GLOBAL ECONOMICS
Patrick Grady
Get Serious on Trade: Ontario, Quebec may talk but they won't act on barriers
National Post, Tuesday, December 11, 2007, p.FP15
Premiers Dalton McGuinty of Ontario and Jean Charest of Quebec have seized on trade between the two provinces in their joint strategy to deal with the economic crisis facing Canada's industrial heartland. The strong Canadian dollar and ferocious international competition has undermined the competitive position of Central Canadian manufacturing industries. At the same time, the housing meltdown and financial turmoil in the United States has dampened export demand.
At a Nov. 26 joint press conference in Toronto, the two premiers inked an agreement launching trade negotiations "to eliminate trade barriers and improve labour mobility between their two provinces." The trade negotiators, who have yet to be appointed, will be required to present an interim report to a joint meeting of the Ontario and Quebec Cabinets next spring. The agreement is intended to build on existing bilateral agreements covering procurement, construction-labour mobility, and co-operation.
Freer internal trade in Canada has recently come back in fashion following the April, 2006, signing of the wide-ranging Trade, Investment and Labour Mobility Agreement (TILMA) between British Columbia and Alberta. That was why the Council of the Federation prompted the Federal-Provincial Committee on Internal Trade to establish an ambitious timetable to improve the Agreement on Internal Trade (AIT). It is thus not surprising that the two premiers would also find a trade agreement appealing.
But their press conference raises a real question about how serious they really are. Their press release called on the federal government "to convene a meeting with premiers of all provinces and territories as soon as possible to tackle the crisis" and "step up and do its part to support the plan." But the declaration setting out the guidelines for their negotiations lacks specifics, other than the vaguely worded "to prepare a modern, comprehensive economic and trade agreement."
The TILMA between British Columbia and Alberta, the new gold standard for trade deals, addressed the two key generally recognized defects of the AIT, namely its lack of coverage and its ineffective dispute-settlement mechanism. The TILMA, unlike the AIT, includes all measures that restrict or impair the movement of goods, services and labour between the two provinces unless they are specifically excluded, and not just those specifically included. The TILMA also introduced a binding dispute-settlement mechanism, with easier access for private parties and significant monetary penalties (up to $5-million). Spurred by the TILMA, the Committee on Internal Trade is now also considering introducing monetary penalties to make the AIT dispute-settlement mechanism more effective. What exactly is Ontario and Quebec proposing to do to address these deficiencies in the AIT as it affects trade between them?
In addition, the Ontario-Quebec declaration does not mention agricultural or food goods, an area with some of the largest remaining barriers to interprovincial trade, including most notably supply management. It is telling that neither Ontario nor Quebec are among the six provinces that signed the 2006 interim Agreement on Internal Trade in Agriculture and Food Goods. This agreement reaffirms the commitment to the AIT's objective of reducing technical barriers to trade in food and agricultural products and extends the scope of negotiations beyond the list of technical barriers identified in the AIT to cover all technical barriers to trade. If Ontario and Quebec were unwilling to sign this agreement, are they likely to try to do much to reduce agricultural barriers to trade in the upcoming talks?
The communique also made no mention of the need to eliminate the remaining barriers in the Quebec construction industry, which impede Ontario construction contractors from getting contracts in Quebec and Ontario construction workers from working there. After the June, 2006, agreement on construction between Ontario and Quebec, which settled a long-festering dispute, more than 10,000 Quebec construction workers are expected to work in Ontario, whereas only a few hundred Ontario workers are expected to work in Quebec. The highly regulated nature of the construction industry in Quebec in comparison with that in Ontario prevents the establishment of a level playing field.
In fact, in contrast with the TILMA, which tackles regulatory barriers head on, the Ontario and Quebec governments only talk of eliminating "unnecessary" barriers and express their belief that "eliminating such barriers and restrictions can and must occur simultaneously with maintaining and enhancing governments' policies for labour, environmental and consumer protection standards, health, education, culture and regional economic development." This isn't exactly a ringing endorsement of the need to eliminate regulatory barriers and really isn't any more ambitious than the existing AIT.
And then there's the little issue of the Quebec government's $620-million support program for its manufacturing sector that had been announced earlier in the month. While only $258-million of the package is new money, it is a good example of the kind of fiscal competition that can be damaging in an economic union, even going so far as to include some investment subsidies that would very likely be prohibited under the TILMA. Is this consistent with efforts to achieve freer trade be-tween Ontario and Quebec?
The Ontario and Quebec governments used the photo-op of their declaration of intent to hold trade talks to put pressure on the federal government to do something to help their manufacturing industries overcome the high Canadian dollar and successfully compete in the global marketplace. Was this their real agenda?
Improving the market between Ontario and Quebec, and hence the Canadian economic union, is a worthwhile objective for both the Ontario and Quebec governments. However, for there to be real progress in the negotiations, the Ontario and Quebec governments need ambitious goals for eliminating trade barriers and improving labour mobility.