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

Issue No. 5 - Evidence - May 12, 2016


OTTAWA, Thursday, May 12, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:31 a.m. to study the issues pertaining to internal barriers to trade.

Senator David Tkachuk (Chair) in the chair.

[English]

The Chair: Good morning 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 eleventh meeting on our special study on issues pertaining to internal barriers to trade. I'm pleased to welcome our first panel today, from Consumer Health Products Canada, Karen Proud, President, and Gerry Harrington, Vice President, Policy and Regulatory Affairs. With them at the table, from the Canadian Trucking Alliance, is Stephen Laskowski, Senior Vice President, Economic Affairs.

On behalf of the committee, I thank all of you for being here today. We'll hear the opening remarks of all witnesses and then proceed to a question and answer session. Ms. Proud, please begin.

Karen Proud, President, Consumer Health Products Canada: Thank you, chairman and senators, for providing us the opportunity to contribute to your study on internal barriers to trade. This is an issue that's of great interest to my association and the association members and of great impact to our industry sector in Canada. We really welcome the work you're undertaking through this study and hope to see some real results in your recommendations.

Just a little bit about CHP Canada: My organization, which is Consumer Health Products Canada — I refer to it as CHP Canada — represents the makers of evidence-based, over-the-counter medicines or non-prescription drugs as well as natural health products. These products fall into a broad category of consumer health products and are used by millions of Canadians every day to manage their personal health and minor ailments such as coughs and colds, as well as some chronic conditions such as allergies and arthritic pain. The types of products we are talking about, so you get a sense of who we represent, are things that you might use every day, like sunscreens and vitamins; pain relievers such as Advil, Tylenol and Aleve; allergy medicines like those found in Reactine and Nasonex; and things like nicotine replacement therapy. There is a very broad range of products that our members manufacture.

Our sector is responsible for over 56,000 jobs in Canada and accounts for $5.6 billion in domestic sales and more than $1.5 billion in exports. Certainly we are no small sector.

Last week I was actually in Washington taking part in the Regulatory Cooperation Council meetings between Canada and U.S. officials and industry stakeholders, and we were discussing very similar things at that meeting as to what this committee is looking at today around how to eliminate regulatory and administrative barriers that negatively affect trade. What struck me at those meetings, as I was thinking about the speaking notes for this particular committee, is that in fact our biggest barriers to trade right now are within the Canadian borders and not the Canada- U.S. system. Again, we're really happy the Senate committee is looking at this study today.

When Minister Bains appeared before the committee, he spoke about misaligned regulations and standards as well as this web of red tape. This is precisely what we are dealing with when it comes to regulation of our members' products in Canada. I'd like to take a bit of time to explain how the system works for our products here in Canada.

The regulation of over-the-counter medicines and natural health products is divided between the federal and provincial jurisdictions. On the one hand, you've got Health Canada, who is responsible for ensuring the safety, quality and effectiveness of the products; and on the other hand you have the provinces, which mandate the conditions or place of sale of those products. Health Canada gets its authority to regulate our products from the Food and Drugs Act, and the provincial regulations are administered through the legislation designed to govern the profession of pharmacy, not those to regulate products. Canada is the only jurisdiction among our major trading partners to use this dual jurisdictional approach, and this is really where the problem starts for our industry.

The provincial regulation of conditions of sale is problematic because it creates inconsistencies from province to province and because it overlaps and even conflicts sometimes with the federal system. These overlaps and conflicts negatively impact access to consumer health products across the board and to varying degrees, depending on what province you happen to live in. They add costs, complexity and uncertainty for industry and ultimately negatively impact overall health care costs.

What I mean by that is, if you think about it, when Canadians use our products to manage their health and treat their minor ailments, they're practicing what we call self-care. This practice is beneficial in a number of ways, including the fact that it can keep people out of the formal health care system, saving the system both dollars as well as freeing up physician resources to be used where they are most needed. Anything that hinders this process of self-care is problematic to our overall health care system.

Just so you're aware, the main source of growth in the consumer health products industry is the creation of new products through a process known as Rx to OTC switch. That's where a product that's currently a prescription drug gets switched to a non-prescription status after Health Canada has undertaken a thorough review of the evidence, has undertaken consultations and has looked at the labelling required for consumers in order for them to be able to use these products without the intervention of a health professional.

After reviewing all of the evidence, Health Canada then makes a decision as to whether or not it will change a product from prescription status to non-prescription status. This point is when we see two different processes take place at the provincial level, one for Quebec and one for the rest of Canada.

Outside of Quebec, there's a body known as the National Association of Pharmacy Regulatory Authorities, otherwise known as NAPRA, which convenes a committee that essentially reviews the Health Canada decision as to whether or not a product should be switched from prescription to non-prescription and then recommends the conditions of sale for that product. These recommendations are basically what we call the scheduling system in Canada. They recommend whether the product would be sold behind the counter in a pharmacy, known as Schedule 2, or in front of the counter in a pharmacy, known as Schedule 3, or anywhere for general use, which is unscheduled.

Here's the crazy part: NAPRA can actually overrule the Health Canada decision to switch a product from prescription to non-prescription and put it back to Schedule 1, which is a prescription drug.

The Chair: Would you repeat that?

Ms. Proud: The crazy part? This provincial body known as NAPRA, which makes decisions around where a product can be sold, can actually overrule the Health Canada decision. Where Health Canada says the product is safe to be used as non-prescription, they can say, "No, it's going back on Schedule 1,'' which is a prescription drug. This is part of the craziness of the system and part of one of these barriers to trade that we run into.

Another part of the problem is what happens after NAPRA actually makes this decision. This is where the provinces come in. In seven provinces, the recommendations that NAPRA makes as to place of sale are automatically adopted, and we call that by reference.

In Newfoundland and Labrador, there is an additional step where their own board of the college of pharmacists reviews the NAPRA review before they decide to add the product to their schedule.

The Chair: They can't overturn Health Canada, can they?

Ms. Proud: They don't overturn Health Canada, although they could if they wanted to. They could also not go by NAPRA and decide not to schedule the product.

In British Columbia, they actually have to amend regulations in order to put in place the NAPRA decision. The process has taken up to two years in order to effect that change.

While all this sounds a bit disjointed, we haven't even talked about Quebec yet. I know there are a lot of senators on the committee from Quebec, so this might be of particular interest to them.

In Quebec, when Health Canada makes its decision to switch a product from prescription to non-prescription, everything automatically goes behind the counter. They don't participate in the NAPRA decision-making; they just put everything behind the counter. If you want to move your product from behind the counter to in front of the counter, you have to apply to the Office des professions du Québec for a scheduling change, and this is a process that can take, on average, about four years.

What does all this mean? It means that Canada is not a particularly hospitable country for our industry sector to do business in. The uncertainty that comes with this entire system is not something that global companies feel is conducive to good business. It means that Canadians gain access to new Rx to OTC switch products, on average, seven to nine years after those products are introduced in the U.S. or the EU.

It also means that if you live in B.C., it may be two years before you see a product that's available in the rest of the country, and if you live in Quebec, you may never see the product, or at least you may not know the product is available because it's behind the counter.

The solution to all of this issue really starts with federal leadership. This is where I think the work of this committee could come into play.

Up until now, Health Canada, which is a globally respected regulator of over-the-counter medicines and natural health products, has been hindered in its efforts to administer what is really a world-class regulatory environment for consumer health products. They approve the product for safety and efficacy, but they have to share authority over scheduling with the provinces despite the fact — I think this is key here — that they have authority under the Food and Drugs Act as Health Canada to determine the conditions of sale.

While we are in no way advocating for the exclusion of the provinces in the decision-making process, we believe that the most effective solution to these problems is to integrate the product approval and drug scheduling processes at the federal level. This can be done in a variety of ways but requires a recognition that there's actually a problem with the system and a desire to find a solution that works and makes sense. We're hoping that through this study, the committee's work might be the catalyst for the change we need.

Before I close, I want to highlight a real life and very recent example of the problems within the system. As some of you may be aware, Health Canada, at the urging of public health officials at all levels of government, decided to remove naloxone from the prescription drug list earlier this year. For those of you who don't know what naloxone is, it's a life-saving drug that reverses the effects of opiate overdose if administered at the right time. It was announced by the Minister of Health and was a move that was welcomed by many in the public health profession.

Because it was seen as an urgent public health issue, Health Canada pursued an expedited switch process, skipping WTO notification altogether in order to effect the change in less than three months. We never get less than three months for our switch products, but this was an emergency situation, or at least recognition of a great public need.

The department finalized their portion of the switch in early March, but because there is no mechanism to coordinate the process with the provincial drug scheduling system, naloxone is still a prescription drug in eight of the ten provinces and will remain so until a NAPRA reaffirmation of the switch is completed in mid-June, more than doubling the time required to effect this change. That's a real-life example we just had about the problems within the system, even when the switch is initiated at the government level and not by a manufacturer or a company.

