Janyce McGregor: 5 things to watch in today’s interprovincial trade deal

Janyce McGregor: 5 things to watch in today’s interprovincial trade deal

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As economic development ministers gather in Toronto today to release the final text of the new Canada Free Trade Agreement, here’s a quick guide to what it will — and won’t — do.

Free the wine and beer? Not yet

Federal minister Navdeep Bains says he’s heard plenty from Canadians about how frustrated they feel at the restrictions provincial liquor monopolies place on their ability to buy beer, wine and spirits from outside their own province. Brewers, wineries and distilleries don’t like the constraints either.

But it’s one thing for the federal minister to say he wants to make liberalizing trade in alcohol a priority. It’s another for provinces — who reap a lot of revenue from their monopolies — to dismantle their systems. (Recent, small steps have put more beer and wine in grocery stores and made it easier to order out-of-province wines online.)CFTA makes no immediate changes. It does, however, set up a working group that will report back within a year with “recommendations to enhance trade in beer, wine and spirits within Canada.”

Meanwhile, a New Brunswick fight to decide if provinces have the right to set cross-border alcohol limits is heading to the Supreme Court. A decision there could force the provinces to move faster than CFTA does.

Another complicated sector, financial services, will see “exploratory discussions” within six months on provincial regulations for things like insurance and credit unions. (Alberta and Quebec already refused to join a national securities regulator that’s set for 2018.)

Red tape remains, for now

Canada’s interprovincial trade barriers are well-documented.

Food labelling standards don’t match. Trucks have to stop at provincial borders to adjust for different rules in neighbouring jurisdictions. Companies, professionals and tradespeople face fees and paperwork to expand or transfer into another province.

None of these barriers disappear when CFTA takes effect on July 1. There is a process to tackle them down the road, however.

A new “regulatory reconciliation and co-operation table” will identify divergent or duplicative regulations and prioritize some for renegotiation.

The committee will be in charge of dealing with the effort to standardize rules across the country, on anything from how the word “organic” is used in food labels to what constitutes an energy-efficient appliance.

But there’s a catch: this process isn’t binding. If a jurisdiction doesn’t like the compromise reached, it can opt out as other provinces proceed.

Bigger, broader — but expect exemptions

The 1995 Agreement on Internal Trade (AIT) covered specific sectors. This deal, which replaces it, covers the entire economy — unless a government negotiates a specific exemption and puts it in writing in the deal’s annex (called a “negative list,” in trade jargon.)

“We’ll be a cheerleader of this one for sure,” said Dan Kelly from the Canadian Federation of Independent Business. As an advocate for small businesses, he’s often critical of government policy. But he thinks CFTA’s impact might be “fairly profound.”

Why? The way the deal covers the entire economy by default, forcing provinces and territories to state clearly what they want to exempt and why.

It may seem unsexy, but “that is giant,” he said, because it makes it harder to justify new regulations over the long-term. “My gut instinct is that it will be quite effective in liberalizing trade.”

Levels playing field for contracts

Ross Laver, a senior vice-president for the Business Council of Canada, said that one of his organization’s bottom lines — and a driving concern for politicians, too — was making sure that as government procurement opens up under the CFTA, Canadian companies have at least the same rights as foreign companies are offered in international trade deals.

“That’s been achieved and that’s important,” he said this week. “(Canadians) were always offside in that sense.”

In fact, more access is offered to Canadian companies under the interprovincial trade deal. Out-of-province bidders can compete on goods contracts above $25,000, a threshold magnitudes lower than the access European companies got under CETA.

CFTA also opens up contracting for Crown corporations like energy utilities.

Engineers and architects will be able to compete for out-of-province business. More competitive bidding usually saves taxpayers money.

“To the extent that interprovincial barriers have tended to keep companies small by restricting their ability to tap new markets … one of the wonderful things about CFTA is it will encourage more smaller businesses to grow,” Laver said.

“If you’re a small business in province X and you’re thinking of going after an international customer, it sure helps if you can gain some scale in Canada first.”

Businesses can fight back

The AIT created a system of arbitration panels to resolve disputes. But to avoid frivolous cases, a province had to endorse a complaint before it could proceed.

CFTA removes the need for this pre-screening, making it easier for companies and individuals to seek compensation if they think the government has made an arbitrary decision that violates the agreement.

The maximum penalties payable have been increased: up to $10 million for a large province like Ontario.

​”It’s kind of a document of economic freedom for Canadians,” Laver said, comparing it to a constitution setting out rights.

“The rulings that will be handed down in years to come will further clarify and in all likelihood extend those freedoms, as provinces are forced to defend longstanding but restrictive practices.”

It’s unclear, however, what kind of panels will judge these disputes.

Cases against the federal government will continue to be handled by the Canadian International Trade Tribunal, but provinces appear to want to set up their own arbiters rather than use a single system.

The New West Partnership trade agreement between Western provinces, for example, has its own dispute resolution regime. Ontario and Quebec have another.