[English]

OTTAWA, Wednesday, May 11, 2016

The Standing Senate Committee on Banking, Trade and Commerce met this day at 4:17 p.m. for the election of the deputy chair and to study the issues pertaining to internal barriers to trade.

Senator David Tkachuk (Chair) in the chair.

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

My name is David Tkachuk and I am the chair of this committee.

Honourable senators are aware that Senator Hervieux-Payette, our Deputy Chair, has retired. We therefore have a vacancy in this role.

Last week in committee, I attempted to hold an election to fill this vacancy. Some senators expressed an interest in electing our deputy chair by secret ballot. However, as I stated last week, the Senate does not have the practice of holding elections of chairs or deputy chairs by secret ballot.

Since our last meeting, and at the request of some members, I have consulted with the table to ensure that my interpretation of the Rules specifically applies to the use of secret ballots. As it is the role of the chair to rule on points of order or procedure, I am now prepared to rule as follows:

Rule 12-20 (4) states:

No Senate committee shall adopt procedures inconsistent with the Rules or practices of the Senate.

Senator Kinsella further elaborates on the bounds of committee practices and procedures in his decision of September 16, 2009:

While committees often operate informally, they remain bound by the Rules of the Senate. Committees cannot follow any procedure whatsoever that they set for themselves. The phrase mutatis mutandis, in the context of our practices, means that the Rules apply in committee, unless they contain an exemption or there is a clear reason why they cannot. While committees are often said to be "masters of their own proceedings," this is only true insofar as they comply with the Rules of the Senate.

Without a modification to the Rules, it bears repeating that the Senate does not have the practice of making decisions by secret ballot. Neither the Speaker nor the Speaker pro tempore is selected in this manner. A secret ballot would therefore not be consistent with Rule 12-20 (4) or with current practice in the Senate.

I know that senators may be anxious to change or modernize our practices, but our committee has no authority to use secret ballots to elect chairs and deputy chairs. I continue to encourage any of our members on the Rules Committee to pursue this if they so wish.

I trust that this resolves the question and would now like to resume debate on the question of electing a deputy chair.

With respect to the process to elect a deputy chair, I would like to remind honourable senators of the following: The process followed is similar to that for the election of the chair. In conducting the election of the deputy chair, the chair will ask if there are any nominations. If there is more than one nomination, the chair must put the question on each motion in turn, in the order that they were received. Only one question may be considered at any time. Votes are initially taken by voice and the chair asks "shall the motion carry?" and makes a judgment of the result.

At our last meeting I received two nominations for deputy chair: the first one for Senator Day and the second for Senator Ringuette. I am prepared to put the question to the committee in the manner that I have just explained.

For debate, Senator Ringuette.

Senator Ringuette: Chair, I would like to thank Senator Greene and Senator Massicotte for putting forward my name to be deputy chair. I am, after you, chair, the second-longest serving member of this committee. However, I realize the politics involved and I also see this as a short-term issue. Therefore, I remove my candidacy as deputy chair.

The Chair: Thank you, Senator Ringuette.

If there are no further nominations, it is moved by the Honourable Senator Enverga that the Honourable Senator Day be the deputy chair of this committee.

Is it your pleasure, honourable senators, to adopt the motion?

Hon. Senators: Agreed.

The Chair: All in favour? I declare the motion carried.

Congratulations.

Hon. Senators: Hear, hear!

The Chair: Today is the eleventh meeting. Welcome, witnesses. Welcome to you, as well.

As a quick prologue, and I know that we will talk about this at another meeting, our meetings in Vancouver and Calgary were exceptional. We had great witnesses. We didn't have quite a full day in Vancouver. We had a packed day in Calgary. Thank you, Senator Black, for suggesting Calgary. We recorded all of the witness testimony. Hopefully we can get it into a situation where you can actually listen to it. The analysts made notes as well.

We have permission from all to use the testimony we received in the conversations we had. We carried the meetings out in conversation fashion, certainly more informal than we would at a meeting like we are at today. It was a great trip. Too bad more were not on it.

Today is the eleventh meeting on our special study on issues pertaining to internal barriers to trade. I am pleased to welcome our first panel, which includes Cyndee Todgham Cherniak and Jon Johnson, both counsel with LexSage Professional Corporation. They are appearing as individuals. Our third witness this hour joins us by video conference. We welcome the Canadian Public Procurement Council, represented by François Emond, Executive Director.

On behalf of the committee, I want to thank all of you for being here today. We will hear the opening remarks of all witnesses and then proceed to a question and answer session.

Ms. Cherniak, please begin.

Cyndee Todgham Cherniak, Counsel, LexSage Professional Corporation, as an individual: Thank you very much, and I would like to thank this committee for having us today to testify. We are international trade lawyers, Mr. Johnson and I. There is no category of interprovincial or domestic trade lawyer. We are not here on behalf of any client. We are just here as international trade lawyers.

I have provided a presentation that you can review at your leisure.

On April 29, 2016, there was a decision in R. v. Comeau out of the New Brunswick provincial court. This is a case about a man with more than a few cases of beer that he brought from Quebec into New Brunswick. In looking at this case, there are a number of paragraphs that I would like to bring to your attention. In paragraph 193 the judge held:

 Section 134(b) of the Liquor Control Act of New Brunswick constitutes a trade barrier which violates section 121 of the Constitution Act, 1867. . . .

At paragraph 191, he said:

I am certain that interpreting section 121 of the Constitution Act, 1867 as permitting the free movement of goods among the provinces without barriers, tariff or non-tariff. . . .

At paragraph 101 of the decision he said:

 . . .the Fathers of Confederation wanted free trade as between their respective jurisdictions. . . . the Union meant free trade, the breaking down of all trade barriers as between the provinces forming part of the proposed Dominion of Canada.

Comeau changes the dialogue. There is a new interpretation out there of section 121 of the Constitution Act, 1867.

It is a great history lesson, this particular decision. It is a great read if you have not read it yet. There are speeches and oratory of the Fathers of Confederation, and I would like to raise a few with you.

On February 6, 1865, Sir John A. Macdonald said:

. . . if we wish. . . to establish a commercial union, unrestricted free trade between people of the five provinces. . . .

On September 12, 1864, George Brown said that union of all provinces would "break down all trade barriers between us," On November 1, 1865, Alexander Galt said, "Now we desire to bring about that same free trade in our own colonies."

On February 7, 1865, Alexander Galt said:

Union is free trade among ourselves. . . . Give us Union and the East shall have free trade with the West.

On November 23, 1864, Alexander Galt said:

. . .the chief benefits expected to flow from the confederation was the free interchange of the products of the labor of each Province. . . .

So we have this decision; what are the next steps? There may or may not be an appeal. No one here has control over that. The federal government could send a reference to the Supreme Court of Canada asking whether or not the decision in Comeau is a good law. If that end arrives sooner — if that occurs, because we aren't going through a provincial appeal and however long that will take, with interests that are not necessarily aligned — we will have control over the issues. More importantly, if there is a reference to the Supreme Court of Canada there can be a secondary question that was not in Comeau: if the Comeau decision is correct and it was always intended by the Fathers of Confederation for there to be free trade between the provinces, how dos sections 91 and 92 of the Constitution Act, 1867, work with that view in mind?

We can ask a more fulsome question of the Supreme Court and we can get the answer of the Supreme Court. We aren't waiting for either this case to be appealed or another case to come along. It gives opportunities to the provinces to intervene and bring forward any other quotes and information that would be necessary for the Supreme Court to consider.

The Supreme Court decision could and would have wide-ranging effects, especially if the Supreme Court agrees that Comeau was properly decided.

The next decision I would like to bring to your attention that you may not know about is Northrop Grumman Overseas Services Corporation v. Canada (Attorney General), which is a 2009 Supreme Court of Canada case. In this case the Supreme Court of Canada looked at the AIT in the context of a procurement and whether or not a foreign company could be a potential supplier under the Agreement on Internal Trade.

What did the Supreme Court of Canada say about the AIT, the Agreement on Internal Trade? It said:

The AIT is an inter-governmental agreement entered into by the executive of the federal, provincial and territorial (except Nunavut) governments. It is not a piece of legislation. The executive cannot displace existing laws by entering into agreements, though the agreements may bind it. . . . Of course, the legislature can choose to adopt an agreement, in whole or in part, and give it the force of law.

