Thursday
Sep112014

A funny thing happened on the way to a trade agreement

As Canada negotiates the Comprehensive Economic Trade Agreement (CETA) with the European Union, it is also setting, consciously or subconsciously a framework that has the potential to improve trade barriers between this country’s provinces and territories. 

Internal trade barriers have been a concern for many years by many groups, including local chambers such as the Peterborough Chamber of Commerce, provincial chambers such as the Ontario Chamber of Commerce (OCC) and the Chamber Network’s federal arm the Canadian Chamber of Commerce. 

At the provincial level, delegates at the OCC’s Annual General Meeting in May voted in favour of a policy resolution called “Eliminating Inter-Provincial Trade Barriers before CETA takes effect.” 

As explicit tariffs between provinces are forbidden under section 121 of the Constitution Act of 1867, most interprovincial barriers are the result of differing rules, regulations, licensing requirements and regional programs. These barriers to internal trade are often enforced by provincial legislation in attempts to protect local interests (OCC Policy Resolution, 2014). 

The resolution asks the provincial government to: 

 

  • Pursue trade liberalizing agreements with other Canadian jurisdictions through the use of Article 1800 of the Agreement on Internal Trade (AIT), that allows interested parties to move forward when consensus is not possible. 
  • Encourage all the parties of the AIT to conduct a full review and renegotiation of that agreement in order to eliminate barriers to trade, investment and labour mobility by 2015. A new agreement should: Cover all sections of the economy including ministries, crown corporations and regional and local governments. 
  • Institute a dispute resolution mechanism that includes access to a panel with binding and enforceable powers and contain significant fines for non-compliance. 

 

The Canadian Chamber of Commerce (CCC) has identified internal trade barriers as one of the Top 10 Barriers to Competitiveness. “Over the years, we have been calling on the government to significantly improve the Agreement on Internal Trade (AIT),” says Perrin Beatty, President & CEO, Canadian Chamber of Commerce in a recent blog. “We are encouraged that the federal government is now committed to eliminating remaining barriers to internal trade—an issue that has been costing Canadian companies billions of dollars over the years. We are ready to work with the various levels of governments to advance this issue and improve the competitiveness of the Canadian economy.” 

The Voice of Business continues to ring loud and clear as the CCC and a number of provincial chambers including the OCC wrote a letter to the Premiers. The letter was sent before the Premiers met in PEI recently. 

“While Canada faces many economic and social challenges, we believe that there is one issue that must be given significant attention by our governments: the removal of barriers to internal trade and mobility. 

Internal trade barriers continue to impede the free movement of people and goods between Canada’s provinces. Such barriers often arise as a result of minor differences in standards, certifications or regulations. The red tape that these differences impose on businesses and the economic toll they place on our competitiveness have become intolerable. 

The Agreement on Internal Trade (AIT) was negotiated twenty years ago and does not respond to today’s economic and commercial realities. While there have been some helpful changes over the years - in particular to the chapter on labour mobility- the agreement as currently written no longer does our economy justice. 

As Canada continues to remove the barriers between our country and the rest of the world, it is time to make the creation of an integrated, efficient Canadian economy a priority. In particular, as we move closer to a final agreement with the European Union, we run the risk of having a more open trading relationship with Europe than we have internally. How can we expect our businesses to be able to compete with the twenty-eight countries in the European Union if they are unable to efficiently access markets closer to home? 

The costs imposed by these internal barriers limit consumer choice, complicate unnecessarily the process for Canadians wanting to work in other regions of Canada, and impose a multi-billion dollar drag on Canada’s economy. These costs are being recognised both here at home and, increasingly, abroad. For example, the Organization for Economic Co-operation and Development (OECD) recently urged Canadian governments to harmonize certification requirements for apprenticeship programs as a means to improve interprovincial mobility. 

We urgently call on you and the federal government to adopt a renewed commitment to break down the remaining barriers to internal trade and mobility in Canada. We believe that all of Canada’s governments should strive for a more modern agreement on internal trade. At a minimum, the existing agreement should be strengthened and updated to reflect the realities of our modern, trade dependent economy, with the onus being placed on those proposing impediments to the ability to do business throughout Canada to justify these barriers and with the ability to resolve disputes in a timely manner. 

Together, our network of Chambers of Commerce is comprised of more than 450 local chambers of commerce and boards of trade representing more than 200,000 businesses and industry associations of all sizes and sectors in every region of Canada. We wish you every success as you prepare for your important deliberations and we stand ready to work with you and the Government of Canada to create an efficient and competitive Canadian economy.” 

Not only is there a cohesive attitude amongst the Chamber Network in Canada, but the letter and follow-up discussion at the Premiers meeting in PEI may be “very good news, if they mean what they say,” says Beatty in his blog. “For years, Canadian businesses have struggled to navigate the complex system of differing rules, regulations and standards. These minor differences increase costs, reduce our efficiency and warn foreign investors away from our country.” 

It also appears the government of Canada is truly taking notice and has issued One Canada, One National Economy: Modernizing Internal Trade in Canada. “Persistent barriers to internal trade, including regulatory differences, inconsistent standards, and restrictions on the free movement of people, goods and services, fragment our economy and put Canadian firms at a disadvantage,” James Moore, Minister of Industry. “The result is a weaker Canadian economy, lost jobs, and a less united Canada.” 

The proposal examines two ways Canada can develop a solution to the problem:  

  • Option One: Focus on priority areas for improvement 
  • Option Two: Completely redesign the internal trade framework for Canada  

The report concludes with a promise to Canadians and Canadian business: 

“These two pathways are each legitimate and viable routes to a renewed AIT and a stronger Canadian economy. They form a sound basis on which to move forward and represent approaches we can pursue over time to achieve meaningful outcomes. Going forward, the Government of Canada is committed to working with provinces and territories to forge agreement on a path forward and begin the essential work of renewing internal trade to the benefit of all Canadians.” 

With the business community, the province and the federal government having an eye to reform, the time is now to get it done. 

**More about the Industry Canada proposal can be found at:
http://www.ic.gc.ca/eic/site/081.nsf/ eng/00001.html 

To comment on this article please go to the "Peterborough Chamber" group of LinkedIn.

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