I'd like to thank the committee for providing us with the opportunity to raise those issues. My colleague Gerry Harrington and I would be very happy to answer any questions you might have, and we are certainly happy to provide any further information you might need as part of this study.

The Chair: Thank you very much. We're now going to switch from drugs to trucking. I'd like to introduce Stephen Laskowski from the Canadian Trucking Alliance.

Stephen Laskowski, Senior Vice President, Economic Affairs, Canadian Trucking Alliance: Thank you, Mr. Chair. Thank you, senators, for having us here this morning. I'll open with some remarks about who we are, our industry, and then move into the guts of the presentation.

The CTA is a federation of provincial trucking associations from across Canada. We represent about 4,500 member carriers. The alliance is made up of the owners and CEOs. We do deal with driver issues, but our membership is made up of the presidents and the owners of the organizations.

The Chair: How many trucks would that represent, if you don't mind me asking?

Mr. Laskowski: In total, the truck aspect of it, we represent about 150,000 employees. That represents about 70 per cent of the freight in the marketplace of the trucks on the road, either in their direct control or in their indirect control as what we refer to in our industry as brokering off freight. The freight would come in, they wouldn't move it on their trucks but they might move it on a partner's vehicle. We represent the industry and are proud of it.

With regard to the industry, trucks move approximately 90 per cent of all consumer goods on the road, and that's almost two-thirds of the value of Canada-U.S. trade.

In terms of overall population, we probably represent about 1.5 per cent of the labour force, and that represents about $24 billion in personal income tax. We're a large, important industry on a number of fronts.

With regard to why we're that big, it's service. The modern economy is just-in-time. The Internet has been a friend to us, and the just-in-time delivery system has been a friend to our industry, as has been north-south trade. As our economy has changed, so too has our industry. It's a very competitive industry but also a very nimble one, filled with many great entrepreneurs.

With regard to a leading indicator, I always say to people, "Never mind your stockbroker; call the owner of a trucking company, ask what's happening, and if it's good, you'll see that in the market in three months. If they say it's not so good out there, you'll see that in the reports coming out.'' As the economy moves, the quarterly reports come out. It's an excellent indicator of the economy as well.

In terms of internal trade barriers, the CTA understands that this committee is most interested in internal trade barriers. We have a number of north-south barriers as well, but with regard to this study, we'll stick to the terms of reference and deal with internal trade barriers.

I wouldn't define internal trade barriers in trucking from an academic standpoint as a pure trade barrier like, for example, in the wine industry, whether it's B.C. or Ontario in various trade battles, where goods cannot be sold in their certain marketplaces. It doesn't downplay the importance of our issues, but they're not what I would technically call trade barriers. They do cause an impediment to trade and I'll explain why.

Trade barriers themselves are not a new concept to our industry but one that has troubled our sector since the 1980s. A large number of trucking fleets in Canada are engaged in interprovincial movement. However, the rules governing the equipment and drivers engaged in this trade are written and enforced by each province separately. While in some cases differing regulations are appropriate given the conditions that exist in each jurisdiction, in other cases these differences do constitute barriers to fair competition and effective trade. In these instances, harmonization is essential.

The CTA would characterize the source of our issues within two key subject areas: the National Safety Code and vehicle weights and dimensions.

The National Safety Code for trucks was introduced nearly 30 years ago as a concept to deal with truck safety. I would say that our industry has come a long way in 30 years with regard to truck safety.

In 1989, just so you understand, deregulation was a huge change for our sector. We went from a very controlled marketplace to a free marketplace. In many ways, our industry and the members in our industry are fairly new because of the evolution that happened in 1989. As a result of that and many new players and rules, just like any new sector, everyone had a bit of a learning curve with regard to safety. That's not the case today, but perhaps it was a picture of 1989.

The National Safety Code deals with 16 standards, everything from truck drivers' hours of service to carrier safety ratings to driver medicals to trip inspections. However, after nearly three decades, many of these National Safety Code standards have still not been uniformly adopted or enforced by the provincial governments. This is not an acceptable situation for government or industry.

Items like hours of service for truck drivers engaged in long highway trucking should be uniform across the country. That is not the case. It took over a decade for all provinces to agree on a new federal regulation governing the hours of service work regulations. With the movement to electronic logging devices by 2019, we fear the same pattern will emerge.

After numerous examples over the years, CTA believes it is time for everyone to admit that the current policy development system is in need of a review. There appears to be a communication breakdown somewhere between the various levels of government and industry. Policy and political silos have to come down.

So you understand, the provincial governments enforce trucking rules and in many ways develop them. The federal government implements standards and suggestions, but there is no hammer over the provincial governments to adopt what the provinces agree to at a larger table. They can go back to their home jurisdictions and completely ignore the advice they developed around the table or somewhat m,odify it. Neither is acceptable because you end up with a hodgepodge of regulations from coast to coast. As I already outlined, trucks move from coast to coast. That is why we say that is atrade barrier.

With respect to weights and dimensions, when I get to the end of this, your eyes may glaze over because it's going to get into what I will call the axles and wheels and where things go, but this is critical to our industry and it's a simple thing. Just look underneath the trailer, and you will see two sets of tires, three, four and five. It's all based on weight. Weight is a reflection of the regional economy. If it's a heavy manufacturing area, you will see more axles. If you see less, it could be light goods like potato chips, those types of products. In some cases, they will be auto parts because some of them can be bulky and big.

Where those axles are placed isn't by chance. Those are rules governed by the provinces. To do these things, the trucking industry has to set up those axles in a certain way, and it can be an impediment to trade, and I will explain that.

GHG emissions is another component that needs to be dealt with. What we're dealing with is a component regulation. GHG emissions are a critical issue for our industry. We are all in favour of improving our fuel efficiency and reducing our carbon footprint; however, these are all done through technology. There is a driving component. There are issues that the management team can deal with, but in many aspects, it's all done through technology. I'm going to give you four examples of technologies that are proven GHG technologies that aren't allowed by all provinces.

One is new generation tires. That means a big tire versus two single tires. These produce about 3 to 10 per cent more fuel efficiency. Only Ontario, Quebec and Manitoba allow these tires to be used in a manner that allows the trucking industry to load their vehicles to full loads.

What makes this rule even more of an issue is that in 2018, these tires will become one of two mandatory options on trailers for all trucks. We are now in 2016. We have two more years for all the provinces to get on board, or the trucking industry is going to be forced to comply with an environmental rule set by Environment Canada that certain provinces have chosen to ignore, for a host of reasons.

Natural gas vehicles: this is a new technology coming to the trucking industry. It's a proven technology. It's not without its management challenges, but it can be done. The issue here is that only one province has dealt with its weight allowance. There are tanks on these trucks that are extremely heavy. The CTA and the provincial associations have said to not to count that as weight with regard to product in the back. For example, what some trucking companies would have to do to operate these vehicles is put less product in the back of the truck to compensate for the weight of these tanks. What we are saying is don't count the weight of the tanks at this point until the manufacturers can make the tanks lighter. Only the province of British Columbia has recognized this. That is a challenge for us.

Boat-tails: For all those who like 911 Porsches from the 1970s and 1980s, that's what a boat-tail is. Just think of the big tail on the back of a Porsche. Well, it doesn't look like that on the back of a truck, but it's the same concept. There is only one province that allows these aerodynamic devices. They fold when they're down and open when they're operating. They've been designed and controlled by Transport Canada so we deal with all the safety issues. But at this point, only one province allows that, again, 3 to 10 per cent.

The other technology is a certain type of axle technology that goes on the front of a tractor. It's about a 3 to 5 per cent fuel efficiency improvement. This axle lifts and goes back to the ground based on the weight. It improves rolling resistance when it's not required under weight. When it needs more weight, it puts it down. Although trucking companies would love to have a full tractor all the time, it's not always possible. What that does is it recognizes, through a software system, that it's time to lift the axle, put the axle up higher, and therefore we operate on a more fuel-efficient basis. There are provinces that outlaw this type of technology. Again, this is something that needs to be addressed because just think if you are a trucking company based in Ontario or Alberta and you're serving either the west or eastern regional markets, you need to spec your vehicle so it can operate everywhere, not just in your home jurisdiction.

Those are examples on the safety side and spec sides of how provincial and federal governments need to work better together to allow the trucking industry to compete on a national basis in a more harmonized manner.

Thank you for your time. I look forward to your questions.

The Chair: I had heard a portion of what you said today from someone else, so I know what an electronic logging device is, but perhaps you can explain that to our committee.

Mr. Laskowski: Absolutely. Our industry has gone through an evolution and, I think, a revolution since 1989 in terms of management and approach to safety. Paper logs are an example of that.