The Supreme Court of Canada also said:

. . . the fact that part of the AIT has been adopted in legislation should not obscure the fact that it was not drafted as legislation. . . . the AIT is a political document. Many of its provisions express general principles or goals that are not directly enforceable.

The Supreme Court of Canada also said the AIT:

. . . pertains to domestic trade within Canada. Essentially, it is a domestic free trade agreement.

These statements by the Supreme Court should be considered by this committee in preparing your report.

I have talked about the Supreme Court reference. There is also another opportunity for this committee to consider. There are references to the Canadian International Trade Tribunal under section 18 of the Canadian International Trade Tribunal Act, which states:

The Tribunal shall inquire into and report to the Governor in Council on any matter in relation to the economic, trade or commercial interests of Canada with respect to any goods or services or any class thereof that the Governor in Council refers to the Tribunal for inquiry.

There are previous reports overlapping with some of the issues that arise in internal trade. I have listed three reports: GC-90-001, which is the Competitiveness of the Canadian Fresh and Processed Fruit and Vegetable Industry; GC-92-001, Competitiveness of Canadian Cattle and Beef Industries; and GC-97-001, where there are a number of reports, some being the Profile of the Canadian Dairy Industry, International and Domestic Laws and Import Regimes for Dairy Products.

I make a recommendation that maybe this committee would consider sending a reference to the Canadian International Trade Tribunal if what you are interested in are the economic effects of removing certain interprovincial trade barriers and what the effect would be at the federal and provincial levels. The scope of the reference will be very key. What you are looking at in this committee might help to define the scope of a question or series of questions that you might ask the Canadian International Trade Tribunal.

To follow up on the Northrop Grumman case, I would like to highlight an issue we have with respect to the AIT that needs to be fixed in any new AIT. It relates to procurement provisions under the AIT. As we know, governments procure goods and services, but there is no effective, accelerated, alternative dispute-resolution mechanism at the provincial level. There is recourse to the provincial courts by judicial review, but that is a costly and lengthy endeavour. There are no stop-work orders such as what the Canadian International Trade Tribunal is permitted to issue at the federal level. Violations of the AIT procurement provisions at the provincial level are very difficult to rectify.

Procurement obligations in the AIT are also not implemented in provincial law, so we don't have the provisions that have been agreed to in the AIT adopted at the provincial level. We do have that at the federal level, the obligations, but not at the provincial level. Even if there is a decision, the question is whether or not the provinces affected by that decision would do anything.

Another recommendation is that any new AIT should be implemented in provincial laws and have an effective, accelerated, dispute-settlement mechanism. My colleague will discuss dispute resolution.

Jon R. Johnson, Counsel , LexSage Professional Corporation, as an individual: I would like to thank the senators for having us here today. This is an interesting and important topic. I will focus mainly on dispute resolution. This has been raised by a number of witnesses. You have heard calls for a stronger dispute-resolution mechanism in the AIT. I will take you through a number of models of dispute resolution that exist in various agreements. The first I will call the trade agreements model. The second is the investor/state model, which has been raised by a number of the witnesses before your committee. Then there is a third category that I will call the force-of-law model.

The trade agreement model is the sort of dispute-resolution solution you find in the WTO agreement, NAFTA, the CETA, which is the proposed agreement with the Europeans, the Canada-Chile Free Trade Agreement various free trade agreements.

The dispute-resolution procedures are available only to central governments. Subnational governments and individuals don't have standing. Usually the parties invoke a panel. The panel decides whether the measure — law, practice, whatever — is inconsistent with the agreement and recommends that the measure be brought into conformity. The losing government may comply but it can’t be forced to. Generally in the case of non-compliance, the winning government may retaliate by withholding benefits under the trade agreement, and there is a process is for determining that. The point is that, at the end of the day, the measure cannot be made to go away.

Now, given that these agreements are among sovereign nations and that there is no overarching legal system that binds them together, it's quite understandable why dispute resolution would be of this nature.

Briefly going through the AIT dispute-settlement procedure, basically it follows this model. As far as being available only to governments, the AIT does permit persons also to initiate claims, but it's a convoluted process. First they have to exhaust local remedies. Second, they have to go to their provincial government and convince the provincial government to start a case. If the provincial government doesn't start a case, the person can start a case on its own but it first has to go to a screener, who decides whether the case has merit or is frivolous. If the screener's decision is negative, the case doesn't go ahead. If the screener's decision is positive, the case goes ahead and ends up with a panel being selected.

The same principle applies, namely that the losing government may comply but doesn't have to. You heard Ms. Todgham Cherniak’s comment from the Northrop case. There was an AIT case between Nova Scotia and New Brunswick. Basically, the New Brunswick government took the position in that case that it was New Brunswick's absolute right to determine if, how and to what extent it would implement or respond to the panel's recommendations. The panel didn't think much of that and said that because of these things New Brunswick signed on for, New Brunswick ought to comply. However, "ought" to comply is not "must" comply.

Essentially, like the international trade agreements, which are among sovereign nations, the remedy is retaliation. The AIT also throws in the concept of a monetary penalty. These are fairly small in the scheme of things. In the case of a person bringing an action, the monetary penalty doesn't go to the person but into a fund where other monetary penalties go, although the complaining person may get some costs. That is the trade agreements model.

The investor/state model has been raised by a number of your witnesses. This is in the NAFTA investment chapter, and CETA has a similar provision. The FIPPAs are referred to in the PowerPoint. They are Foreign Investment Promotion and Protection Agreements, and they have similar regimes. Also, there are thousands of bilateral investment treaties. This is a very common phenomenon.

Non-government parties, in this case investors, have standing. They don't have to go to anybody to ask permission to go ahead and start a case. They can just do it. They also do not have to exhaust local remedies. Generally the investor must elect. You may either go, say, NAFTA Chapter Eleven, or you go to the domestic court system, or whatever. You can do one or the other, but you can't do both.

A tribunal is convened, and there are various ways of choosing them. Generally, one member is chosen by the complainant, one by the defending country and then a chairman is chosen in some manner. The tribunal decides whether the measure complained of breaches the provisions of the investment agreement. If a breach is found, the tribunal awards damages to the complaining investor.

The measure itself can remain in force but, unlike the monetary penalties discussed in the AIT, the maximum of which is $5 million, these can be pretty pricey.

On case was AbitibiBowater. It was an expropriation case against Canada involving Newfoundland. It was ultimately settled, but the settlement amount was $130 million.

The largest investor/state award ever, at least up until 2012 — I haven't gone farther than that — was Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador. The amount awarded was $1.77 billion with interest. It's quite different from the AIT process.

It may be difficult for provinces to buy into, but that's the way it works. As far as the measure going away, it could be very expensive for a non-conforming measure to be held in effect.

The third model is what I call the force-of-law model. This is where a decision arising out of an adjudicative process under the trade agreement ends up with an order that "the offending government must comply."

I will give two examples. NAFTA Chapter Nineteen was rather extraordinary. It provides for binational panel review of certain decisions in anti-dumping and countervailing duty actions, as opposed to judicial review. If the panel is, say, reviewing an American injury finding by the U.S. International Trade Commission, it decides whether the ITC applied U.S. law correctly. It's U.S. law that it applies, but it will say, "Okay, you got it wrong in such and such a way. Go back and get it right."

This may go back and forth, but ultimately the binational panel can say, "Okay, cancel your finding." Of course, in an anti-dumping or countervailing duty case, if the injury finding falls away, then there is no longer a basis for anti-dumping or countervailing duties, and they have to be paid back. That's what I mean by a force-of-law model. That is what I mean by a force-of-law model. Three sovereign nations — originally two with the Canada-U.S. agreement, and three with Mexico — put that dispute-settlement process right in their law.

There have been problems under softwood with that model, but those are not really germane to the point I'm making.

The other one actually follows Ms. Todgham Cherniak’s point about procurement. The federal government, interestingly, established a process before the CITT — the Canadian International Trade Tribunal — where a prospective supplier who felt that it had not been properly dealt with by reason of an obligation under a trade agreement being breached — you've got the AIT, NAFTA and WTO government procurement agreements, which are the main ones, and there's the Canada-Chile agreement as well — can go to the CITT. It's a pretty expedited process, and the tribunal can make a number of recommendations, like to do the bid again or cancel some contract you've awarded. It can even award damages.

