Industry Committee on April 20th, 2021

[The Chair, Liberal, Sherry Romanado]

Good morning, everyone. I call this meeting to order.

Welcome to meeting number 32 of the House of Commons Standing Committee on Industry, Science and Technology. Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, 2021. The proceedings will be made available via the House of Commons website, and so that you are aware, the webcast will always show the person speaking rather than the entire committee. To ensure an orderly meeting, I'd like to outline a few rules to follow.

Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have a choice at the bottom of your screen of “floor”, “English” or “French”. Please select the language preference now.

I remind you that all comments by members and witnesses should be addressed through the chair, and please wait until I recognize you by name. When you are not speaking, your mike should be on mute, and when it is your turn to speak, please unmute your mike. Please do not speak over each other, as this does not allow for the interpreters to do their important work.

Most importantly, as is my normal practice, I will hold up a yellow card for when you have 30 seconds remaining in your intervention and a red card for when your time for questions has expired. Please keep your screen in gallery view so that you can see the cards when I hold them up. Please respect the time so that all members have a chance to pose their questions.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on February 23, 2021, the House of Commons Standing Committee on Industry, Science and Technology is meeting today to continue it's study on competitiveness in Canada.

I'd now like to welcome our witnesses. Today we have Professor Trevor Tombe, associate professor at the University of Calgary; Mr. Robert Ulicki; Mr. Robert Donald, executive director of the Canadian Council for Aviation and Aerospace; Jim Balsillie, chair of the Council of Canadian Innovators; and Robin Shaban, principal economist at Vivic Research.

Each witness will present for up to five minutes, to be followed by rounds of questions.

We will start with Professor Tombe.

You have the floor for five minutes.

[Dr. Trevor Tombe, Associate Professor, University of Calgary, As an Individual]

Thank you very much, and it's really my pleasure to be here.

My brief opening comments will focus on how certain barriers to interprovincial trade in Canada may represent material drag on our national productivity, competitiveness and ultimately our economic prosperity. First, to fix ideas it's necessary to appreciate what internal trade costs are, because unlike costs between countries, they are not tariffs. They're not observable in that way. Instead they're countless tens of thousands of individually modest but collectively significant differences in the rules, regulations, standards, certifications and so on, that add costs to businesses operating across provincial boundaries.

Examples abound. In agriculture there are inspection and labelling requirements. For trade in services and a lot of professional services in particular, provincial standards and certifications can prevent customers in one province from accessing the services of a supplier in another. For trade in goods, you have differences in trucking regulations and so on. These are just a small handful of examples, but recent advances in data availability and economic modelling techniques make it possible to measure costs on a broader scale.

For example, Statistics Canada researchers Robby Bemrose, Mark Brown and Jesse Tweedle recently constructed what is perhaps the most sophisticated and robust estimate of interprovincial trade barriers. They found that for manufacturing it adds about 7% to 8% to the cost of shipping from one province to another. Predating their work, Lucas Albrecht,a former University of Calgary graduate student, and I estimated that when you include services, the average cost of trade between provinces is between 8% and potentially as high as 15%.

These may appear modest at first, but they are not. They can inhibit productive producers in one region from expanding and exporting to another. They inhibit consumers' ability to purchase lower-cost goods and services from elsewhere. This matters for productivity, because if you specialize less in areas where you have a comparative advantage, overall productivity can decline. Estimating the size of that effect is not easy of course. It requires a rich model of Canada's economy but that work has been done recently. I and others have developed such models.

In recent work with my University of Calgary colleague, Professor Jennifer Winter, which is forthcoming in the Canadian Journal of Economics this year, we find that internal trade may lower Canada's overall productivity by between 3% and 7%, depending on the measure. Work published through the International Monetary Fund, researchers there and I suggest that liberalizing internal trade in goods alone, just manufacturing, could increase Canadian productivity by nearly 4%. This is large. This represents an increase in Canada's economy by nearly $90 billion per year, over $2,000 per person or $5,000 to $6,000 per household per year.