Just to back up a bit so you understand: Truck drivers can only work so many hours a day. They have to take rests at certain portions of the day. This all has to be logged for compliance reasons, which we fully support.

Well, we are in 2016, and there is no need for this to be done on paper. As we all know, paper allows for what I'll call creativity, and we are trying to eliminate creativity from our industry. There are devices out there from very low-end smartphone apps to high-end software/hardware systems that are full management systems. What we are saying to the federal government and the provinces is that it is time to eliminate paper from the long-haul trucking industry. It is time to move completely to mandatory electronic logs. Transport Canada has been working with us, but there has yet to be an official announcement that this country will move.

Going back to my previous comments about the hours-of-service regime, our great fear is that the provinces will agree to this, yet they will go back to their home jurisdictions and begin to decide if they want to follow the National Safety Code. On this matter, no one should be wavering on this issue at all. This is an issue about safety, level playing fields and moving products safely on the roads. To us, this is a no-brainer, but it has been a bit of a frustrating exercise for us to date.

The Chair: Just to finish this: It's more efficient, because instead of the driver, after the trip sitting down and filling out paper for half an hour, he does not have to do that. He can go back home to his family, and he would have to do the same at the beginning of the day.

Mr. Laskowski: Change is difficult in all aspects of life, and when you bring in change of anything, there is a fear to it. But as we go through these numbers and show them on the driver side, industry side and the government side, this becomes a no-brainer. Drivers make more money. It allows transparency and clarity for all. If there is some yelling in the woods, it's more from a reticence to change and perhaps ignorance of what we're really trying to achieve as an industry and as an employer group.

The Chair: Thank you very much. We'll continue with questioning.

Senator Greene: You have lots of issues. You have so many issues that I think we ought to do a separate report just for you. Maybe we will one day.

I have a bunch of little questions that may turn out to have big answers. You mentioned that the federal government has no hammer. Do they have a hammer but they are not using it, or are they constrained by an interpretation of the Constitution? And what do they do in the U.S. by comparison?

Mr. Laskowski: I will start with the bigger picture and drill down.

I think you're 100 per cent bang-on that this is a reflection not of our industry but of Canada as a nation and how we are governed and were governed between the separation of federal and provincial authorities and how we evolved.

However, I think the word "evolve'' is a good word here. We can look to our neighbours to the south to get a lesson here. The Americans deal with these similar issues, whether safety or truck weights and dimension rules, to get federal compliance of state authorities — because they have the same regime — with the big hammer of money, and money is a great hammer.

What they say to the states, the Federal Highway Authority to the U.S. state DOTs, is, "Governors, this is what we are going to do in the trucking industry, whether it's safety or on the truck weights and dimensions, and we will consult with you.'' And they do, and at the end they make a decision. They say, "Here is our decision. Now you can choose to abide by our decision. If so, here is some money for those highways that those trucks pay use.''

I will clarify. The trucks pay for it because it comes out of fuel tax and registration, which is purely dedicated in the United States, and that's a key point. All the billions of dollars that the trucking industry pays in the United States with fuel and registration are dedicated towards highway infrastructure. Federal and state-wise, it is all dedicated; it all goes into a pot.

What happens in this case is that the federal government says, "Here is the rule. If you choose to comply, here is the cheque. But it's your choice. If you choose to not abide by the rule, we respect that decision. By the way, give the cheque back.'' Actually they don't even give them the cheque.

In Canada, we have been pushing for the last decade for there to be a concept of a trust fund. Three things to overcome are the separation of federal and provincial authorities, the idea of dedicated funds and the concept of the federal government being willing to take leadership but also to be able to will the provinces into compliance. If they want money for provincial highways and bridges that comes from federal coffers, they abide by national safety codes and federal standards.

Senator Greene: That's an interesting idea. Would you recommend that be one of our recommendations?

Mr. Laskowski: Yes.

The Chair: We do it with health care.

Senator Greene: Yes, we do.

Mr. Laskowski: Just in the United States, with consultation, consultation is a good and necessary thing between the private-public sector and the provincial authorities, but once a decision is made, leadership needs to be shown. We need to say, "We have made a decision here. We will abide by this decision. We have had a process in place. Now, it's time to move on.'' And we must abide and not allow the provinces to go back to their jurisdictions and say, "Well, that was a great exercise, but we're not going to agree with it, so we will do what we want to do, and the money comes anyway.''

Senator Greene: Would you have any members within provinces who don't truck beyond their borders and would prefer the barriers?

Mr. Laskowski: I think you could apply that question to both. For the most part, people will look at free, open competition as a leader in business, to not compete on artificial barriers but to compete on management — who is a better manager and who is a better business person — as opposed to artificial barriers. You could go across the trucking industry, whether it's intra- or interprovincial, and find such operators.

But if operators are relying on artificial barriers to justify their business or their business case, that's not a strong business case.

Senator Ringuette: Actually, there is such a fund nationally, except that the money collected through that fund is given to the municipalities, which removes the leverage in regard to your issue. But it does come from your industry.

Mr. Laskowski: We have applauded the policy direction of the Federation of Canadian Municipalities' fund with regard to the transit spending. Without being an expert in that area — and it's not for me in the trucking sector to talk about that — I understand there is not a perfect situation, but I think it's an excellent example of the movement toward those types of measures.

Senator Wallin: I know everyone thought this was an odd combination here, but when I worked in New York, these two sectors were there on the trade file weekly, because — we didn't solve it, no. I do know that the rules and regulations and internal trade barriers we're talking about here are a real deterrent for international players as well as our own domestic industries here.

Like Senator Greene, I have a few little questions. Yesterday, we spent some time dancing on the head of a pin about the use of the word "barriers'' versus "irritants,'' with the person who was kind of involved in the internal trade negotiations saying, "There are no barriers, really; there are just some issues on the side.'' I would like to get both of you on the record here on barriers versus irritants, if we could.

Ms. Proud: Are you interested in our opinion in the difference between barriers and irritants?

Senator Wallin: Whether we have barriers or just irritants.

Ms. Proud: When you look at Canada in the global sense and say that for introduction of new products, we're seven to nine years behind the EU and the U.S., there are barriers here. That's not just an irritant. It's a definite trade barrier. We overcome the barrier seven to nine years later, but it's certainly a barrier to the global decision-making as to whether they bring new products to this country.

Mr. Laskowski: I would build off that comment that, in the technical term, whoever was saying that, I wouldn't disagree. However, whether it's an irritant or a barrier, it has the same effect, being inefficiencies. If we can eliminate the provincial inefficiencies, we're just a better marketplace. Yes, technically those trucks can still roll across all those borders, but they do so in a more inefficient manner than they should. As our members would say, "Just fix it. I don't care what you call it.''

Senator Wallin: You made a reference, Ms. Proud, that in the drug to counter the opiate overdose, they skipped the WTO process. Was there any sanction for that?

Gerry Harrington, Vice President, Policy and Regulatory Affairs, Consumer Health Products Canada: No. The WTO notification is to permit manufacturers outside of Canada to come into compliance. As this was a single-manufacturer drug, it wasn't considered to be an issue. There was no sanction in that instance.

Senator Wallin: Is it something people could do more regularly?

Mr. Harrington: We would love to see that. We do have a proposal on the table.

Senator Wallin: They could be as creative as they are in the trucking industry.

Mr. Harrington: We took note.

Senator Wallin: I know this seems odd, but it's a personal anecdote about one of the OTC drugs, Aleve, which you can buy in this country. You can buy Aleve PM in the U.S. but not here; although, I can go to a pharmacy in Canada and buy the two ingredients. The only difference is I have to buy two drugs.

Is there a level with the industry itself where those kinds of rules and regulations are helping them? They obviously make more money if I buy two drugs instead of one.

Mr. Harrington: No. To put it bluntly, the industry would far prefer to innovate and to have that single product serve your need, because that's what you were looking for. The problem is the barriers between you and the company wanting to put it on the market. In that instance, that would be a separate switch.

When a product is switched like Aleve, naproxen sodium, it is switched under very specific conditions. If you want to combine it with another ingredient, that's a separate switch application that will have to go through all of the federal and provincial processes. It's a smaller market, and that's where those barriers become more significant.

Senator Wallin: It seems like it would be financially in their interest to sell two drugs, but you're saying no.

Mr. Harrington: No.

Senator Tannas: Ms. Proud, you mentioned the antidote to opiates, naloxone. You said eight provinces are still fiddling around with it. That would infer that two have already dealt with it. Is Quebec one of them?

Mr. Harrington: Yes.

Senator Tannas: Because of their unique circumstance, correct?

Ms. Proud: In Quebec, as you may recall, they don't deal with NAPRA. It goes directly behind the counter, which actually is the intended place for this particular switch.

