and be recognized. That did not happen
before. The accountants have reworked their entire training and system to have
one system that is recognized across Canada. That is just in recent years. That
is because of the AIT and the work on the labour standards.
I think it should be recognized that incremental progress is probably robust
and effective and that we need to do it based on evidence. The sector councils
and the evidence that we have talked about are probably the best way to do that.
I do hope that government will invest in a real industrial policy to shift us
toward a green economy. I will just throw that in.
The Chair: Thank you for that.
If there are no further questions, we will suspend for a couple of minutes
and then come back to talk a bit about future business. Let us use the
suspension as a time to really thank our witnesses, who have been terrific. I
think we learned a lot, and I think that senators had a good time questioning
and discussing it with you. To those on video conference, I wish you were here.
Nonetheless, thank you very much.
With that, I will suspend and reconvene in a couple of minutes.
(The committee continued in camera.)