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The Progressive Economics Forum

How to Solve a Problem like Internal Trade Barriers?

In 1995, Canadian First Ministers signed an Agreement on Internal Trade. From the website, “Its purpose is to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services, and investment within Canada and to establish an open, efficient, and stable domestic market.”

Well, it turns out that agreement, although regularly updated and renegotiated, is no longer enough. The previous Conservative government had really, really, really wanted to update AIT to be more in line with their approach to trade in international agreements such as TPP and CETA. The pretty conservative Senate wants it badly too. And it seems the current government is happy to oblige.

The updated agreement on internal trade, which had been moving along nicely, has hit a snag. Negotiators had wanted to open up all government procurement (meaning, not allowing any preferential treatment for local contractors). Alberta has asked to be allowed to require 20% local employment in government procurement.

The other proposed feature of an updated AIT that is particularly troublesome is a switch to a negative list. (A negative list starts from the assumption that all services should be delivered privately, without restriction, and a positive list starts from the assumption that most services should be publicly provided and/or regulated. The language used in these deals is super technical and inaccessible for a reason – it’s harder to organize opposition around something that’s so abstract.)

The current AIT and all of Canada’s international trade deals operate on a positive list. Only the CETA has been negotiated on a purely negative list (I’ve been told that some elements of TPP are negative list and some are still positive list because of references to WTO rules).

Proponents are trying to argue that a negative list is ‘modern’ – but it’s just privatization and deregulation through the back door. As I told Blacklock’s Reporter, implementing a negative list to solve Canada’s internal trade barriers makes about as much sense as using a chain saw to trim your fingernails.

It seems like a good time to post my comments on behalf of the Canadian Labour Congress to the Senate committee on Banking, Trade, and Commerce.

********************************

Mr. Chair, the labour movement is keenly aware that trade is, and has always been, an important feature of the Canadian economy. We understand the interest that all governments have in fostering healthy trade between jurisdictions, inside and outside of Canada.

Unfortunately, trade agreements can unduly restrict governments’ right to regulate, give huge advantages to larger businesses, and rarely have effective protections for workers or the environment.

As such, they do not always increase trade, improve economies, or benefit Canadians.

So our question is: what problem is an updated Agreement on Internal Trade meant to solve, and is it possible that there are better policy tools available to solve those problems?

Since 1995, many of the impediments to internal trade have been addressed. Most empirical studies have found that the cost of remaining internal trade barriers are quite small, and the benefits of expanding AIT have been grossly exaggerated.

Most often, one hears about the movement of alcohol, or the movement of trained workers.

On the labour front, considerable gains have been made in recent years, for example with the Red Seal program that sets a high standard that is accepted in all provinces. We’re confident that provinces are moving in the right direction on labour mobility, and on harmonizing training as well as certifications.

Do we need to re-open an existing agreement to improve the interprovincial movement of alcohol? It seems that provinces could work together on specific issues, such as that, when they arise.

As Scott Sinclair recently told this committee, it would be a useful exercise to list and estimate the cost of specific trade barriers between provinces. Provincial governments could then cooperate to remove any costly barriers that do not serve any useful purpose, rather than sign onto a far-reaching agreement that may have serious unintended consequences.

One of the other reasons that we’re talking about changing the Agreement on Internal Trade is to make it compliant with international trade agreements such as the Trans Pacific Partnership and the CETA. The labour movement has serious concerns about those agreements, as they contain elements that are harmful to workers, the environment, and local economies.

Particularly, we want to preserve local governments’ ability to deliver high quality public services, and to use procurement policies to promote local economic development and environmental stewardship.

We know that public purchasing policies can have broad benefits, such as reducing waste and energy consumption, developing economic capacity among underserved populations, and supporting smaller suppliers and suppliers who have sustainable and ethical business practices. Expanding the AIT will make it more difficult for provincial and local governments to accomplish this.

In terms of protecting public services, the drive to switch to a negative list in the AIT is very worrisome, particularly in light of investor dispute settlement mechanisms.

A negative list means that any service governments wish to be kept out of a trade deal, such as health care or education, must be specifically named. If new services emerge, or if public consensus grows for new programs such as pharmacare, these services are automatically subject to the trade agreement. This is privatization by default. A positive list would give all governments, and their residents, the chance to decide if they want to protect new areas of public service delivery.

Even for those services that have been protected, standstill and ratchet clauses effectively lock the current level of privatization into place, and only allow increased privatization. If a hospital has outsourced meal, laundry, and cleaning services – but finds that they are getting sub-standard service for higher prices – decision makers subject themselves to an ISDS complaint & potential fine if they want to bring those services back in house – even if that is the best decision economically.

As it stands, the AIT prohibits adopting or maintaining even non-discriminatory measures that “restrict or prevent the movement of persons, goods, services, or investment across provincial boundaries.” This seriously ties the hands of elected officials at all levels of government, in an unnecessary way.

We have followed the policy prescriptions from the OECD and IMF from the 80’s and 90’s in terms of privatization of public services, trade liberalization and lowering corporate taxes, and not seen much economic benefit as a result. We would suggest to you that it is time to try something new, not rehash old policies.

Enjoy and share:

Comments

Comment from Liam
Time: July 5, 2016, 9:13 pm

The introduction and passing of Bill C-311 at the Federal level makes any prohibition of inter-provincial trade illegal.
Any effort to prevent inter-provincial trade (example: the New Brunswick resident that ‘imported’ beer from Quebec) will result in cases being brought to the Supreme Court of Canada. Their reference for legislation and decisions will be Bill C-311 and the articles you mention above.

Comment from Angella MacEwen
Time: July 6, 2016, 4:37 pm

Liam, you’re absolutely right, thanks for pointing that out. Conservative senators mentioned that repeatedly when I was at the committee, and Pamela Wallin in particular was impatient for the Supreme Court to intervene and eliminate all potential inter-provincial trade barriers.

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