Senator Tannas: In that case, they're ahead of the curve instead of behind the curve, or outside of it.

You mentioned B.C. and their unique situation. Why hasn't the New West Partnership and the commitment amongst the provinces to harmonize solved this issue? Is it an exception that they put on their list?

Mr. Harrington: There have been numerous attempts to harmonize the various provincial regulations. It's never been on the agenda within the Western alliance, but there have been numerous attempts for the various provinces to work together and try to harmonize these requirements.

Consistently, there have been issues arising that have kept them from getting the job done. Primarily the problem is that the organization that is at the centre of that — the National Association of Pharmacy Regulatory Authorities — is not a government agency. What we've heard from provincial governments is that they are not comfortable delegating that authority to a non-government body.

Senator Tannas: Do you know if it is specifically exempted in the New West Partnership?

Mr. Harrington: I'm not familiar with any specific language for this initiative for drug scheduling, so I can't answer the question. I can tell you that the rules in B.C. and Alberta are significantly different. Alberta does indeed follow the NAPRA system by reference, whereas in B.C. they have their own regulation that has to be amended.

Senator Enverga: Thank you for the great presentations.

As we go through international trade, we always deal with the U.S. more often. Could you cite some examples where it's easier to trade with the U.S. and other countries than from province to province, especially with pharmaceuticals? I know trucking has issues, but can you give me more examples, if there are any?

Mr. Harrington: It is less a matter of conducting business once a product is approved. The challenge is that it is easier for a company to gain approval for a product federally in Canada that's been approved in the United States. That part is relatively efficient and comparatively gives much the same sort of result. It's when you then go through the remaining process that the difficulties arise.

I will give a concrete example: In the U.S., the one advantage is that when a manufacturer makes a submission for a switch, they have to create research evidence to support that so Canadians can use it safely without a prescription. The U.S. actually provides a period of protection for that data so that they can recoup that investment in a period of three years.

We don't have that in Canada, which is not in itself a complete deal breaker. You can still make that investment pay, but when you add to it all these delays you have in the provincial system, what ends up happening very often is that the second-entry drug is getting distribution at the same time and in some cases even before the innovator drug is on the market.

In that respect, it's a bigger barrier than the absence of the data protection at the federal level. That's the sense in which we say that interprovincial barriers are more important. They have a bigger impact on the willingness of a company to invest in a switch product, and it is a bigger part of the reason why we're seven to nine years behind on those switches.

Senator Enverga: Do you have examples in trucking?

Mr. Laskowski: I would say that since 9/11, nothing has been easy for trucking dealing with the United States — the myriad of rules at the border, enforcement at the border, what I'll call taxes applied at the border, state enforcement of Canadian trucks close to the border because of certain funds being directed towards them to keep them afloat. Canadian trucks become more of a target of local enforcement.

Canadian trucks cannot make efficient moves in the United States. You can basically only drop your freight and then go back to Canada with the freight. You cannot reposition vehicles in the United States that are empty.

9/11 is an important hallmark in world history, but it has had a dramatic impact on how trucking does business in the United States, and not for the good.

Senator Greene: Can Americans reposition trucks in Canada?

Mr. Laskowski: No, but like anything, there is creativity. Enforcement is always the judge of what can be allowed. Enforcement in the United States on this issue is vigilant; in Canada, not so much.

The Chair: The Americans have finally figured out a way to get around free trade by doing what the provinces do here.

Mr. Laskowski: Senator Wallin would know more about this from her previous life in her role and responsibility as the lead negotiator with several of the states in the federal government. The Americans, we found over time, only respond to our asks when it means something for their side.

For example, it has been illegal since 9/11 to traverse through the United States, for example, from Toronto to Vancouver using the U.S. route because it is shorter. Why burn fuel when do you don't have to? That has been illegal since 9/11, by the Americans. We, on the other hand, allowed it until the Canadian Trucking Alliance stepped up, and we put a lot of pressure and said: Well, I don't know how you're going to get freight to Alaska, because that's an in transit route. We're going to say if it's good for the goose, it's good for the gander. The same thing for U.S.-Michigan mail. It comes through Ontario. That got their attention. I think there is a lesson in both of those that when it matters to them, they'll negotiate.

The Chair: That will help trucking to the east because right now you're forced to go through Ontario rather than taking the easier route through Detroit.

Mr. Laskowski: Absolutely. For Americans, just so senators understand, our registration fees and fuel taxes are prorated based on where we travel. So if we travel through the U.S. states, they get the appropriate portion of the fuel tax and the registration fee of that truck going through their jurisdiction. So there's money in it for everyone.

Senator Massicotte: On the issue of trucking, you say the Canadian truck can deliver, and your words were that you can come back with the same freight?

Mr. Laskowski: With another load. You can go to another customer but must return back home.

Senator Day: Mr. Laskowski, you indicated the National Safety Code was developed in 1988-89. Was this developed by all the provinces and the federal government, or was this imposed on the provinces by the federal government?

Mr. Laskowski: It's a process that involves Transport Canada as the chair and the various provinces from the various ministries as committee members, so it is a well-organized process. The industry is allowed to participate, and provinces participate. As technology and rules evolve, you develop what I will call a "gold standard'' about how the rules should be written. There are 16 of them. And then you go back home to your own jurisdiction understanding the language and how things may fit. But in essence that becomes a boiler plate. The process is open, and it's not a question of the rules within the National Safety Code. It's a matter of implementation.

Senator Day: It seems strange that if there is agreement and the provinces participated in this agreement at the national level, that they go back home and don't necessarily implement it. You indicated the problem is not implementing some of these code provisions.

Mr. Laskowski: Correct, senator. That's why I have grey hair and I'm balding.

Senator Day: But they were developed without objection at the national level.

Mr. Laskowski: Correct, sir.

Senator Day: You were talking with the chair about this electronic logging device. You indicate that it's coming into force in 2019.

Mr. Laskowski: Correct.

Senator Day: There is not going to be a problem with that? Because there is some indication that maybe some of the provinces won't adopt this even though it has been agreed nationally to adopt it by 2019.

Mr. Laskowski: There is a fear that history will repeat itself, based on the practices and responses over the last twenty years of the provinces. I find it difficult, senator, that in 2016, if I was a minister of transportation, I wouldn't be embracing this technology as a measure to improve highway safety in my jurisdiction. Yet, to date we only have, I believe, two provincial ministers who have actually embraced this technology publicly.

Senator Day: My final question is to Ms. Proud and Mr. Harrington. It deals with your reference to the expedited way that naloxone was dealt with in terms of bypassing certain rules. I think I heard Mr. Harrington indicate that we have a proposal to maybe use that process again. Are you able to share your proposal with us?

Mr. Harrington: Yes. Because the WTO notification is about allowing other manufacturers who would be affected by the decision to be notified six months in advance, we proposed to Health Canada to remove just the product that has been applied for by the innovator from the prescription drug list during that six-month notification period, and at the end of the six-month notification period then move that entire ingredient, which would then impact the other manufacturers. It's a simple and, we think, elegant solution to the problem that is completely consistent with WTO's intent.

Senator Day: That proposal has been made by your association, Ms. Proud?

Ms. Proud: It has. We've been talking to Health Canada for some time about this. We have a large graphic representation of the current system in Canada we have been developing over some months, as well as a proposed system that we would like to see in place. We would be very happy to share that with the committee. It details the various aspects, because it is a complex system, and we will be happy to share that with you.

I've only been in my role for two years, and when my team was explaining this issue to me, I didn't believe that it could be this insane with regard to the products, but I quickly learned that they were in fact telling me the truth. I think even when we talk to the various levels of government, both federally and provincially, everyone sort of says, yes, it's a bit crazy and we'd like to see some changes.

What we're really hoping from today is that if there is something in a Senate report that speaks to it, maybe that would be a catalyst for some change. We know it just takes one little thing, one sort of priority or a Speech from the Throne or something like that to put it on the agenda. If this were to be put on an agenda for P-T ministers of health to look at, then we can make some progress. We'd be happy to share the documentation we have with you and certainly feed any further information you might be interested in.

The Chair: Thank you very much, witnesses. This was a great session, a great way to start the morning.

We will now welcome one, Mr. Daniel Schwanen, Vice President, Research, C.D. Howe Institute. Thank you for coming, and please begin, Mr. Schwanen.

Daniel Schwanen, Vice President, Research, C.D. Howe Institute: Thank you, honourable senators, for your invitation to comment on some issues around internal trade in Canada.

The C.D. Howe Institute is an independent public policy think tank. We have hundreds of members and fellows across the country that advise us on what they think the important economic issues are that affect the lives of Canadians, and we try to research them and analyze them and come up with recommendations to improve Canada's economic performance and the standard of living of Canadians.