The results here also suggest that lower-income regions benefit more than higher-income ones. Among the five provinces with the lowest average household, for example, we find that gains there average more than 5% which is significantly more than the overall average.

There's a lot that government can do. A lot of recent reforms have made some progress on this file, notably the Canadian Free Trade Agreement from 2017, but there's much left to do. Continued federal, provincial and territorial co-operation through the various efforts within the Canadian Free Trade Agreement is critical. There is funding needed to increase capacity, for example, to bolster the ability of the CFTA secretariat to work through its growing work plans. That's something we saw yesterday's budget provide a little bit on actually. That can be valuable.

The gold standard may involve provinces moving unilaterally, potentially. Alberta, for example, moved in the summer of 2019 to drop many of its self-imposed exemptions under the CFTA. I estimate that roughly two-thirds of the gains from lower internal trade barriers for a province can be achieved by that province moving unilaterally and recognizing the regulations and standards that prevail in another province as automatically compliant with respect to its own.

I see the 30-second notice. I'll end by saying that of course there are some valid objectives of regulations that apply in one province and another, and so the goal, I think, ought to be, to think about regulations that don't achieve a very specific and well-defined public policy objective and otherwise harmonizing, smoothing out the differences that prevail.

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you so much.

Our next presenter is Mr. Ulicki.

You have the floor for five minutes.

[Robert Ulicki, As an Individual]

My name is Robert Ulicki, and I will outline the complex morass of regulations, committees, expert reports, tribunals and licensing requirements I am navigating to create a day care.

In July 2016 my wife and I purchased a mixed-use property located in Cabbagetown, a residential neighbourhood in downtown Toronto that began gentrifying in the 1970s. It is an ideal location for a day care as it is near families, parks, bicycle infrastructure and public transit.

In May 2017 we applied for a zoning certificate. The city responded four months later telling us that we needed site plan approval that would cost around $100,000. Thankfully, the city was wrong about the application of its own policies but indicated that variances to the zoning bylaw would be required. We applied to a committee of five people for the variances to the zoning. They denied us. We appealed that decision to a municipal tribunal. From the application to the committee to a final decision from the tribunal, it took three and a half years and cost $100,000 for variances to a zoning bylaw.

Why did it take so long? First, we were forced to respond to opposition from a handful of wealthy and connected neighbours who hired a Bay Street law firm, a major engineering firm and a senior land use planner to argue that day care did not belong in their midst.

Second, the local councillor at the time sided with the loudest and the angriest neighbours and asked the city to pay for lawyers and hire an outside traffic consultant to further oppose us before this tribunal. Initially, two days were set aside for the hearing which commenced in August 2018. Well, two days turned into six, then eight, then 12 and, finally, 14 days over two years. Fortunately, the decision was in our favour.

When you cut through all the drama and the posturing, the primary issue was setting aside parking spaces on a public road to facilitate [Technical difficulty—Editor] and picking up their children. Every home in the vicinity has laneway parking, but some residents either opt to landscape the rear of their backyard or own two cars and want a cheap spot to park on the street. They pay a paltry 55¢ per day, or $200 per year, for the privilege to park 24-7 on public roads in downtown Toronto. Residents tried to fiercely guard this privilege with the encouragement of the councillor at the time. All this happened when there's a genuine lack of day care in the city and a multitude of policies aimed at making Toronto less reliant on cars.

You would think that it ended there. No. Some residents and the city did not like the tribunal's decision and asked the appeal body to review it, so we got back into the queue. We waited another five months for a hearing and received a decision in January 2021. Once again, we prevailed on the simple argument that caring for kids trumps parking cars.

Where do we stand today? In some ways we are closer, but still far, as we have several layers to cut through. The appeal body that approved the application does not have the authority to amend street parking rules; only city council does. Yes, the same city that sent the lawyer and the traffic engineer to fight us will decide if we can operate. In the end, approving our application is a political decision on parking.

We have hope. The former city councillor who opposed the application lost in the last municipal election. The new councillor, Kristyn Wong-Tam, is a fierce advocate for families and day cares. With the benefit of a 32-page decision that unequivocally supports our application, we remain hopeful that the concerns of our opponents will be laid to rest.