The tribunal makes these recommendations to the government institutions, which means the body that was making the procurement. The section 30.18(1) of the CITT Act provides, "Where the Tribunal makes recommendations to a government institution" — the department doing the procurement — "under section 30.15 of the Act" — that says what recommendations can be made — "the government institution shall" — not "ought to" but "shall . . ." — subject to the regulations — "implement the recommendations . . . ." to the greatest extent possible. My understanding is that the practice is that they almost always do. That's what I mean by force of law. You have an adjudicative body who can tell the offending government to fix it.

That's a very strong model. I don't know whether the provinces would ever agree to it, but there you have it. That is one effective way of dealing with it.

On adjudicative bodies, there are various types. In NAFTA Chapters Twenty and Nineteen, they are ad hoc panels. The government sets up a roster of individuals, and then the disputants pick panelists from the roster.

Investor/state procedures and the FIPPAs are pretty much the same. The tribunals are structured a little bit differently but, essentially, there are rosters of people to serve on them, and the parties pick people from the rosters.

CETA is stronger; they actually have a CETA Tribunal, which is basically a more permanent body. There is a CETA Appellate Body, which I think is intended to be a fairly permanent institution.

The WTO agreement has ad hoc panels, but it has a permanent appellate body. One of the merits of that has been to achieve a greater degree of consistency in WTO jurisprudence than might otherwise be the case.

Under the AIT, you have ad hoc panels chosen from rosters. There is an appellate procedure, but again you set up a panel in a similar manner. The question is: Would you be more effective if you handed it over to an existing court, administrative trade tribunal or establish a new permanent tribunal to handle these cases?

I'm going to say a few last words. I call it federal involvement in internal trade barriers. There are a couple of obvious ones. There are ones that umbrella under federal laws, and the whole beer-liquor-wine regime is a combination of a federal act — the Importation of Intoxicating Liquors Act — and the various provincial laws. The Importation of Intoxicating Liquors Act makes possible the creation of provincial monopolies, which have the sole right to import or control the importation of alcoholic beverages into a province.

Fairly clearly, there are trade barriers there, but that's one done by both levels of government. Obviously, Comeau may have an effect on that because Judge LeBlanc, about the Importation of Intoxicating Liquors Act, said the only reason he didn't say anything or make any decision about it is because no one argued it.

Supply management regimes come under the same category. With dairy, you have the Canadian Dairy Commission Act. It sets up the quota system among all the provinces and has a lot of other provisions in it. Then each province has its own regime. In Ontario, you have the Milk Act, and they dole out the quota to individual farmers.

I think you had one witness suggest that the supply management system was not a trade restriction, in and of itself. I don't know whether that's right. But it's a system that depends on federal — "complicity" is too strong a word, but participation.

One other thing is that when you have regulatory requirements differing from province to province, often that's the case because you have areas of exclusive provincial jurisdiction. But it can also result from federal policy, like leaving the approach to climate change province by province. You will have 10 potentially separate rules and then various regulations going from that. There may be excellent political or other reasons for the government doing that, but it does lend itself to a multiplicity of rules and regulations. To deal with it, you have to push for harmonization to the greatest extent possible and mutual recognition where that doesn't work.

I noticed in the New West Partnership, by the way, that mutual recognition is far stronger than it is in the AIT.

Those are my remarks. Cyndee and I look forward to your questions.

[Translation]

François Emond, Executive Director, Canadian Public Procurement Council (CPPC): Mr. Chair and honourable senators, I want to begin by thanking you for the invitation to appear before your committee to discuss issues related to internal trade barriers.

My name is François Emond. I am the Executive Director of the Canadian Public Procurement Council, an independent non-profit organization created in 1999. Our primary objective is to become the main resource for public procurement in Canada. Our organization’s mission is to promote dialogue and networking, facilitate information and knowledge exchange, develop approaches to common issues and provide leadership for the resolution of shared challenges, while remaining at the service of citizens and public procurement in Canada.

We play a leadership role in order to promote dialogue in public procurement, add value to the procurement professional and supply chain management functions of our member organizations. Our objective is also to exchange ideas, and information and experiences on procurement-related activities, as well as to consider operational impacts of emerging policies and practices in public procurement, including trade agreements, the electronic marketplace and public-private partnerships.

Our member community is made up of procurement professionals, who are employed by about 100 public organizations across Canada. They come from all levels of government — federal, provincial-territorial or municipal — crown corporations, and organizations from the education and health sectors.

One of our strategic objectives is the recognition of the procurement function, which plays a leadership role within public organizations, regardless of their size or origin. We are convinced that this function can have a positive influence on the achievement of their objectives and contribute to public funds being spent optimally. We believe in the values of integrity and transparency when it comes to the overall procurement process, from the identification of a need to the awarding of a contract, through the resulting management.

One of the important elements associated with the profession of public procurement specialist has to do with knowing their market when they are called upon to fulfil a need, whether we are talking about a good or a specific service. That request can take the form of a public or written call for tenders, according to the rules in effect. Therefore, the process of preparing tender documents implies a significant strategic reflection where the knowledge of the targeted market and the related constraints is a key element.

Therefore, the opening of markets is a primary concern, as it ensures increased competitiveness among bidders, thus favouring the awarding of contracts with terms that are more advantageous for our public organizations. This market openness should not be impeded by interior barriers that could discourage some companies from concluding contracts with public organizations.

Currently, the agreements in place among the provinces reduce risks and favour the opening of their markets. Although the agreements are well-integrated into the practices of public organizations, those organizations would certainly benefit from being better recognized by the community of suppliers that want to do business with them.

The operational reality associated with certain needs where geographic proximity is a key element could, however, represent a barrier in itself. For some companies, the costs related to market development and trade with certain public organizations, based on their territory, are also elements that could hurt market openness.

Although many elements are currently in place to promote internal trade among public organizations and their supplier community, we believe that procurement professionals can make a difference in the implementation of innovative strategies that help create conditions conducive to the opening of markets, in order to encourage more bids.

We have to ensure a review of the legitimacy of contractual requirements to avoid those requirements becoming internal trade barriers. However, public organizations should not lower their requirements with the sole purpose of ensuring increased competitiveness beyond provincial and territorial borders, especially when there is already a pool of suppliers that encourages sound competition and thereby ensures adequate pricing. However, a number of sectors have limited pools of potential suppliers. They would benefit from having more suppliers nationally and showing an interest in doing business with public organizations.

That was a brief summary of the mission and vision of the Canadian Public Procurement Council when it comes to issues related to internal trade barriers. I dare hope that these few elements will give you some food for thought. I would be happy to answer your questions in English or French to continue the debate.

[English]

The Chair: Thank you very much. We have another two witnesses and I'm trying to get out of here at 6:15. We have another committee coming in half an hour, and they need time to get organized. Let's try to keep the questions for another 20 minutes, and then the next two witnesses will be able to appear.

Senator Black: Thank you all very much for appearing today. The material you presented is extremely comprehensive — a lot of meat to chew on here.

I have a couple of questions for each of you.

In respect of the Comeau decision — and thank you very much for your good conversation in respect of that — is it your view that that decision affects trade in services or is it just goods?

Ms. Todgham Cherniak: If I look at section 121 of the Constitution Act, 1867, it says:

All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.

So if it is "growth, produce, or manufacture," I think that it is mainly goods.

Do we "produce" services? I'm not sure if a legal argument can be made that "growth, produce, or manufacture" can be extended to services. To be honest, I think that may be a stretch, but it's something to ask the Supreme Court.

Senator Black: That's where I'm going next. Would your recommendation to us be to recommend that the government refer this decision but broaden the question to ask for their opinion in respect of services?

Ms. Todgham Cherniak: Anything is possible, so the questions can be: Was Comeau correctly decided? How does section 121 work with 91 and 92 in the division of powers, and does section 121 also apply to services? That's so we don't have numerous cases going up to the Supreme Court and some unanswered questions. Then we get the "treatise" from the Supreme Court — their decision — and work with the provinces based on whatever the Supreme Court decides.

Senator Black: That's very helpful.

Let's quickly relate those comments to your comments on the Northrop decision, Supreme Court, 2009. Is it your view that any of the thinking in that particular decision could impact a reference question?

Ms. Todgham Cherniak: I'm not sure if it would affect a reference question. It's more a matter that the Supreme Court of Canada has made some statements about the AIT — what it is and what it is not — and that is helpful in understanding what the Supreme Court's view is of this particular agreement.