Barriers to commerce and to plying one's trade within Canada have accumulated over many decades, due mostly to the proliferation of programs and regulations in our various Canadian jurisdictions. A lot of that is accident. Some of that is protectionism and some of that is willful, but a lot of that just occurred by accident over many decades across the many areas in which governments exercise their jurisdiction.

I really enjoyed the discussion on barriers versus irritants. The expression that we like and that I think most captures them — apart from the straightforward barriers that are protectionist barriers and discrimination against other Canadians — the expression that we use at C.D. Howe is the "tyranny of small differences.'' It's the tyranny of differences that are actually really small and completely unnecessary for governments, federal or provincial, to actually achieve their legitimate policy goals, such as consumer protection, et cetera. That's how we look at this.

There has also been debate about the cost of these discriminatory practices and small differences. Over the decades that I've been looking at this, there have been wide differences in these estimates of what these costs are.

One thing I would point out is that any estimate that comes to you is usually an estimate of what it has cost someone to overcome, to actually manage to do business in spite of the barriers. What were the additional costs they had to pay? What were the additional costs to consumers? You never get the costs of the seven-year delays that were just discussed in terms of getting drugs to market. You never get the cost of the business that is not done at all because people just look at the barriers and say "I'm not going to bother reaching out to customers, even though I know I would offer a better service. It's too complicated. I have to register my business in another province,'' et cetera. There's a caveat there.

Those invisible costs fall mostly on small business and individual Canadians. A small business does not have the luxury, or it's more difficult for small business, to access foreign markets where barriers typically, even to access the United States, are higher. To grow beyond their original provincial jurisdiction, they really need access to the Canadian domestic market.

In fact, that's why the Canadian domestic market was created, to encourage business growth and also to provide Canadians with more economic security. If there are not a lot of jobs in your chosen profession or skill in a particular jurisdiction but more in another jurisdiction, you have that added security or risk reduction of being able to have your skills or qualifications recognized in another jurisdiction.

Those are the invisible benefits, but they are very real. In a sense, that's why, in my view, apart from the broader efficiency questions and the reduction of costs to consumers that we just heard from the transportation and the drug industry, there are also those invisible costs — the lack of dynamism for small business, the lack of protection for workers being able to move where the jobs are.

That's just the broad picture. I want to say I've been looking at this for too long, and I want to emphasize something positive. There has been a change in mindset at the provincial level, particularly since the negotiation of the Comprehensive Economic and Trade Agreement with the European Union, in which the provinces were involved. I do hear and do believe that they're going to come out with successful efforts — the provinces and territories have been at it for a couple of years — to at least improve on some of the remaining shortcomings. There are many. Even though we signed the Agreement on Internal Trade in 1994, there are many barriers remaining under this agreement.

The provinces and territories have taken the experience of CETA to look, for example, at how to complete the internal Canadian market in terms of access to procurement. It makes no sense to have better access for Europeans to any given provincial procurement market than for someone from another province, for example. They're going to harmonize those international rules; make sure that the purchasing manager in the province doesn't have 30 different sets of rules, one with CETA, one with NAFTA, one with the Agreement on Internal Trade, to comply with; make sure there are no greater barriers vis-à-vis Canadians than there are vis-à-vis suppliers that want to access the procurement market from another country; and lower the threshold at which Canadians have non-discriminatory access to procurement contracts at the provincial level. That's one example.

I don't have inside knowledge exactly. I think that's exactly what they're discussing right now, to actually build and improve on the Agreement on Internal Trade, building on the international negotiation experience. It makes no sense to raise our barriers against Canadians higher than against foreigners. We have all heard of this experience. Let's plow ahead with reducing even further barriers to access to procurement contracts, for example.

I think that, under the AIT, the provinces have made genuine improvements to the mutual recognition of skills and professional qualifications in a number of areas, but not a lot in terms of harmonized standards. There have been some. You've heard today that one of the principal irritants remaining is the whole regulatory framework, or perhaps lack thereof, across Canada that provides for some regulatory harmonization, the absence of which is very costly to business and consumers.

I probably shouldn't believe every communiqué I read or rumour I hear, but I think that some progress is being accomplished at the provincial and territorial levels. I think something will be announced this year. Nevertheless, it won't deal with all the remaining barriers, including some of the ones you heard about this morning.

One barrier that likely will remain, and to me is a particularly poignant illustration, is the need for Canadian businesses to separately register with provincial registrars in each province in which they want to do business. That is bizarre. This is a problem that other federal countries, very decentralized countries like Switzerland and a bit more centralized like Australia, have fixed. It's a problem for which technical solutions exist despite the many different provincial programs and regulations that do require businesses or provinces or provincial regulators to have access to information about a business operating in your province. That's a legitimate goal. In the domain of tyranny of small differences is the fact that you have to register in each separate province in order to do business. In Alberta, you even have to be listed in the phone book. How quaint.

There are actually only two provinces, New Brunswick and Nova Scotia, that have this mutual recognition: If you're registered in one province, you can operate in the other and vice versa without any need to reregister. I could speak to that at some length. It's a perfect example of a barrier that could be addressed. It doesn't cost hundreds of millions of dollars annually to the Canadian economy — at most tens of millions. Still, it's incomprehensible to me that in this day and age of information in the cloud and so on you have to register separately in all these jurisdictions in order to do business. I'm repeating myself.

The Chair: Would you have to file in all provinces every year?

Mr. Schwanen: Yes. Sometimes you need to have a representative. If you're from another province, you need to file through someone in the province, a local law firm. All these barriers have their own constituencies in terms of people that get to work or some of the bureaucracies involved, but I won't go there.

Another poignant example is a bit trickier, but it's real: The federal government's supportive and even decisive role in maintaining internal barriers. I'm encouraging the committee to maybe look in that direction as well, as a recent judgment handed down recently in New Brunswick provincial court reminded us. The pre-eminent example, and I have to mention this, is the federal support for supply management with individual quotas in each province. That could not exist without federal legislation.

I don't want to be too dogmatic about this, but I think, and in closing I will say, that the federal government could be more muscularly proactive — did I write this? — in ensuring that federal legislation conforms to section 121, for one thing, and in examining federal legislation to see if it does conform, for another.

In addition, use the trade and commerce powers to at least forbid provinces to maintain barriers against other Canadians that are higher than barriers maintained against non-Canadians. Why should that be the topic of federal- provincial negotiations? It should be a principle of our economic union that the federal government can enforce. I could go on. The federal power has been involved in the past to resolve some of our surface transportation problems, for example, interprovincial or intercity bus back in the 1980s. Some of the issues we heard about earlier this morning could be addressed in a more proactive way in terms of the federal responsibilities for the economic union.

The Chair: Thank you very much. We now have Robert Carberry, Assistant Secretary, Canada-United States Regulatory Cooperation Council; and we also have Philippe Massé, Director General, Labour Market Integration, Skills and Employment Branch. Mr. Carberry.

Robert Carberry, Assistant Secretary, Canada-United States Regulatory Cooperation Council, Treasury Board of Canada Secretariat: Thanks very much. I believe that Karen Proud was just here and she referred to the show in Washington last week. That was actually our show; so we survived.

I'll just read some opening remarks. They're not overly long so as to leave as much time as possible for questions.

In February 2011, the Prime Minister of Canada and the President of the United States announced the creation of this Regulatory Cooperation Council. Its goal was to align the regulatory systems between the two countries.

This primarily touched the manufacturing and supply chains, recognizing that there were things impacting the cost of production in moving products back and forth between our two countries that were impeding economic competitiveness for both countries. The intent was to get at that.

A secretariat was formed on both sides of the border to work together and advance this regulatory cooperation effort and to boost North American trade and competitiveness. I've been the lead for all aspects of the Canadian secretariat since that time. My counterpart is in the Executive Office Branch of the White House. They've proven to be really competent, hard-driving partners over the last five years.

Canada and the U.S. have the world's most integrated manufacturing relationship and market. However, there are two independent regulatory systems that impact on all supply chains and products, resulting in duplicative and unnecessary costs and requirements for manufacturers, double the work for a number of regulators and impact on consumers. Simply put, between the Canadian and the U.S. regulators, we scrutinize and do things twice. The goal of regulatory cooperation is to avoid the unnecessary requirements and steps for businesses and to generate benefits for business, consumers and the regulators themselves.

Work began through the creation of an initial action plan that we settled on about 29 work streams. As we worked on those 29, we knew there would be another 229 created, but we needed to start somewhere. The work included initiatives in 14 federal departments on both sides of the border, Canada and the U.S., and covered a broad range of health-, safety-, and environment-related activities.

