A web of regulations hinders internal trade in Canada: report

by Barrie McKenna (feat. Laura Dawson)

The Globe and Mail
November 26, 2015

More than three years have passed since Parliament made it legal for consumers to buy wine directly from wineries anywhere in Canada.

And yet the practice remains impossible for most Canadians because Ottawa has failed to get provinces to rewrite their own liquor distribution regulations. So far, only British Columbia, Manitoba and Nova Scotia have passed enabling legislation to put that freedom into place.

It’s just one example of the painfully slow progress toward a fully integrated internal market in Canada, according to a Fraser Institute report being released Thursday.

A web of intricate rules and regulations still inhibits the free movement of workers and goods in Canada as the country prepares to join two massive free-trade deals spanning Europe and much of the Pacific Rim, author Laura Dawson points out in the report, Five Ways to Improve Internal Trade in Canada.

“If we continue to impede Canadian businesses from growing to the level where they can compete in the relatively small Canadian market, we’ll never be able to make them competitive internationally,” Ms. Dawson said in an interview.

The previous Conservative government and the provinces had pledged to come up with a plan for renewing the 1995 Agreement on Internal Trade by next March. But that deadline could slide as the new Liberal government strives to repair strained federal-provincial relations, said Ms. Dawson, director of the Canada Institute at the Woodrow Wilson Center in Washington.

“I would hate to think there will be a slowdown in this process as a result of the new government, but unless we get strong leadership from the provinces on barrier reduction, we’re going to see a fallow period,” she said.

The report highlights five steps the new government can take to shore up the internal trade pact. These include adding an energy chapter to the internal trade deal that would push provinces to provide more freedom to buy and ship energy, freeing the movement of dairy products between provinces and fostering an export-oriented industry outside the tightly regulated supply-management regime.

Ms. Dawson said a $4.3-billion package to compensate farmers for concessions made in recent trade deals is a “good segue” to reforming supply management, which regulates production of dairy, eggs and chickens in Canada. “The momentum is in place,” she said.

Likewise, Ms. Dawson pointed out that United States’ rejection of the Keystone XL pipeline puts added pressure on Canada to develop a competitive internal energy market. “We can’t rely on external actions to help us out,” she said.

The report also recommends strengthening the internal trade deal’s ineffective dispute-settlement mechanism, while rewording the agreement to make clear that “opening up markets is the default position and that everything is covered, except that which is explicitly excluded.”

Another problem area is the maze of different apprenticeship systems and licensing requirements for professionals across the country. The report suggests that Ottawa could withhold training funds until provinces agree to meet predetermined labour mobility targets.

The original internal trade deal was supposed to create a “single window” for registering a business in Canada. More than two decades later, the federal government’s central Registrex system is little more than an Internet link containing contact information for registering a business in the various provinces. In many cases, companies must register with Ottawa as well as in each province, paying fees each time, and often being required to maintain an “agent” in every jurisdiction. The lack of harmonization costs companies tens of millions of dollars a year, according to the report.

“If you make it hard for a company to get started, you are likely to have fewer companies,” Ms. Dawson said.