Senator Black: Good. That's what I took from your comments: They looked at it, categorized it as an agreement — not a legal document, statute or regulation. So we take that as knowledge and drive on. Is that your assessment?

Ms. Todgham Cherniak: Absolutely.

Senator Black: Sir, very quickly: In respect of dispute resolution, this, of course, is key.

I'm guessing that you have looked at the dispute-resolution procedure in the New West Partnership?

Mr. Johnson: Yes, briefly, I did. Not thoroughly, but I have read it through.

Senator Black: It would be very helpful, either now or subsequently, if you were able to tell this committee what you think the essential elements are of an effective dispute-resolution provision.

Mr. Johnson: If you want to make it really effective, you make it have legal effect. In other words, if a measure is found to be inconsistent, then the measure can't be enforced anymore; it has to go away.

Senator Black: You are saying there has to be a hammer.

Mr. Johnson: Yes, there has to be a hammer, and that is the ultimate hammer. Essentially, with the procurement process with the CITT, you have that. NAFTA Chapter Nineteen19 has that as well.

Senator Black: Would you want to rely on the courts, or would you think that the creation of some kind of tribunal would be effective or desirable?

Mr. Johnson: Probably the creation of some sort of tribunal. Courts do certain things, and I think a tribunal would be better because it is specialized.

Senator Black: I understand that.

The Chair: Mr. Emond, did you have any comments? If you do, just jump in.

Mr. Emond: No, not for now. Thank you.

Senator Black: I have a question for Mr. Emond, if I can.

The Chair: Please.

Senator Black: Sir, I just want to understand your very important testimony to us today.

Do I take away from what you've said that your organization believes in an open system and competitiveness and that, therefore, you favour the breakdown of interprovincial trade barriers? Is that your evidence to us?

Mr. Emond: Yes. Definitely, we favour the openness between provinces.

The Chair: A follow up question to Senator Black's on the question of services. Was there a concept of services? Were services ever discussed as a concept in 1867?

Ms. Todgham Cherniak: I have not done that research. The research that I brought to you was done by lawyers in the Comeau decision. They did an amazing job. I have not done independent research to be able to answer that question, but it is a very interesting one.

Mr. Johnson: I think, when you read the Comeau decision, the answer is no. "Services," at that time, wasn't on the radar screen.

The Chair: I got the impression, from the people you quoted during the Confederation debate, that it was everything. They didn't restrict anything. In other words, there was no mention of "except for," or "we're not going to allow this." It was open trade.

Ms. Todgham Cherniak: There are a number of quotations, but I think we'd have to dig through the archives a bit more.

The Chair: I'm sure you will.

Ms. Todgham Cherniak: And spend a little bit more time with the statements that have been found. I find the statements very interesting. The Comeau decision is a very interesting one to read. If you are interested in Canadian history; it is really good decision to read, well-written. I recommend that everyone read it. You will be fascinated by the decision. Judge LeBlanc did a very good job.

Senator Tannas: Senator Black has done a great job with the question I was going to ask, so I will pass.

Senator Ringuette: Thank you very much; we always appreciate when you come in before us and share your expertise.

As a New Brunswicker, I was a little surprised by the decision of Judge LeBlanc on the basics. I was thinking that, because of the more modern inclusion in the Constitution and the Charter of Rights and Freedoms of mobility rights, based on an individual consumer and mobility from one province to another. My area is 5 kilometres from the province of Quebec but 2 kilometres from the border with Maine. I am somewhat surprised.

I don't know if you have looked into this, but how does section 121, with regard to the free movement of goods, enter into the slate of exclusive jurisdiction between the province and the federal government? These two issues have not been mentioned at all in the LeBlanc decision, which are also part of our Constitution. I'd like to have your comments on that.

Ms. Todgham Cherniak: I agree with you. I think that the decision is a narrow one based on section 121 because that was the question posed of Judge LeBlanc. If a reference goes to the Supreme Court, I think that it is an important extension of: Is Comeau correctly decided, and should Gold Seal now be old law?

If there is to be free trade between the provinces, East to West, if that is what was intended by the Fathers of Confederation, how does that work with sections 91 and 92, the division of powers? Is section 121 a chapeau, or does it come first and then we look at the division of powers in the context that free trade is the general statement and then look at specifics? That would be something that I think would be a secondary question to the Supreme Court so that we don't have to go back again and ask them later. I think that we can get a full interpretation of interprovincial trade and how that is supposed to work from a constitutional perspective and what the Fathers of Confederation envisioned.

I think that it would be great to have the federal government lawyers and provincial government lawyers and other intervenors come forward with all of the information that they think is important and have the Supreme Court of Canada render a decision that ultimately will either be, yes, free trade between the provinces, or that wasn't what was intended in a more narrow view. I'd look forward to reading that decision.

Mr. Johnson: Courts decide what is argued before them. In some ways, this is not very edifying. For example, the Importation of Intoxicating Liquors Act: Judge LeBlanc did not make any decision on that because it wasn't brought up; it wasn't argued.

As far as section 92 issues and whether powers of the provinces would be infringed upon by his interpretation of section 121, it wasn't argued. Nobody raised, "Well, we have this power under section 92, and section 121 is inconsistent with that." Judge LeBlanc would have had to deal with that if somebody had argued it, but they didn't.

Senator Ringuette: We've heard comments with regard to nontariff barriers regarding, for instance, meat inspection. If you are looking at a facility that processes meat that will be moving across provinces then it becomes federal jurisdiction, and if it's meant to only go to the provincial market then it's provincial.

That, in itself, is a service: meat inspection. It comes because of a law and regulation with regard to the protection of citizens.

With an item like meat inspection, where would you put that into the scenario, Mr. Johnson?

Mr. Johnson: That is a good point to raise because it is tough. The reason it is tough is that the rationale for having meat inspection is because people can die from eating tainted meat. The whole rationale of having systems in place and rigorous rules, where you have to comply with this, that and the other thing, and inspecting meat and inspecting slaughter plants and inspecting places where meat is processed, there is absolutely no quarrel with that.

The problem is when you get mismatches say, between provinces, where one province says, "You really should've done this," and the other province says, "No, that's too rigorous, but we think you should do that." That's where you get into difficulties. Obviously, the best approach would be to harmonize. There are lots of things that can be and have been harmonized. Second is the principle of mutual recognition.

The other thing is that sometimes these eminently reasonable systems that are required can be used for protectionist purposes. When one is being used for the protection of human health, there is that, but when is it being used for protection? It is sometimes a tough line. That's where it gets tough.

Senator Day: Thanks to all three of you for your presentations.

Most of the questions I wanted to ask with respect to the Supreme Court reference have been dealt with, but I wanted to make it clear for the record that we tied it in with Comeau, but a reference to the Supreme Court by the federal government isn't necessarily tied into Comeau. They’re questions that might have arisen that came to mind as a result of Comeau, but it's separate and not dependent on the facts of Comeau.

Ms. Todgham Cherniak: No, I would just say that Comeau has gotten us thinking a bit. Comeau has given us a new vision and a new way of looking at what the Fathers of Confederation desired at the time of Confederation. Seeing that we are almost at 150 years, it is a perfect time to revisit what they said and get a Supreme Court pronouncement.

Senator Day: For example, the federal government could ask questions about whether the Constitution covered both goods and services, even though it's a matter of interpretation. That question could be asked, even though it didn't come up in Comeau.

Ms. Todgham Cherniak: Absolutely. I think that Comeau kind of gets us thinking. What questions do we have for the Supreme Court, based on the fact we have the Comeau decision and we want to control and have the process end quicker rather than waiting 10 years for it to ultimately get up to the Supreme Court, either in Comeau where the questions may be more limited or some other case where we don't even know what the facts are yet?

Senator Day: Mr. Johnson, you indicated the Importation of Intoxicating Liquors Act wasn't argued in Comeau. Does that present a problem in terms of precedent value for the case? Should we forget about the appeal process there and encourage a separate reference?

Mr. Johnson: I think a reference would ask that question. Basically, with what was decided there, nobody could appeal anything about the Importation of Intoxicating Liquors Act because Judge LeBlanc chose correctly — it wasn't argued —not to deal with it.