Since the decision, the city's transportation department is prepared to recommend a provision of intermittent parking spaces for pickup and drop-off. We can now hope that logic, fairness, evidence and policies that support day cares more than street parking prevail before city council.

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Our next witness is Mr. Robert Donald.

You have the floor, for five minutes.

[Robert Donald, Executive Director, Canadian Council for Aviation and Aerospace]

Thank you very much, Madam Chair.

Thank you to the committee for inviting me back. Some of you may recall that in my appearance in March, I spoke about the critical shortage of skilled workers and the lack of training capacity in Canada to produce the graduates we need.

I've been asked today to expand on my comments about competency-based training and accreditation, and what the government can do in the aerospace sector to increase competitiveness and reduce the regulatory burden and eliminate red tape.

As a quick reminder, the pandemic has provided a temporary reprieve from the critical labour shortage for some sectors of our industry, but the shortages have already started to return. Canada's biggest competitive advantage in a global competition is our skilled workforce, but if we don't have the necessary workforce, the jobs will go to other jurisdictions and never return.

The pandemic has resulted in a loss of approximately 35% of our prior workforce due to those being laid off, choosing to retire or to seek employment in other fields. As the recovery takes hold, there will be a surge in demand for skilled labour, which cannot be met from simply trying to rehire those laid off.

We have a lack of training capacity. Canadian colleges do not have the capacity to meet anywhere near the demand from our industry. Even prior to the pandemic, they were only producing 25% of the needed graduates, despite all of them, except ÉNA in Montreal, having wait-lists.

The pandemic has delayed graduations and reduced capacity by approximately 35%. I don't believe it's realistic to expect the government will fund expansion of capacity at bricks and mortar institutions, so we need alternatives, new ways of training and eliminating the red tape associated with hiring foreign workers.

We have a lack of training facilities, not just capacity. In Yukon and the territories, there are no aviation programs. In Quebec, Manitoba, Alberta and Saskatchewan, there's only one college in each province. In the four Atlantic provinces, there are only two.

Turning to the competency-based accreditation and what government can do to help our sector, new ways of training are needed. I spoke at length about Transport Canada last time. There are three issues with Transport Canada regulations for our sector.

First, there's competency-based training versus hours. The benefits of competency-based training are well documented. Despite that, Transport Canada only recognizes hours in class. Transport Canada dictates that colleges must provide 1,800 hours of instruction for maintenance and avionics and 1,000 hours for structures. If students finish a lab assignment in one hour instead of the three allocated by Transport Canada, they have to sit there for two hours anyway and just kill time, because the professor has to certify that they spent that much time in class. Transport Canada says it's too hard. We've spoken to them, but they said it was too hard to move to competency-based. It is not.

The second point is online and blended learning. As I alluded to last time, prior to the pandemic, Transport Canada did not allow colleges to use online or blended learning. As a result of the pandemic, it has now allowed that, but only until December 31 of this year. Like all sectors of society, the air transport sector has experienced rapid technological advancements. Artificial intelligence, machine learning, augmented and virtual reality training are all dramatically impacting the way training can be delivered. Colleges want to use these new ways of training, but TC regulations prevent that.

The third point refers to outdated curricula. Transport Canada-approved colleges are required to follow woefully outdated curricula. Their curricula hasn't been updated in over 20 years. They still require colleges to teach students how to fix cloth wings, wood structures, and insist on repairing components that are no longer in use in current aircraft. Failure to update the curricula will leave the Canadian aviation and aerospace workforce at a distinct disadvantage. Current regulations don't meet the requirements of new and emerging technologies, such as glass cockpits and composites. If we don't act quickly, businesses will not choose Canada, and they'll go where they can to get these essential services for the modern industry.

The hours-based programs, together with mandatory content, prevent colleges from adapting and providing more relevant and effective ways of training. Industry needs more accessible, efficient, effective and targeted ways of training, both from colleges, but also given the lack of capacity for training in the workplace....