The first action plan was intended as a first step only to initiate a new kind of dialogue and to generate some lessons learned. I was the person who met with all Canadian regulatory departments and the U.S. regulatory departments. When I said I was there to talk about economic competitiveness, I had the same answer from every department on both sides of the border, which was: "We do health and safety work; we have no impact on the economy.'' That has substantially changed over the last five years. When I say we want to get a new dialogue going, that's what it was.

It also allowed us for the first period of the initial action plan time to consider how to achieve systemic Canada-U.S. regulatory cooperation rather than having to do a series of initiatives as we have done in the past. When we put out the initial action plan, I'd inserted a phrase called "We will work towards creation of ongoing alignment mechanisms.'' When people came to me and asked what they were, I'd leave the room quickly. I had the notion but didn't know what it would look like, but we got that in the initial time period.

The initial action plan actually did a lot for us. It initiated this new dialogue between regulators. It added the new lens and legitimatized discussion of economic consequences as the health and safety outcomes were being pursued — not seen as contrary to health and safety outcomes, which was important. It clarified the various categories of benefits that can be realized, and they're in three buckets: Business, consumers and the regulators themselves.

It demonstrated that the focus of our work is rarely on the regulation itself; it's really on how we implement it. I've said this a number of times. The same regulation in Canada and the U.S. would still require us doing everything twice, so we have to get at some of the implementation procedures.

It also showed us that there were some very real barriers and challenges for systemic regulatory cooperation in terms of how we might want to jointly fund something or the information we might share and the use of that information, so we're working on some of those.

Doing it in an aggregate created a considerable amount of momentum, which was very helpful as well. It recognized the important role of stakeholders, which is embedded going forward. It successfully demonstrated the proof of concept through a bunch of individual initiatives that really worked, and it allowed us to figure out what kind of a model would have to be put in place to achieve this ongoing cooperation.

A lot of consideration went into that latter aspect on how we do this permanently. It became clear that misalignment wasn't occurring because we had different regulatory outcomes in mind between Canada and the U.S.; it's simply that we haven't taken the time to work on achieving those outcomes in the same way and doing it together. There were no structured formal mechanisms to plan together and align our directions and efforts.

I tell a story sometimes around this: Since the time of covered wagons, we have been integrating our economies. We've been sharing in the production and manufacturing of things. We've been addressing common issues that we face from offshore. But at the time we're doing that, we were also building two world-class regulatory systems, but the regulatory systems don't recognize the quality of work being done in the other jurisdiction. There were no bridges built. There was no anticipation there would be a willing and competent partner on the other side of the border.

When I took my son to the Alamo a few years ago, because I waited too long before spring break to buy picture tickets to Florida, I took him down there. It struck me that I wasn't afraid to breathe the air, drink the water, eat the food, rent and drive a vehicle, or buy over-the-counter drugs, because I knew that the regulatory system was working. I know that when my U.S. colleagues come to Canada, they feel the same way. But the two things that don't recognize that are our regulatory systems. That's what we've been working at: Getting our regulatory systems and regulators to recognize that, actually, there is a good job being done on the other side of the border and we don't have to do everything twice.

These lessons learned and understandings led to a joint forward plan being released in 2014. That was set as a transition into a new Canada-U.S. regulatory relationship. The forward plan was significantly different from the initial one, which picked on these topical issues — it was very issue-centric. That was the best way to start; we had to get a dialogue started somewhere. But we really put this in place to create a foundation for a more institutionalized, regulatory, cooperation effort between the two countries.

We did three things in the forward plan. We asked for public agreements between similarly mandated agencies in Canada and the U.S. for them to take the leadership role in regulatory cooperation — it's not the role of the centre all the time, and they need to embrace it. They would actually be doing plans on an annual basis, and they would do it through the creation of new senior-level committees — the Health Canadas and FDAs, and the CFIAs and the USDAs. Those kinds of bundles have formed. We have 16 of those partnerships in place.

We also moved from an individual-issues approach to one that has longer-term commitments. Instead of fixing two motor vehicle safety standards, we said, "In these bundle of standards, we're going to align all of them going forward. That may take some time, but we're making that level of commitment, and we'll cast that in annual action plans so we can actually show what we're doing on an annual basis.'' We also formalized a role for the stakeholders at the strategic and technical levels.

We got these agreements in place. Last week, the session Karen was talking about, was the kicking off of these senior-level committees and the departments taking on responsibility for that planning cycle. We actually had over 420 registered participants in this event — senior regulators, but mostly industry at the event. When I started this, we had to get people in a room five at a time. This is a big change in five years. There's been a lot of momentum. The room has changed. The flavour has changed.

Importantly, we are now looking at a short-, medium- and long-term focus. We learned that once a regulation is already being proposed, it's very hard to unplug it. We need people to be working together and thinking about the next generation of regulation, the new technologies coming down the road and how might we take those on together — the nanotechnology, the synth-bios — those kind of things.

On March 10, Prime Minister Trudeau and the President met again, and we added a few more enhancements to our approach where we're going to create an industry consumer and expert group, so we can talk to them about where we want to take this and ensure there's an emphasis on consumer issues going forward. We're going to include regulatory department officials into the overall governance so they actually have skin in the game. We put a call out to generate the most ambitious work plan by July 1 of this year that's existed between Canada and the U.S. The first one was 29, and the last one was about 120 items. We want this one to be even bigger, and it's new departments that are loading in.

As another point, as we've been doing this between Canada and the U.S. over the last five years, international regulatory cooperation has emerged to be a real, interesting and important international aspect of work going forward. The WTO technical barriers to trade and sanitary and phytosanitary standards, requirements and tariffs are all kind of dealt with. Now comes regulatory cooperation, where we have existing market channels and those types of things. We're going to use this to remove some unnecessary costs from the system.

There's a lot of dialogue going on about it. The Canadian model is held in the highest regard. This is the one folks want to see applied elsewhere, because it just makes good common sense. We should be very proud of what we've been able to do. We should be proud of the fact that, with the U.S., we've actually held the pen; we've had the thought leadership on this going forward. It has been a very unique exercise and experience for someone such as me, after arguing with the U.S. over so many things over a career of 37 years.

I was actually vice-president of the Canadian Food Inspection Agency, so all the BSE work, the P.E.I. potato ban — all those things — I was in the centre of that. Now, I'm building bridges. I like this a lot better.

That's where we're at. I open up to any questions you may have.

The Chair: Thank you, Mr. Carberry. Mr. Massé, please go ahead.

[Translation]

Philippe Massé, Director General, Labour Market Integration, Skills and Employment Branch, Employment and Social Development Canada (EDSC): Hello, my name is Philippe Massé and I am the Director General of the Labour Market Integration Directorate at Employment and Social Development Canada.

Part of my responsibilities is to cooperate with provincial and territorial governments to foster labour mobility in Canada. I will speak briefly about these activities and explain how they are governed within the Forum of Labour Market Ministers (FLMM). In particular, I would like to talk about the evolution of labour mobility in the context of the Agreement on Internal Trade (AIT). There are structures in place to support its implementation. I will also discuss the Red Seal Program and the ongoing work of the Canadian Council of Directors of Apprenticeship (CCDA) to promote mobility within the skilled trades in Canada.

[English]

Let me provide you some broad context on the overall mobility situation in Canada. Labour mobility is an important element of a well-functioning labour market and economy, as it facilitates the efficient redistribution of workers from areas of low employment demands to high demands, and it enables Canadians to take advantage of job opportunities.

The majority of Canadians who move permanently each year — about 1.2 million — actually move within a province or territory. There are another 300,000 that move across provincial borders. About 20 per cent of those who go across borders move for the main reason of a job. There is also, of course, a significant number of workers who reside in one province or territory and work in another as part of their ongoing business or who move temporarily to take advantage of opportunities in other jurisdictions.

The majority of people who work in Canada are employed in non-regulated occupations. It's estimated that about 15 to 20 per cent of those employed work in regulated occupations, and this involves working in a field that requires licences to be recognized by a regulatory body in the province or territory they are destined to work.

The Agreement on Internal Trade, as you know, was signed in 1994 to increase the movement of goods and labour across Canada. Chapter 7 is where labour mobility is covered. Although it's specifically designed to eliminate or reduce interprovincial barriers that restrict or impair mobility in Canada, it did not start out this way. So for over a decade, mobility still remained quite fragmented across jurisdictions and occupations. There wasn't a lot of progress toward achieving full interjurisdictional mobility. Until 2009, many occupations were unable to bridge differences across the standards that existed across the jurisdictions.

In 2009, there were amendments made to chapter 7 that strengthened the mobility of regulated workers by establishing the core principle of certificate-to-certificate recognition. As the name suggests, it allows workers certified for a regulated occupation in one province or territory to be certified for that occupation anywhere in Canada without any additional material training, experience or assessments.