Insofar as an appeal, whoever does it — for example, the New Brunswick government — they wouldn't raise questions about that because it was not dealt with by the court. I am no expert on Supreme Court references, but I think you can have a much broader range of questions in a reference.

Senator Day: I suppose the reference has a political implication to it. We heard witnesses talk about the nuclear approach. The federal government has the authority, go ahead and damn the torpedoes. If the federal government decides on a reference without consultation with the provinces, then there could presumably be political ramifications from that.

Ms. Todgham Cherniak: I would think the provinces will have the opportunity to participate in the Supreme Court reference as intervenors. They actually would have an opportunity to have their say and bring forward any evidence and argument they believe the Supreme Court would find of value.

Mr. Johnson: This could bite the federal government. I’m thinking of the Importation of Intoxicating Liquors Act. I don't know how much they care about it, but it is a federal statute. With the supply management system, there are federal statutes that are basically critical to the maintenance of it.

Senator Ringuette: Further to the issue of meat inspection, since your field of expertise is mostly international, I believe that if there is a problem there is also a solution out there.

Going to the scenario of meat inspections, the recognition of the ISO system — which has a range from ISO2000 and so forth — couldn't that be the system to establish standards and the harmonization we are looking for? Let us stay with the meat inspection scenario. Couldn't that be a system that should be encouraged to help harmonize and establish a standard?

Mr. Johnson: I'm not familiar specifically with that, but I know a number of international trade agreements encourage the adoption of international standards. Certainly the sanitary and phytosanitary provisions of the WTO agreement on that subject and the NAFTA chapter encourage that. There are many areas where there are international standards for the protection of various things.

I don't know the degree to which countries adopt them, but I suspect a lot of them do and suspect they are widely recognized. It is an excellent way to harmonize, because someone has put serious and intelligent thought into coming up with a regime that protects people, and you don't have to reinvent the wheel if you adopt one of these.

Again, if everyone does that, then essentially you have a pretty much uniform system. That is highly desirable. It is certainly a highly desirable approach.

Senator Day: We are anticipating some movement with respect to AIT, the Agreement on Internal Trade. Something was supposed to come out by March of this year. We are anticipating something fairly soon. Some of the articles I have read talk about a new initiative with respect to dispute resolution. Are you familiar with what might be coming out of this?

Ms. Todgham Cherniak: I have not heard anything publicly being discussed as to what has been proposed at this point in time, so I do not have any knowledge that I can share with you.

The Chair: Mr. Emond, do you have any comments?

Senator Day: Mr. Emond, do you have on anything about that?

Mr. Emond: It was not specifically to your question. It was related to Senator Ringuette's question about ISO requirements, so perhaps I can go back to that after.

The Chair: No, please go ahead now.

Mr. Emond: Having worked in procurement in the private sector for a long time, I was able to familiarize myself with ISO requirements. It could be a solution, but at the same time ISO requirements are very general and broad as to be applicable to any sector.

If you are looking specifically at certain specific sectors like meat inspection, as you mentioned, there might be some international standards, as Mr. Johnson mentioned, that could be applicable to this specific sector. I am not sure that ISO requirements would be the solution and be applicable as an overall or general standard, because they look after the quality aspect and the procedures within the company. They are not necessarily applicable to a specific industry, which is why some industries, like the automotive and other types of industries, have created their own standards.

Senator Ringuette: Mr. Johnson, do you have something to add?

Mr. Johnson: No.

The Chair: Thank you, witnesses.

Our next panel has an Atlantic theme with us here in Ottawa. Representing the Government of Prince Edward Island is Kal Whitnell, Senior Director — Economic Research and Trade Negotiations, Economic Development and Tourism. Coming to us via video conference is the Atlantic Institute for Market Studies, represented by Marco Navarro-Genie, President and CEO.

Kal Whitnell, Senior Director — Economic Research and Trade Negotiations, Economic Development and Tourism, Government of Prince Edward Island: I appreciate the opportunity to come and speak to you today. I am the Senior Director of Economic Research and Trade Negotiations for the Province of Prince Edward Island. I am responsible for both internal and international trade negotiations for the Province of P.E.I.

I have had an opportunity to review quite a bit of the testimony over the past few months in terms of this committee, and I am sensing and seeing a number of emerging themes. I will be touching on some of that today, and obviously I would like to get into a discussion after my testimony.

Obviously I deal with the regulatory harmonization and regional recognition — the idea of transparency and utilizing a negative-list approach — dispute resolution, which we heard a lot of testimony on, and that seems to be a major theme coming out of the testimony from some of the witnesses. The idea of internal trade barriers is prevalent for certain goods, and obviously alcoholic beverages is at the forefront now due to the Comeau case and the decision in New Brunswick, and the idea around the agreement on internal trade and the governance structure around the current agreement and how that works.

I want to give you an overview from a P.E.I. perspective on the importance of trade, and then I will get into the existing internal trade agreement and a bit about the renewed agreement and where we might be going with that.

From the P.E.I. perspective, trade is extremely important. We have a diversified economy. We are less prone to the boom and/or bust cycles which affect manufacturing-based and/or resource-based type economies in other provinces. We have a number of small industries that protect us against a lot of those cycles.

In terms of the P.E.I. economy in general, we have our traditional sectors — agriculture, fish and seafood, as well as tourism — but we also have a number of emerging strategic sectors that have been doing quite well in terms of aerospace, bioscience, information and communications technology, advanced manufacturing, marine technology and obviously professional services as well.

The ability for P.E.I. companies to trade internationally and within Canada is critical for a vibrant economy. It is very critical for Prince Edward Island. Interprovincial trade represents about 60 per cent of all imports and exports for our province.

It is critical for P.E.I. companies that there are trade rules and provisions in place to allow for openness to do business in other jurisdictions in Canada.

I recall witness testimony from Statistics Canada around an interprovincial openness metric. It identified that P.E.I. had the highest metric, around 80 per cent. We are quite open, and we want to ensure in these negotiations moving forward that we have openness and ability for our companies to continue to trade.

In terms of trying to help our companies, we have established several key initiatives. We have a Sales PEI initiative and a Food Island Partnership initiative that support our companies to make sure they can extend their reach into other markets, whether that be within Canada or internationally.

A bit on the history of the Agreement on Internal Trade: You are all aware it was signed in 1994 and entered into force in 1995. A number of work plans or amendments have occurred, 14 protocols of amendment, over that 20 or 21 years since the inception and entry into force. Some key amendments have occurred in the areas of dispute resolution, labour mobility and government procurement.

There was probably a bit of a chill in the first 10 years following entry into force, but since 2004 premiers took it upon themselves and developed comprehensive work plans moving forward which focused on some key areas around labour mobility, government procurement and dispute resolution. In 2007 they also had another five-point work plan which was somewhat of a hybrid of the 2004 agreement.

I know this topic is about internal trade barriers. In my view, Canada is not riddled with barriers. To me a barrier implies that you are not allowed to trade a good or a service or establish an investment in another jurisdiction. In a lot of cases it is more of an irritant or a burden that is currently in place. We have to deal with some of the remaining irritants. We have dealt with a lot of the low-hanging fruit, but I don't think we are riddled with barriers, per se.

In terms of the mandate moving forward for the renewed agreement, why are we doing this now and what are we currently negotiating? I will take this from two perspectives. The first is the broad mandate by the premiers and the federal government. Why are we doing this now? I think the time is ripe in terms of renegotiating the Agreement on Internal Trade. Obviously, internal trade is significant. It's increased significantly since about 2004. It represents close to 20 per cent of the GDP within Canada. At the same time, though, the federal government has undertaken an ambitious international trade agenda. There were the negotiations for the Canada-European Union — CETA — agreement and the TPP, and bilateral negotiations that started with Japan and South Korea, which were completed and entered into force as well.

The time is right and we need to make sure that, moving forward, we're taking a look at what we're doing internally as well, given our focus on external markets. We want to make sure that companies and business people here have the same opportunities and are not treated less-favourably than our international counterparts in agreements that have either entered into force or may be coming into force in the near future.

There were six key priorities identified for the renewed agreement: government procurement, goods, services, investment, technical barriers to trade and regulatory cooperation.

From a P.E.I. perspective, our mandate and objectives are twofold. First, we want to improve the openness and go beyond the existing agreement in internal trade. We think there's opportunity to improve upon, and have greater openness beyond, the existing agreement. And my second point, which I have already touched upon, is that we want to ensure Islanders, as well as Canadians are, at a minimum, treated no less-favourably than our international counterparts.