I have run out of time. I will leave it there.

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, Mr. Donald. It's always a pleasure to see you.

We'll now turn to Mr. Balsillie.

Welcome back to INDU. You have the floor for five minutes.

[Jim Balsillie, Chair, Council of Canadian Innovators]

Thank you, Madam Chair.

I congratulate committee members and staff for their excellent report on the Investment Canada Act and its recommendations for a needed reorientation of Canada's economic strategies.

My remarks today will build on that direction to improve Canada's competitiveness. I will comment on three issues: the meaning of competitiveness in the intangibles economy; measuring our economy in a way that captures prosperity to promote better management; and developing institutional capacity in our public sector to support policy development.

In the traditional economy, competitive was synonymous with low cost. To attract multinational investors, companies cut red tape, offered land at concessional rates, provided tax benefits, etc., knowing this economic activity would generate a fair return to the host. However, as economic returns increasingly shifted to owners of IP, and more recently data, this strategy amounted to capturing the low-rent district in the global economy—equivalent to competitively priced low-income jobs in an Amazon fulfillment centre, while the highly profitable data-driven rents accrued to Jeff Bezos.

Competitiveness in the intangibles economy means the ability to capture economic rents that flow to IP owners and to those who control data assets that also power rent capture. Canada only had policies for the traditional production-based economy, which is shrinking in importance as the digital transformation continues to transform all industries. For Canada to compete in the 21st century global economy, we need to develop policy frameworks that enable our companies to capture their fair share of economic rents in the intangibles economy.

According to the IMF, Canada's pre-pandemic GDP per capita was 3% lower than 2010 levels, while the U.S. experienced a 35% increase over the same period due to the alignment of its economic policy strategies with contemporary economic realities. GDP per capita is no longer a sufficient metric for prosperity, because it fails to capture earnings on assets abroad and the accrual of value in asset holdings. This gap would certainly be even wider if we included these wealth effects.

Canada's deficit on IP payments and receipts is widening at an alarming rate. This deficit would be larger if the value of net flows of data were included.

I offer one recommendation that can foundationally help improve Canada's competitiveness. Rebuild the Economic Council of Canada to create in-house capacity for the analysis of the contemporary economy. The nature of today's global economy requires an unprecedented amount of horizontal integration, analytical depth and rapid response to deal with the accelerated pace of innovation and the powerful feedback and spillovers that emerge in our network society. This is particularly critical for the data-driven marketplace which features economies of scope and scale alongside information asymmetries that together give rise to monopolies which are reducing the rate of entrepreneurship, innovation and business dynamism.

Proper regulation of the IP and data-driven economy can restore competitive market dynamism, which is why IP and data giants are under investigation for antitrust behaviour by U.S. federal and state authorities, the EU and others.

A revived economic council would have several core functions: develop the expertise to measure and manage the intangibles economy, including the capacity to develop both intellectual property and data governance strategies; serve as a centralized resource to support line department and expertly assess policy decision spillovers on Canada's intangible assets; provide strategic focus for Canadian researchers who have deep expertise on many of these issues, but whose work may not necessarily reflect governance priorities.

With the federal government budget released yesterday, I submit that redistribution of a fixed economic pie or prudent fiscal anchors are insufficient without a strategy to generate new wealth. Canada urgently needs growth strategies attuned to contemporary realities.

The charts and statistics included in my presentation are irrefutable. As successful innovation companies and countries turn their focus to strategically generating valuable IP and, in the last decade, to controlling valuable data to accrue wealth, Canada missed these shifts and as a result became a large IP and data services importer.

IP and data have different features than tangible goods. They behave differently in a marketplace and therefore require different tool kits for both companies and policy-makers. A properly built economic council would lead in the necessary intellectual revival of our policy community and help government rebuild critical capacity that favours national interests, including advancing our competitiveness.

I thank you for your time today.

[The Chair, Liberal, Sherry Romanado]

That's perfect timing. Thank you so much.

We'll now go to Ms. Shaban.