The amendments essentially reversed the burden of proof of competencies from workers to regulators. Provinces and territories must demonstrate why a certified worker from one jurisdiction isn't qualified to be licensed in their jurisdiction. It doesn't actually bind the provinces' hands, and governments can approve exceptions to mobility in certain occupations. For example, in the legal field, a lawyer from Quebec who is trained in civil law and wants to work in another province must undergo additional training in the common law field to be allowed to practice. They're not meant to be restrictive in terms of aggregating barriers, but they are ways to communicate to Canadians what additional requirements might be required for a specific occupation that need to be met The idea is that these are posted. They are available for Canadians to be able to have the information. There are 44 exceptions that exist, currently, covering 14 occupations.

Implementation of chapter 7 is a good example of federal-provincial collaboration, and the responsibility rests with the Forum of Labour Market Ministers, a ministerial committee co-chaired between the Minister of Employment and Social Development and a rotating provincial co-chair serving two-year terms. The current co-chair is from Quebec. Within the committee, we have a Labour Mobility Coordinating Group responsible for implementing chapter 7. We work together through a number of subcommittees that review and talk about policy interpretations, mobility exceptions between jurisdictions and communication strategies to ensure that the information is available to regulators as well as workers.

The FLMM reports annually to the Committee on Internal Trade on the status of implementation. Generally there is consensus that the chapter is working well. I can't comment on the state of the negotiations currently are, but there is no indication by jurisdictions that there is a desire to make fundamental changes to the way that chapter works. It's based on that negative list approach, which I'm sure you've heard a lot about during these hearings, that covers all regulated occupations and is seen as a model that could be or should be reflected in the broader agreement.

[Translation]

I would like to talk about the Red Seal Program. In general, it is Canada's standard of excellence for the skilled trades, making it possible for tradespeople to have their skills recognized across Canada.

Apprenticeship training and trade certification is an industry-driven system under provincial and territorial jurisdiction. The Red Seal has been in place since the early 1950s and has been instrumental in developing pan-Canadian standards and examinations that provide the foundation for skilled trades mobility. There are 57 Red Seal trades, which account for 77 per cent of all registered apprentices.

Employment and Social Development Canada works with the provinces and territories to manage and deliver the Red Seal Program through the Canadian Council of Directors of Apprenticeship (CCDA).

The core of the Red Seal Program lies in quality interprovincial standards for industry, against which tradespeople can be trained and assessed. The CCDA collaborates with industries and other professionals across Canada to build these standards.

The Red Seal Program's collaborative approach to setting national standards and examinations enables all provinces and territories to train apprentices to the same standard for certification in the skilled trades.

This creates a solid foundation to facilitate labour mobility, since trade certificates bearing the Red Seal endorsement are automatically recognized across Canada. Furthermore, chapter 7 of the Agreement on Internal Trade provides for certified workers in non-Red Seal trades to have their certification recognized across jurisdictions.

[English]

To further improve mobility in the trades, the Government of Canada and the provinces and territories are now working together with industry to harmonize apprenticeship training. We've covered journey persons and certifications, and now we're going down to the apprentices themselves to better harmonize the training that's happening and improve the mobility of apprentices.

There are four areas that the provinces are focusing on: use of the trade name so everyone uses the same name; the total number of training hours; the number of technical training levels, which is typically three or four for each trade; and the sequencing of the in-school training, where the same course is given in the same year.

This is one of the priorities of the Forum of Labour Market Ministers. They announced significant progress last July when the first 10 trades will be implemented by September of this year in most jurisdictions, in 2016, and we're looking forward to harmonizing two thirds of Red Seal occupations by 2017, which would be 30 of the 57. There is strong momentum and collaboration with industry, and it is a continuing progress.

In conclusion, the mobility in Canada under the AIT generally works well. It's a strong example of intergovernmental collaboration, both in the way it has evolved and in the way it's being implemented.

The Red Seal Program, which is older than chapter 7, continues to be vital and relevant due to strong industry buy- in to manage and deliver the current program and to move forward on harmonizing the apprenticeship training. Overall, these measures are helping to build a stronger and more effective labour market.

I'm happy to answer any questions.

The Chair: Thank you, Mr. Massé.

Senator Wallin: Mr. Carberry, I just have a point of clarification. If I understand correctly, you're saying the American regulatory approach — how they deal with the states, et cetera — should be used or could be used as a template here, that it works better. On the other hand, the Canadian model for discussing it is held as the gold standard, and that's the one on which you have the pen or others have the pen. Am I correct on that?

Mr. Carberry: Not quite. Our work has been strictly federal to federal. I'd have to say, when I look at the array of state regulations and those kinds of things, that the U.S. probably has a tougher row to hoe than Canada.

But I have talked to the provinces about opportunities that are related to what we're trying to do federally between Canada and the U.S. There are two things. One is in terms of how you would feed a provincial or territorial agenda, and the other is how you might approach this.

Our formula has been successful, which has been a surprise to a lot of folks. In terms of feeding the agenda, I told them two things. First, if there are things we have gone to the trouble of aligning federally between the two countries, such as electrical efficiency standards for appliances, move and adopt those. Creating a new one provincially is not particularly helpful. If you can follow the federal lead in some of these things where there is a predominance of federal jurisdiction and federal agencies, that would be extremely helpful. Those are things like environmental and emissions standards and so forth.

Second, we had a lot of things that we had industry asking us to take on that we weren't able to do because there was too much state and provincial legislation and regulation involved, such as trucks. They wanted us to look at trucks on highways. We couldn't go there; there was just too much. There is a federal aspect to that as well. So we would ask they clear the track and set that as a priority so that the federal side can work on it with the U.S. counterparts. That would be helpful as well.

In terms of the lessons that I think are applicable in both situations and probably with other countries, we took on things where there was willingness. You're not going to be able to force any of this stuff on anyone. You need two willing partners on both sides, whether it's provinces, territories or federal governments.

We also looked at trying to avoid adopting a standard from one country over the other one. We looked for opportunities where both needed to improve, because then you can work on it together and end up in the same place and no one is accused of adopting the other's standards and losing sovereignty or sliding to some lower level that someone interprets. We've been very careful in our exercise to always make it about improving it and doing that together. That has been quite helpful as well. We've avoided the whole concept of adoption and it has worked well.

The third point is that it doesn't have to be everyone. I know I shocked someone when I said that. We have a situation now before us — in the cosmetics industry. You have six countries that represent 65 per cent of the market: Canada, U.S., Japan, Brazil, EU, and China as an observer. They have come up with a standard that would work well for everyone. That isn't confined by any individual FTA, so you don't have to force every country in the FTA to get into it. It's not an international standard; it's a bit of a bundle. If we can get willingness for that, you no longer need six product approvals and six different formulations and all those kinds of things. We're looking for where there is willingness and a real opportunity. That's where we're trying to press our work.

Senator Wallin: That is most helpful.

Mr. Schwanen, you talked about the role of the federal government, and we've heard lots of testimony that sometimes they are part of the problem rather than part of the solution, and now we've seen the decision in New Brunswick, et cetera. You, however, seem to me to be quite optimistic about the potential of a deal. Did I misread that, or were you just hopeful?

Mr. Schwanen: No, you didn't misread me.

Senator Wallin: At what point, though — we've had this discussion with a couple of witnesses — would we determine you have had all the time in the world and this doesn't seem to be working, so let's try some other things like a Supreme Court reference, or whatever it is, on either the larger question or the specific issue to try to push it?

Mr. Schwanen: Thank you. I think I was optimistic about a deal on some of the issues outstanding. I was referring to government procurement, and I did mention that on labour mobility in particular, I think that is a single achievement of the Agreement on Internal Trade, albeit it took us so long to get to the point where we are now.

To answer your question, first indirectly, when the Agreement on Internal Trade was signed, it was one of those situations where all the provinces, including at the time Mr. Parizeau, signed on the dotted line and said, "We're not going to discriminate,'' et cetera.

As things dragged on, whether it was on labour mobility, of course, we got there on procurement and regulatory harmonization, particularly with the colour of margarine and so forth, there were panels that actually opined on provincial rules, but the rulings of the panels were not observed because they didn't have the power to force them to implement the findings of the panels or the recommendations.

With respect to the AIT, I was thinking we have all these governments that have signed on the dotted line, and the agreement they signed also says that it doesn't change any of their constitutional responsibilities, which then goes back to the federal government. They've all signed on, and now you even have the moral authority to actually exercise your constitutional power on trade and commerce. This is a major impediment to trade here, especially in line with our international agreements. Let's implement what we all said we would implement. I would argue that that goes to transport and so on.

In answer to your question, the time was maybe in 1994 but it's even more so now that we do have cooperation and so on. We don't have the carrot of money as some of the governments in Australia and the U.S. have. Our provinces are big spenders and big revenue raisers on their own. But since you guys all agreed on the principles, we are going to be in charge and make sure you do follow up and enforce the Constitution essentially.