In P.E.I. we have a number of initiatives under way. Trade agreements are about providing and extending reach for our companies and giving them additional opportunities. Locally, we have red tape reduction where we're doing things for companies to make it easier to do business. We're also doing things at the Maritime and Atlantic levels on red tape.

I see the opportunity, through the renewed agreement on internal trade, to not just provide us the ability to do what we're doing, but also to extend that reach nationally beyond what we're doing at the Maritime and Atlantic levels.

Last year we conducted a survey of a number of P.E.I. companies to get an understanding of what their issues are with internal trade. Consultations are important. About 250 businesses responded to the survey, and about 46 per cent of those respondents indicated that they are currently exporting. We're basing our survey on a lot of the results and comments that came back from about 110 companies.

We're hearing similar themes emerging from the companies that I introduced in my introduction as well. Based on what witnesses are saying at this standing committee about a lack of transparency, some provinces and territories and the federal government might have local preferences in place for government procurement.

Differing standards and regulations is obviously a critical area that needs to be resolved because this can also lead to additional costs to doing business.

What are some of the key elements of our renewed agreement? Ontario is currently the chair of the negotiations and all governments — federal, provincial and territorial — are sitting around that table. We are working towards the completion of that agreement. Federal Minister Bains, as well as Minister Duguid for Ontario, identified in some news releases what we're working towards. Obviously, there was some reference made to the idea of transparency and a negative list, and there is the concept of a robust regulatory framework which could help tackle differing standards and regulations and help to reduce costs of doing business.

We're also looking at eliminating the number of exceptions that governments are taking in this agreement. That would deal with some of those local preferences issues that I identified earlier.

All that said, I do want to make the point that governments still have the right to regulate for legitimate purposes and objectives of public safety, health and consumer protection, and the list goes on. I know there was a lot of discussion with the last witness around that and meat inspection, and I think you have to keep in mind that there are regulations in place and legitimate reasons for them.

Based on our internal consultations with government and companies, P.E.I. will be focusing on some regulations we hope to tackle immediately. Food is critical for P.E.I. We have started to brand ourselves as Canada's food island, and we want to make sure we have every opportunity to export our food, whether beef, potatoes, blueberries or any of the types of food we currently produce on the Island. Transportation has also come up as an issue, and that's the movement of the goods across provincial boundaries.

With regard to services, we've had some companies, mainly in construction, indicate to us that they have had some issues, even though they have won a contract in another province, in going there to actually do the work and complete the service.

Government procurement is an area in which we're looking at minimizing, as much as possible, the number of entities currently excluded, whether federal or provincial departments or Crown corporations, that don't have to openly procure. There are some other limited exceptions that provinces are taking and that are in the existing AIT. We’re hoping to limit those moving forward.

All that being said, P.E.I.'s focus is this idea of interprovincial openness, and that's our goal at the end of the day in these negotiations.

Thank you.

The Chair: Thank you very much, Mr. Whitnell.

Marco Navarro-Genie, President and CEO, Atlantic Institute for Market Studies: I am grateful for the chance to appear before you on behalf of the Atlantic Institute for Market Studies today.

Trade is crucially important to the Atlantic region.

[Translation]

Trade is an integral part of the history of Canadians in the Atlantic region, from Aboriginals to the first European settlers, whether English or French.

[English]

It was present in the minds and dreams of key figures involved in the creation of the Dominion of Canada that the new entity would give us free trade.

In the last decade or so, our country has made significant efforts in developing trade with other countries. But on internal trade we have fallen short of the dreams and promises of the dominion's founders. That's why I would like to focus on internal trade here today and present a bold idea.

As John A. Macdonald put it in 1865, the new project would:

. . . establish a commercial union, with unrestricted free trade, between people of the five provinces. . . .

This was reflected in section 121 of the 1867 Constitution, to be sure, which reads as follows:

All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.

While the legal meaning of "admitted free" is challenging, there is consensus that each province can determine, in its own jurisdiction, as we have just heard, how a product may be distributed or sold once it has entered freely. Without interfering with any province's right, one cannot deny that some provincial forces have opposed the spirit of the framers' ambition for free trade.

During the debates and considerations in the 1860s that led to the creation of the dominion, it was very much in the minds of leaders and legislators that joining something larger than each of the colonies would lead to commercial and political benefits. "Liberating the energy and ingenuity" of peoples was George Brown's phrase, meaning liberation from parochial restrictions of a culture and from the impositions of local chieftains.

Nova Scotia's Ivany Report for One Nova Scotia pointed out that the province will careen toward an economic cliff unless a series of policies is changed or reversed.

It recommended that a culture of entrepreneurship be fostered and mentioned trade as one of the ways in which Nova Scotia can grow its economy and weather a perfect economic storm. To name but a few, these are the factors involved in this storm: Out migration, rising taxes, mounting debt, an aging population, a hollowing out of the countryside, decaying infrastructure, flight of capital, sliding productivity and underperforming education.

Around the Atlantic region, the provinces recognize that the Ivany analysis also applies to them, with small variations.

The Ivany Report is permeated by a sense of urgency, evidenced in its title, Now or Never. It conveys a concern that people will spend months and years debating, without acting with the swiftness required to correct economic deficiencies before it is too late.

At the Atlantic Institute for Market Studies, we make two recommendations: one to each of the constitutional levels of government.

To the federal government, encourage Atlantic provinces to lower all possible barriers to trade — we just heard that there are no barriers, only irritants, but irritants by other means are still barriers — the free movement of labour, the creation of dispute-settlement mechanisms and the harmonization of standards for investment, public-sector hiring practices, procurement, business permits, licences, professional accreditations, et cetera.

To the Atlantic provinces, in order to avoid protracted and valuable years of long talks and lengthy negotiation that could eventually lead to deadlock and failure anyway, the institute strongly recommends that each of the Atlantic provinces individually seeks, at their leisure, entrance into the New West Partnership Trade Agreement. Each Atlantic province could determine for itself whether to adopt an already-existing set of standards, designed to lower barriers to trade, without having to wait for its neighbours, without having to wait until every detail is worked out and settled to the satisfaction of all the other Atlantic parties.

If the Eastern Canadian provinces were to join Western Canadians in removing obstacles to trade, they would strengthen the fabric of our country, develop closer bonds between east and west, and underscore the need and desire to have the Energy East Pipeline completed.

The Atlantic joining the Pacific, as it were, may have a salutary effect on us once more and can pave the way for the future toward more liberalized internal trade in all of Canada.

Finally, we could fulfill the dream of the founders of the Dominion a century and a half ago, echoed in the words of George Brown, who said, "The proposal now before us is to throw down all barriers between the provinces. . . ."

Thank you very much.

The Chair: Thank you very much, Mr. Navarro-Genie, and now questions. Senator Tannas: Mr. Navarro-Genie, your ears must have been burning yesterday. In Calgary, a number of senators had hearings where exactly what you are proposing with respect to other provinces signing on to the New West Partnership was proposed. It was proposed by one of the former negotiators of the New West Partnership, who gave us some significant insights. I'm not telling tales out of school: it was recorded and he agreed to it.

He actually said that the negotiators involved in the New West Partnership actively contemplated that potentially all provinces could join in that. It ticks all the boxes that people are talking about with respect to negative lists and a dispute-resolution platform with teeth.

I'm delighted to hear that testimony from you today, and that proposal. As I say, we heard it yesterday and it's captured my imagination and I think the imaginations of other senators who have had 24 hours to think about it.

First to our colleague from Prince Edward Island: We also heard the growing speculation — and I suspect it grows every day — that there is nothing coming from the AIT. The magic March 30 deadline passed 45 days ago — radio silence. That adds to a growing body of opinion that the AIT is a failure.

I'm going to put this all on you now, sir. What do you think or know about the potential for the AIT to deliver something meaningful with the current round of efforts and task forces and so on that are now 45 days late in telling us how it all went? In addition, we've heard pronouncements from provincial premiers that they're going to demand that things like Ontario steel only go into infrastructure in Ontario, so protectionist activities. What do you think about the potential for the AIT to really deliver the goods? What do you think, and what might your province think or what might you recommend to your boss with respect to the New West Partnership and being a signatory to it?