You have the floor for five minutes.

[Robin Shaban, Principal Economist, Vivic Research]

Thank you, Madam Chair.

Thank you to the committee. I'm happy to be here again to testify.

My name is Robin Shaban, and I am the principal economist and co-founder of Vivic Research. I am also a Ph.D. candidate at Carleton University, where I am studying Canadian competition law.

At a previous hearing, Mr. Erskine-Smith asked that I submit a briefing note to the committee outlining changes that I think should be made to the Competition Act. I will submit this brief in the coming days. In my opening remarks, I will outline some reforms in the brief.

In past meetings the committee has heard about the need for greater independence for the Competition Bureau. Currently, the bureau is nested within ISED. Enforcement actions of the bureau are not subject to ministerial review or approval. However, the commissioner reports to the deputy minister for non-enforcement matters, meaning that the bureau does not have the authority to speak openly about many broad issues of competition policy. This arrangement undermines transparency and is not consistent with our international peers. Therefore, my first proposal is to make changes to the structure of the Competition Bureau so that the commissioner is no longer answerable to the deputy minister of ISED.

Second, the bureau should be given the ability to compel information from corporations to undertake market studies and evaluate the effectiveness of its enforcement decisions. Currently, the bureau can only collect information from corporations during an investigation. In the U.S., for example, the Federal Trade Commission has broad powers to compel information outside an investigation, and it has used these powers to do studies that are available to the public.

Third, as we have discussed before, Parliament should abolish the efficiencies defence on the grounds that it brings us out of alignment with major competition laws elsewhere and is inconsistent with equitable economic growth. Abolishing the efficiencies defence does not mean that the Competition Act will be ineffective at promoting efficiency. Rather, it means that it will prioritize efficiencies that directly benefit all Canadians, not just corporations.

Fourth, some have highlighted that the bureau lacks sufficient resources. An additional way to resolve the bureau's budgetary pressures is to revise the act to make enforcement more efficient.

For example, Canada's system for clearing mergers is complex and more restrictive than that of the U.S. These conditions mean that officers must do more analysis on mergers that are likely not going to raise competition issues, because the risk of overlooking a harmful merger is higher under our system. Aligning our merger clearance system with that of the U.S. could create efficiencies in the bureau, making more resources available for high-impact work.

Another area where our competition policy severely lacks is enforcement in labour markets. Based on my own search, there is no publicly available information that suggests the bureau has ever investigated potential anti-competitive behaviour against workers. I believe there are two reasons for this oversight.

First, our law is inadequate. For example, wage-fixing agreements do not fall under criminal provisions of the Competition Act, unlike in the U.S. Instead, these cases must be taken under civil provisions of the act. This means that the legal test the bureau needs to meet to build a successful case is significantly higher, and this reduces the likelihood of success, accounting for differences between civil and criminal standards of proof. To address this issue, the 2009 revisions to the act with regard to section 45 need to be rolled back.

Second, I find no evidence that the bureau has assessed a merger's potential anti-competitive impact on jobs, even though it could. In this way, the bureau is not fully enforcing the law. This is a major oversight, given the growing prevalence of gig work and other types of employment not covered under traditional labour laws. To address this issue, the bureau should develop specific merger enforcement guidelines that outline how it plans to assess a merger's impact on wages, job quality and job availability.

My last proposal is not a change to the act but rather a change to our approach to competition policy. The logic of our competition law is based primarily on theoretical economic models developed between the 1960s and the 1980s. Research methods in economics have evolved substantially since then, allowing us to create policy based on empirical evidence rather than theoretical models. As part of any reform of the Competition Act, analysts should be collecting and understanding empirical research to inform decision-making. One way to do this could be to reinstate the Economic Council of Canada.

In our conversation today, I'm happy to speak about the proposals outlined here and to answer any questions committee members may have to the best of my ability.

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you so much.

With that, we will start our round of questions.

MP Poilievre, you have the floor for six minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you.