So it does need leadership, and it has to be at the federal level. There is an opportunity now that there is an agreement on principle on so many of these things.

Senator Day: Mr. Carberry, I understood from your presentation and what you have just indicated to Senator Wallin that this isn't United States to Canada and that level of regulatory overlap, but we have been hearing here — and we're looking at interprovincial trade — that the major problem is regulatory overlap and incompatibility within the provinces in Canada. You indicated the United States has a major challenge there as well. Is there any equivalent multiple state organization in the United States similar to your Regulatory Cooperation Council? Can you tell us a little bit about that if there is such a thing going on?

Mr. Carberry: As far as I know, there is no equivalent to what industry is trying to do right now with the Agreement on Internal Trade.

As a corollary to what we're doing, we have had a lot of industries come to us that were primarily governed at the provincial level, such as plumbing, heating and electrical things. They came to us, and there has been quite a movement hitching their tail onto our kite by saying this is a new thrust between the countries, and there has been considerable work going on on voluntary standards. Voluntary standards are the ones being adopted into codes at the provincial level. I've seen good progress, but it has been the Canadian organizations that have taken that to the U.S. and are trying to drive it.

There is a linkage with what the SCC and their various accredited bodies are trying to do, so there is effort going on, but not directly through ours; it's really being driven by industry. But in terms of a federal-state construct in the U.S., no, there is nothing similar going on right now. At the federal level, this is an incredibly target-rich environment, so there are already a lot of positive things that can happen.

Senator Day: Did you make the comment that Canada is a model?

Mr. Carberry: Yes.

Senator Day: I understood that. Is that in the area of the industry-driven side of things?

Mr. Carberry: No, mostly in terms of what we're doing federal to federal. There are a couple of other models. There is an EU model, but that's where they put an overarching control over the member countries. We're not going to do that with anyone, and it's not sustainable in terms of getting going with other countries. Australia and New Zealand made physical changes to the some of the departments. They have their departments report jointly to both parliaments. We can't do that with the U.S. It would be hard to turn them into Westminster-style governments. That would take me weeks.

Ours is focused on the regulator and the market channels in a big role for the stakeholders. I think that's applicable everywhere. Every time I go to the U.S., the EU Commission is all over us: "Where is your thinking now?'' The Canada-U.S. model is seen as being the most successful exercise in this space in the last five or ten years, and there are a lot of folks interested in what we're doing, but I'm talking about the federal-to-federal aspect.

Senator Day: Mr. Massé, in one of your comments as you were developing the new initiative with respect to apprenticeship, similar to the Red Seal Program for tradesmen, and then you move into the apprenticeship program in a similar coordinated fashion, I found this in your statement: "As registered apprentices are not covered under chapter 7 of the AIT,'' then things can move faster. I found that quite interesting. Can you tell us what's the problem with chapter 7 of the AIT? This Red Seal Program has developed through industry initiative outside of chapter 7. Do we need chapter 7?

Mr. Massé: It's a question now that chapter 7 exists, and the Red Seal existed since 1959, so it predates chapter 7. It was at the desire of industry to get together to develop those national standards and identify the standards and the basic competencies required to exercise a trade in Canada. Provinces and the federal government got together to try to support it at that time, and over the years it's grown to 57 trades. These are trades that are national in scope and that have a significant number of individuals involved in them, and chapter 7 only came after. These are all people that are certified. They've completed their apprenticeship, so they're certified journey persons, fully certified, and there was a desire to allow that mobility to occur in the trades. It hasn't evolved in the same way in other fields, so chapter 7 covers the rest. There is still value in the Red Seal because technically the Red Seal is not required. Any worker with their trade certificate, whether they've done the Red Seal exam which is on top their provincial certification, can work in any province. But because it's so long-standing and employers recognize it, they actually look for it.

Senator Day: You seem to be suggesting that things can be done faster and better outside of the AIT chapter 7. Am I misreading your comment, where you say, "As registered apprentices are not covered under Chapter 7, harmonization will make it easier for the apprentices to move . . .''

Mr. Massé: There is a distinction to be made between the apprentices and the journey persons who have received their certification. As the apprentices are not certified, they don't have a certification that could apply to a different location. They are employees. They need to have a job. They need to be a registered apprentice in the province. They can work in another province. That's not a problem. With the chapter 7, because they don't have a certification, there is nothing yet to recognize.

The biggest barrier to apprentice mobility is the fact that the training itself varies from one province to another, so some of the curriculum in some provinces means you learn one task or one aspect in your first year of your apprenticeship; in others, it's the second year. So an apprentice who moves to a different jurisdiction sometimes has to take courses over or their prior learning is not recognized adequately. The idea is for the apprentices to be able to move. We're trying to harmonize both the number of hours they need to take, the sequencing of those training courses and the number of levels to be achieved. For an electrician, it's four years.

Senator Day: Outside of AIT?

Mr. Massé: Yes. AIT covers certified workers. Apprentices are still in their studying period, even though it's very much a work-based occupation. I'm sorry if that wasn't clear.

[Translation]

Senator Massicotte: Congratulations, Mr. Massé. I think we are making real progress on workforce mobility in Canada, and that's very important. Economically, too, it is very important to help newcomers integrate in Canada. We heard from engineers about a month and a half ago, and they explained the procedure to follow for engineers who come from abroad. They can visit the website of the Ordre des ingénieurs du Québec, where a program can tell them, according to the type of degree they have, whether they have to attend classes to become members of the Ordre des ingénieurs and what the requirements are, or whether they have academic gaps.

Coincidentally, I happened to talk with an engineer from France, who is staying elsewhere at the moment. We tried the exercise. I recommended that he visit the Ordre des ingénieurs website and put in his information to determine whether he had any gaps in his academic record. However, the program did not work at all. We contacted the Ordre des ingénieurs du Québec, and they confirmed that it does not work. They required $900 for reviewing his résumé and giving him a report. I think this approach is not very welcoming to immigrants. It seems that we are missing the mark on something very important. Do you have any comments on that?

Mr. Massé: As you say, recognizing foreign qualifications is very important to help immigrants integrate. Every year, we select skilled immigrants who hope to work in their field of study or professional qualification.

Our department has run a program for ten years known as the Foreign Credential Recognition Program. We work with professional bodies to help them develop systems and mechanisms to improve their credentials recognition process and enable them to be more transparent with respect to requirements in Canada, including what that means in terms of the steps to be followed. It is still an ongoing process. We are holding further discussions in areas where provincial jurisdictions differ. We try to get national associations to come to the table and work with their partners.

It's not perfect, and this approach is more developed in some areas than in others. All I can say is that the example you mentioned is not familiar to me, but this is an issue we are trying to advance. Labour market ministers are aware of this and are allocating resources to support professional bodies and to achieve better outcomes. However, things are still not perfect, and it is very frustrating for immigrants to not be able to work in their occupation using the skills they acquired abroad. This represents a productivity loss and an economic loss for Canada.

Senator Massicotte: As reported in the newspapers, in Quebec, and particularly in the case of medical doctors, professionals have a natural tendency, which is understandable if selfish on their part, to protect themselves. If people with the right qualifications are allowed to practice their occupation in Canada, this increases supply, which could have financial consequences. It should not be assumed that professionals will always act in an absolutely correct and open manner. There should be a government incentive, possibly accompanied by penalties. The federal and provincial governments have an important role to play here.

Mr. Massé: In fact, the provinces are responsible for regulating occupations in Canada. We act as facilitators and motivators, and we try to find ways to support the systems. We try to work together to keep moving in the right direction.

Still, many occupations have seen progress over the last 10 years. Nurses, in particular, have organized at a national level and are able to provide a single point of entry for immigrants, instead of 12 or 13. Of course, there is still work to be done, and we are cooperating with all professional bodies and the provinces to move things forward.

Senator Massicotte: Good luck, and thank you.

[English]

The Chair: Are there any other questions? Thank you very much, witnesses. That was very good and, amazingly, we actually ended on time.

This is the last of the hearings on interprovincial trade. Next Wednesday, we will have a working session for putting the report together. I think we'll be sending out a list of all the recommendations for you to sort through at once, either Friday or Monday, but certainly before the Wednesday meeting. If you could have a look, it would be helpful to give direction to begin putting the report together.

Senator Greene: There was a recommendation made by somebody — I can't remember who — this afternoon about section 121 and how the federal government should investigate to see if their laws are consistent with it. I thought that was an excellent idea.

The Chair: I'm sure it will be part of the comprehensive package, but we won't be able to include all of them. We will have to set priorities, which is what we will start doing Wednesday. Give it some thought before Wednesday so that we all come to the table prepared.

Witnesses, thank you very much.

(The committee adjourned.)