Strengthening Canada’s Economic Union: The Agreement on Internal Trade and Beyond

October 4, 2006

The Canadian Council of Chief Executives believes that the free flow of goods, services, people and investment within Canada’s borders is essential to the competitiveness of our economy and the future prosperity of all Canadians. I therefore would like to thank you for the opportunity to appear before you to discuss Canada’s Agreement on Internal Trade and how the country’s economic union can be strengthened in future.

I will keep my initial comments brief so that we can go into more detail on specific issues of concern to members of this Committee, but with your permission, I would like to raise three issues in particular to start us off. These issues are labour mobility, regulation of capital markets and dispute resolution.

Encouraging labour mobility

The primary focus of the Agreement on Internal Trade more than a decade ago was on encouraging the freer flow of goods and services. Today, though, the most urgent issue facing some sectors and regions is a shortage of labour. The aging of our population means that such shortages are likely to become more serious and more frequent in the years ahead, making it increasingly important for Canada to encourage the free flow of people within our borders. As the Council of the Federation recognized at its July 2006 meeting in St. John’s, further reductions in barriers to both trade and labour mobility are vital means of strengthening the economic union and improving Canada’s competitiveness and productivity.

On this front, we are seeing some welcome progress. Earlier this year, Ontario and Quebec signed a deal improving the mobility of construction workers between their jurisdictions, while Alberta and British Columbia signed a very significant and wide-ranging Trade, Investment and Labour Mobility Agreement. And federal and provincial ministers responsible for internal trade, at their September conference in Halifax, agreed that Canadians will be able to work, without restriction, anywhere in Canada, by April 2009.

We fully support this objective, and we would urge governments if at all possible to move faster. Canadians should not have to wait another two and a half years to enjoy what should be a right of citizenship and also is critical to our country’s future prosperity.

In pursuing this broad objective, I would like to note two concerns in particular. The first is with respect to apprenticeships and skilled trades. Businesses are facing a severe and growing shortage of workers in skilled trades. But in some trades, even highly qualified workers cannot always move freely between provinces. More seriously, the fact that apprentices who move between provinces lose their status appears to be a major cause of the distressingly high proportion who fail to complete their apprenticeships and get certified.

Our second concern involves what I might call policy barriers to labour mobility. Here I am referring specifically to the Employment Insurance system and its impact in discouraging people from leaving regions of high unemployment even when their skills are in demand elsewhere in the country. Moving a family is difficult. I have done it several times myself. But public policy should not make it more difficult.

Regulation of capital markets

Let me turn now to the continuing frustration of the business community with Canada’s fragmented approach to the regulation of capital markets. We live in an era in which investment flows freely around the world, yet we persist in maintaining 13 separate securities regulators. This fragmentation hurts investors by limiting their opportunities, reducing their returns and leaving them with less effective protection. It also adds to the cost of raising capital and thereby hurts the ability of Canadian enterprises to grow.

The need for a single securities regulator in this country is clear and compelling. The passport approach being pursued by most provinces is a modest improvement but simply cannot meet the needs of today’s investors and issuers. In June, the Crawford Panel on a Single Canadian Securities Regulator put forward a creative model that would pool provincial expertise, respect constitutional authority and prevent dominance by any one jurisdiction. It also suggested a federal presence within a governance structure modeled on the proven and successful Canada Pension Plan Investment Board.

The federal Minister of Finance has been clear in his support for a single regulator and has suggested addressing the issue in the context of broader federal-provincial discussions of equalization and transfers. We are prepared to support bold ideas for the reform of fiscal arrangements, but we also believe that provinces should be willing to give as well as take in the context of these discussions. We therefore would go one step further than the Minister and suggest that an agreement by the provinces to establish a single securities regulator be an explicit condition of the next federal-provincial accord on the reform of fiscal arrangements.

Dispute resolution

Finally, let me speak to the issue of dispute resolution. The lack of an effective process for resolving disputes has been the greatest weakness of the Agreement on Internal Trade. The recent agreement between Alberta and British Columbia includes a much more effective approach, and we are extremely pleased that federal and provincial ministers agreed in September to develop an “effective, fair, efficient, accountable and enforceable” dispute resolution process by August 2007, to take effect by September of next year.

The Canadian Council of Chief Executives strongly supports this commitment by ministers. A truly effective dispute resolution process is essential for achieving the goals of the Agreement on Internal Trade and would mark the single most important step governments could take in enabling a free market within Canada to propel the competitiveness of our economy and the future prosperity of all Canadians.