THE STANDING SENATE COMMITTEE ON BANKING, TRADE AND COMMERCE
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
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
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
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
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
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
Hon. Senators: Agreed.
The Chair: All in favour? I declare the motion
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:
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
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
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
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
Senator Black: You are saying there has to be a
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
. . . 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Senator Day: We will give it the consideration