Mr. Whitnell: There are a few good questions there. Obviously some are of a somewhat political nature, which I won't chime in on. I'm sitting in the room, obviously. I'm one of the trade negotiators around the table for the renewed agreement. All momentum right now is continuing on a renewed agreement and we are moving forward with that. All provinces, all territories and the federal government are working extremely diligently to come out with a very solid outcome on this.

I hear the comments about the New West Partnership. I’ve put those to the side for now. I think all the focus and energy right now is in getting a very solid outcome on these negotiations.

You have to realize that when you talk about timelines, there are political reasons why a timeline or deadline might be set. There are complex issues. Elections have taken place. There are reasons why, and I think you don't want to sacrifice a few weeks or a couple of months for making sure you get that solid outcome.

We are continuing to move forward, in my personal view. From a provincial view, we're continuing with full momentum forward on reaching a successful agreement.

I would defer any comments around the New West Partnership to a later date, but I would say from a trade perspective — not even a trade policy perspective — you have to understand that from the Atlantic provinces' perspective, from a P.E.I. perspective specifically, close to 90 per cent of our trade is done Ontario east. Our joining the New West Partnership, we'd have to seriously look at whether that would ever be an alternative. You have to look at where your regional focus is and where your trade currently happens.

Senator Tannas: You would have to join, obviously, with other Atlantic provinces and have a situation where it was those who deliberately did not want to have the principles of the New West Partnership, in the context of all of Canada, participate. That's fair enough.

You mentioned weeks and months. The cynics who don't believe there is anything meaningful coming, when would you suggest they might want to say they're right? Would it be Christmas?

Mr. Whitnell: I'm not in a position to comment on the deadline or when an agreement will be announced. That's a political decision amongst premiers and first ministers, so I think it's up to them when they want to announce a final agreement.

I will repeat my comments earlier that there is full momentum ahead to come out with a solid agreement that I think all participants, all governments and, most importantly, all business stakeholders will find useful.

Senator Black: Building on the excellent questions of my colleague, recognize that we're both from Alberta so we like things done yesterday. I accept that. I understand that you're moving forward and doing what you need to do.

I want to inject another thought into what I think should concern Canadians, which leads us to a sense of heightened urgency. I'm interested in your view on this.

Following the American political scene, it would appear that either "President Trump," if he were to be elected, or "President Clinton," if she were to be elected, has an agenda that today is anti-trade. Don't you think, in light of that potential reality, that we should be pulling out all the stops in Canada to get a national trade agreement done now to protect some of our down side?

Mr. Whitnell: In terms of what's happening in the United States and their election cycle, I wouldn't bet too much money on them being completely anti-trade. I think maybe Mr. Trump might be a little bit more to that side, whether Clinton gets in or not. I think when you're in an election cycle there are a number of things that can be said. That’s one thing.

The Canadian and U.S. economies are so integrated and our supply chains are so integrated. It's very important that trade and the borders between the Canada and U.S. remain open — the thin border which is obviously referenced and referred to.

I know there are a lot of cynics around internal trade within Canada, and there remain a number of barriers. That's not my take on this. My view is that there are a number of irritants. I'm not saying things can't improve, and there are probably additional costs or administrative burdens that can be removed or improved upon, but I think we're not too bad. We've dealt with a lot of the low-hanging fruit, but the time is ripe right now. Based on where the federal government has negotiated international agreements, we want to make sure that our companies and business people are treated as favourably as our counterparts.

Mr. Navarro-Genie: It is very clear that we do not control the agenda of the American electorate, of course. It's also slightly an ostrich reflex to think that even if one or the other gets elected that none of it will have an effect on us. The most prudent course of action would be to prepare for the worst, hoping that the best will happen. It is clearly in our past, for example the reciprocity treaty we had with the United States that came undone fairly quickly. Essentially, that eventually led to the founding of the Dominion and put pressures on us. This has happened before. We've seen this movie before.

International treaties can have repercussions on domestic trade. Here we're talking essentially about the policies of our greatest trading partner changing. Even if they change in a very small way, we could be looking at serious repercussions on our side of the border — the more reason to press with opening up and lowering barriers within our country.

Senator Enverga: This is more in line with everyone's questions. You said the AIT is chugging along well, and at the same time you mentioned that we should be a member of the New West Partnership.

I know there are some government policy changes. We will have an election somewhere in another province by next year and anything can happen with the negotiations that you're doing with the AIT.

In the meantime, why do you not just join the New West Partnership and then continue negotiating with AIT? That way you will have a sure bet. You get a comprehensive agreement, and you continue to negotiate with the other groups. That way you will lessen trade costs, according to our witness yesterday.

Is it possible for you to join the New West Partnership and at the same time continue to work with the AIT? That way you will have a sure place to go.

Mr. Whitnell: On the New West Partnership, those three provinces are at the table. They're bringing their ideas, framework and potential thoughts to the table based on their experiences and their trade agreement currently in place.

Our view is that we trade with all of Canada. We trade not just with the New West Partnership provinces: We trade with Ontario, Quebec and others. We want to move forward and look at this as all of Canada. I don't see the value necessarily in segmenting and having a parallel negotiation currently going on with other provinces, territories or the federal government for that matter. They're at the table, and we want a comprehensive agreement with all provinces and territories and the federal government. One Canadian agreement is our objective and goal.

The Chair: Mr. Navarro-Genie, do you have any comments?

Mr. Navarro-Genie: That seems to be putting the cart maybe not in front of the horse but at least beside the horse.

Quebec, for example, isn't part of any partnership with either the East or the West, but they still trade with Alberta and members of the New West Partnership. To say that joining the New West Partnership will somehow impair trade with other Canadian jurisdictions is simply a false premise.

In fact, the opposite is true. If the Atlantic provinces were to subscribe to the rules and framework of the New West Partnership, they could soon and quickly begin to trade within the Atlantic region under the same rules and bring greater prosperity to the Atlantic region.

Senator Wallin: I have kind of a statement, but then maybe a question to Mr. Whitnell.

I know you're a participant in this process, so you have to be optimistic and you need to reject plan Bs. You can't be Bernie going around saying you'll support Hillary while the race is still on; so we get all that.

You seem quite insistent that there are no barriers, just irritants and burdens. I think that comes from your position and your place. I guess to all of us who have been listening to this, if there weren't barriers, there would have been a deal done and we would be there.

Your language is of interest to me, that you're so insistent on that.

Mr. Whitnell: For me it's more about the definition when I hear the term "barrier." The term "barrier" to me means that a good absolutely cannot cross a provincial boundary. That would be an absolute barrier. I don't think there are absolute barriers in place. Yes, there might be major irritants in some situations, but in most cases the goods can cross borders, whether it's alcoholic beverages. It’s been raised that wine, beer and spirits can't move across borders. That's not entirely the situation. We all have provincial liquor boards in place that have first receipt of these goods.

I guess producers can actually try to get listed in each of the provinces. Once they are listed, it becomes an economic decision whether those products stay on the shelves. If the demand isn't there, they may not stay on the shelf in certain areas. Obviously there is not enough shelf space to house all alcoholic beverages produced in this country in any particular store.

My reference is more around that a barrier is something that would only be able to get to your provincial border and stop a good from moving. In my view, they are more irritants because they can still get into other provinces.

The Chair: Do you think a government official should decide what wine people should buy? That's what you’re saying.

Mr. Whitnell: Not at all.

The Chair: You're saying they have to be listed to be sold. You can list 10 or 20 Canadian wines but there are tons of them out there. A person from P.E.I. cannot buy a lot of them because you won't allow it.

Mr. Whitnell: You can go through your liquor control corporation to order those products.

Senator Wallin: It's difficult. I take your definition because I think that obviously we have heard testimony — and you will have read it — that there are actual barriers. It's more than just anecdotal.

I appreciate your point, and for our drafters it's helpful. Thank you.

The Chair: Mr. Navarro-Genie, any comments?

Mr. Navarro-Genie: Perhaps we do need to adjust the language slightly and say that we should be very much in favour of lowering barriers, removing obstacles and erasing irritants.

Senator Greene: I was going to raise the same issue as Senator Wallin. I was really surprised when you said there were no barriers; there are just irritants. A fence is a barrier. Some people can get over the fence with extreme effort; others don't for whatever reason. So it's a barrier.

