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Commentary Canadian free-trade deal a good start, but must go further

At this time of anxiety surrounding international trade relations, it was encouraging to see a new Canadian free-trade agreement arrive on the scene Friday. Unveiled by federal, provincial and territorial governments, the CFTA seeks to reduce government-imposed barriers that Canadians face when seeking economic opportunities across the country. But does it deliver? Only partly.

Our economic union, with all its flaws, remains a vital avenue of economic opportunities for Canadians. The CFTA represents a serious but incomplete attempt at removing barriers to accessing these opportunities. Canadians looking to buy and import alcoholic beverages more freely from other provinces will certainly be disappointed by the CFTA, which only engages governments to put forth options to liberalize trade in this area. As will those seeking freedom from the supply restrictions and high consumer prices imposed by dairy and other farm-marketing schemes that rely for their existence on continuing interprovincial as well as international barriers.

Also disappointed will be those seeking immediate regulatory harmonization, for example, of trucking regulations hampering movement of goods across the country, or new mechanisms that would enable businesses to operate in multiple Canadian jurisdictions without having to register separately in each one of them. The CFTA leaves all these barriers and more in place.

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But the deal improves matters in some key areas of internal trade. It genuinely reduces the available room government entities use to discriminate between suppliers based on their place of business. It also addresses long-standing issues limiting electricity transmission, or "wheeling," across provinces. It includes clear strictures against the use of standards or administrative requirements to discriminate against workers or firms seeking to ply their trade or do business from one Canadian jurisdiction to another – Canadians will be spared future episodes in which producers in one province are unable to sell in another because their product is of the wrong colour.

The CFTA clearly lists instances where governments plan on allowing continued discrimination in awarding contracts or licences, based on place of business or residence. These may range from accords to direct the benefits of some oil and gas developments to local communities, to requirements that the seller of certain services have a place of business in the province awarding the licence. This "negative list" approach is a significant step toward transparency of remaining barriers.

The CFTA is also harmonized with international agreements that bind Canada, such that we won't be able to say anymore that Canadians impose higher barriers against other Canadians than they impose against the rest of the world. This is good for the Canada "brand" abroad.

In short, the CFTA contains a built-in "ratcheting down" of barriers over time. It contains a robust dispute-settlement mechanism, which can lead to monetary penalties enforceable in court.

The agreement fails, however, to create more uniform business rules and standards across the country. Seeking to compensate for this failure, the CFTA introduces new mechanisms for continuing regulatory co-operation and harmonization among governments. Governments now must also draw up new regulations in a way that harmonizes them as far as possible with their fellow governments. But over all, the agreement is weak on standards and rules harmonization.

With the CFTA, Canadian governments deserve an "A" for effort at transparency and harmonizing with international trade rules and a "B" for enhanced access to public procurement contracts, providing avenues for redress against discriminatory practices and preventing new barriers to trade from emerging within Canada. But the CFTA cannot be the end of the road as far as enhanced opportunities for Canadians to benefit from our internal market are concerned. Indeed, the three western provinces, now joined by Manitoba, are continuing their deeper New West Partnership Agreement even as they sign on to the CFTA. Canadians should continue to press for enforcement of constitutional provisions underpinning Canada's economic union, with or without the CFTA. Canadians must continue to hold governments' feet to the fire until they have removed from the scene other egregious measures rooted in our protectionist past.

Daniel Schwanen is vice-president, research, at the C.D. Howe Institute.

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