Because we are, in part, engaged in a communications exercise, I would hope that we all look at what you would perhaps choose to call "irritants" as barriers. If a widget manufacturer in P.E.I. wanted to sell widgets to Ontario and he was producing them in blue but the Ontario government insisted on red, unless he remodeled his operation, which might be too expensive, it's a barrier. It's not an irritant; it's a barrier.

I seldom get preachy on these panels, but I urge you to look at your positioning.

Senator Black: We very much appreciate you being here, because we haven't heard from a lot of governments, so you need to know that we do love you.

I have a couple of points that I would like to bounce by you. We have heard testimony that your "irritants" might be costing the Canadian economy as much as $35 billion a year. Now, that's some "irritant;" agreed? You don't have to agree.

Mr. Whitnell: Is that a question?

Senator Black: That is an observation that I am wondering if you have a view on.

Mr. Whitnell: I'm quite perplexed by the discussion around cost of barriers. It's not substantiated, in my mind. I really need to understand. I have heard the range of $2 billion. CFIB, in April, provided testimony that it could be upward of $100 billion. That's a pretty broad range. It tells me that the studies out there — obviously there is a huge gap there. I'm not sure which number makes sense.

I would really need to understand what the underlying assumptions were — what are driving that. In the $2 billion, $5 billion or $100 billion, whichever is quoted, what is included in that? Do they include supply management? What do they define as a true cost in this model?

From an economics background, my view is that if you are throwing out something that is $2 billion or $10 billion, is the optimal level 0? I don't know if that is the case. If you look at companies, whether in telecommunications or other areas, and they have customer service models and they measure customer service, do you think their goal is to get to 100 per cent customer satisfaction? I'm not sure. It probably costs too much to try to get to that and achieve that benefit.

It is a bit narrow to look at one side of the equation, and I think the cost is only one side of it. You have to look at the benefit side. Perhaps a better metric is looking at the net benefit and the opportunity cost of removing some of those costs, if they are real. What are the costs associated with trying to remove those, and what is the return on investment of doing that?

Senator Black: I am wondering if the other witness might have an observation on the cost of the irritants.

Mr. Navarro-Genie: It is completely contradictory to the spirit in which this country was founded to begin to think of protective measures as benefits, for various reasons. It benefits certain people to be sure but, on the whole, it does not benefit the country and runs against one of the premises upon which it was founded.

I am baffled at the rejection of the cost, in some senses. It matters not in the end whether it is $100 billion or $50 billion. Let's take the lower of the figures for the sake of skepticism. If we think of it in terms of that amount of money representing, for example, the difference between providing more jobs for Canadians or having more Canadians out of work, that should be one of the measures. It should not be whether it benefits a small number of people or whether we are talking about, for example, types of cartels as we have established in our commercial affairs.

The issue of customer satisfaction is kind of a false analogy, because there is always a difficult customer to be sure, but let's focus on the principle. The principle is that less irritants, lower barriers and fewer obstacles represent greater opportunity for wealth for all Canadians.

In the region I am from, where there is greater need for opportunity, job creation and wealth creation, I think we ought to do the best we can — and better — to lower those irritants and make sure there is prosperity for all of us in Atlantic Canada.

Senator Black: You observed near the end of your testimony that government should, however, despite all of the above, retain to themselves the ability to regulate in areas such as safety. You gave three examples, but safety stuck with me. Your testimony is that government should have the ability to regulate in terms of safety.

Let us choose elevator safety. Why wouldn't the regulations in Nova Scotia be good enough for P.E.I. or New Brunswick? Why shouldn't the elevator regulations in P.E.I. be good enough in Nova Scotia? Don't you see that if we encourage every government to have their own regulatory protections that it completely defeats what we are trying to do? I'd like your views, please.

Mr. Whitnell: I agree with you. There are differing regulations, and I think they evolve differently. Those are the irritants I am trying to define here. They evolve slightly, and those differences can cause irritation and issues for businesses.

I am all for prosperity, free trade and everything else. I agree with you. If you can take an elevator in Nova Scotia or in P.E.I., it doesn't matter which hotel you are in because you are not thinking about that; you just know the standard is being met.

I agree there are probably some standards and regulations that need to be reviewed. That's why we are looking at moving forward on this.

Senator Black: I just wanted to understand. That is very helpful to me.

Senator L. Smith: Mr. Whitnell, do you feel that, in the negotiations, the group has established a common language? I say that because of "barrier" versus "irritant," and I hear you talk about negotiations. It makes me think, having done some negotiating in my career in business, if you don't have a common language that everyone agrees to then will this just be another incremental advancement that you will make in these negotiations and will not be material? I'm not saying that it does exist, because you are the one who is closer to it. However, when I hear your and Mr. Navarro-Genie's testimony, they seem different. There seems to be a different base.

If people say, "Yes, I will be flexible, but I have to protect some things," I'm not sure how much progress you would make. Maybe you are past that point but you can't share it with us.

I am trying to get an understanding. Is there a common language? You need a common language in any negotiation, especially with multiple people. We senators know that more than anything. Here we are trying to modernize the Senate, but to modernize it we have to have a common language that we all agree to. That's the biggest challenge we face.

How about you folks?

Mr. Whitnell: I would definitely agree that we have a common language. We're all striving for the same objectives and goals, and that's interprovincial openness. We're all striving for that.

There's some uniqueness across different jurisdictions. Obviously the economies aren't all the same so there will be some slightly different sensitivities or areas that they are looking at, but I think everyone is talking about a common language.

The term "irritant" is something I have mentioned today. I wouldn't speak for every other government at the table and say there are no barriers or irritants. That is my personal perspective.

In terms of the negotiations, I hope we are talking a common language. We have been at this for more than 12 months, and I know these people pretty well. We are all working toward the same objectives.

Senator L. Smith: I am trying to find some positive information so we can ascertain where you folks are at.

The Chair: He is a very disciplined witness. Irritant is irritant is irritant.

Senator L. Smith: Mr. Navarro-Genie, do you have any comment on that question?

Mr. Navarro-Genie: Yes. When we hear, for example, this talk about different regulations from province to province about something as basic as an elevator, presumably all governments are looking after the benefits and the welfare of its citizens. This is where joining the New West Partnership would leapfrog over these protracted and lengthy debates over language.

The partnership already has established commonality of language and policies on a wide range of things. While we wait for arguments about whether the word "irritant" means an obstacle or not, we can move forward on what has already been done for years and years at the other end of the country.

We all know that in communication the fundamental premise is that we are on the same page and have a similar good faith to negotiate. We know, for example, that there are certain kinds of obtuseness regarding many of these issues in establishing barriers, irritants. Why should we have such stringent regulations about the way in which butter is wrapped, for example? These are clearly indicators of a desire to block things or to make things less fluid.

I would like to address the latter argument. "All economies are not the same" is often used in this region as a kind of exceptionalism. We are too small, too big, not strong enough, this and that. This builds a layer of exceptionalism where we are trying to almost beg for a different set of rules for Atlantic Canada. An economy is an economy is an economy, and I think that should be the premise upon which we work.

The Chair: Thank you, Mr. Whitnell and Mr. Navarro-Genie. We appreciated your testimony and the discussion.

Our final meeting is tomorrow on this issue of trade, and then the following week, Wednesday, we will discuss the report. We will have an hour and a half or two hours so we will have some substance to talk about. The following Thursday we are already making inquiries on the budget bill.

I didn't have a steering committee, so we are planning an agenda so that I am at least a week ahead of time. I will have my office contact you, Senator Day and Senator Black, and see if the three of us can find a time for a regular meeting every two weeks to put in our itinerary, and that will be the time we meet. If that is okay, that is the way we will proceed.

Senator Black: For clarification, you are saying next week we will look at a first draft of a report?

The Chair: No, we will talk about the report; in other words, how we proceed.

Senator Black: In camera, then?

The Chair: In camera. There will be a table of recommendations that they will put forth.

Senator Day: Have we seen that yet?

The Chair: No.

Senator Black: That will be next Wednesday?

The Chair: Thursday we have got the budget. We have to have the budget back into the Senate by June 9. That is a high priority. That is government business so that is first priority.

Senator Massicotte: I recommend that the steering committee meet next Wednesday at noon.

The Chair: We will take your recommendation and consider it.

Senator Day: We will give it the consideration it deserves.

(The committee adjourned.)

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