Mr. Ulicki, this is good timing, your being here. The government tells us it wants to charge taxpayers $9 billion for day cares. They believe that the best way to provide daycare is to take money from parents and bring it up to the federal government, which will give it to the provincial government, which will give it to the municipal government, which will give it to agencies that deliver day care spaces.

You had another idea, which was just to build a day care and provide 80 kids with a place to go and be cared for. Of course, the obstacles you faced were municipal, but those same municipal leaders are constantly asking for federal tax dollars. That's why they have elevated this to the federal level. I note that there were roughly 80 millionaires who stood up and opposed your proposed day care. You were going to provide 80 day care spaces. So you had one millionaire for every child, one millionaire blocking every kid, from having a day care space. That is quite an interesting ratio.

One of those privileged elites, of course, was Tiff Macklem, the head of the Bank of Canada. He has been a big rhetorical supporter of government day cares, and yet he and his family objected, saying that your day care would have taken away the charm of the neighbourhood and that it would even have required garbage trucks to come to pick up the waste that would be produced by the day care. I don't know who picks up their garbage. Perhaps Mr. Macklem could testify about how he disposes of his waste.

How much money did you have to spend on government already in your efforts to provide these 80 kids with a day care space?

[Robert Ulicki]

The question is not how much I have spent on government. The spend on government is with respect to paying for permits, etc. The primary cost is the carrying cost of having a building sit vacant for effectively five years now. That includes interest, heat, light and power, property taxes, utilities, insurance, etc. Those costs are approximately $100,000 per year.

May I also I point out that because it's a project that you're developing, as per our wonderful CRA, I do not have the ability to deduct those costs. I actually have to capitalize them. I have to make $200,000 in order to have $100,000, because I pay in after-tax dollars, and I get to capitalize it. Then, once it's completed, if it's completed, the deduction is 4% per year. Basically, with all these carrying costs, etc., I get to deduct at 4% per year into infinity.

[Pierre Poilievre, Conservative, Carleton, ON]

Wow. You've already wasted half a million dollars on delays. You began this process in 2017, so now we're going on five years of waiting. Do you expect that the day care will open any time soon?

[Robert Ulicki]

I think you'd have to ask the City of Toronto. It's up to city council to decide whether or not they want to support what you call PUDO, which is pickup and drop-off. It's not uncommon in the city of Toronto to allocate public parking spots for the pickup and drop-off of children. They do it for day cares. They do it for schools. You have to pass this specific municipal bylaw in order to authorize that.

That's the primary impediment we've had here. The neighbours do not want to have those spots given up for pickup and drop-off, because it would impede their ability to park in front of their house in downtown Toronto.

[Pierre Poilievre, Conservative, Carleton, ON]

Right. So they want the spaces for themselves instead of for the kids.

[Robert Ulicki]

Absolutely.

[Pierre Poilievre, Conservative, Carleton, ON]

Well, we'll see. Ms. Freeland might be very concerned about this, because she says she is going to create all of these new day cares with her $9-billion-a-year taxpayer-funded plan. I don't know if she'll be able to get them approved by city councils if we have the same experience as you've had.

You know, I have a hard time understanding why someone like you would go through all of this torment. You're obviously a successful businessman. You've devoted almost half a decade of your life and half a million of your dollars to try to do something good for 80 kids. All you've had is a bunch of self-serving gatekeepers protecting their own backyards. One of them actually complained that the danger was that there would be kids making too much noise next to her house. She signed her submission to the city with “Ph.D.”, so I gather she is busy thinking big thoughts in her house while she doesn't want to be interrupted by little munchkins running by, singing songs and skipping their way to the park.

That's how crazy it's gotten in this country. One day I hope people rise up—consumers, workers and entrepreneurs like you—against this gatekeeper economy. Thank you for telling your story and for persisting through all of this bureaucracy.

Madam Chair, how much time do I have left?

[The Chair, Liberal, Sherry Romanado]

You have 30 seconds.

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Donald, you told us last time that if someone who had been working for Lufthansa came here as an immigrant from Germany and had the capacity to maintain Air Canada planes in Germany, they wouldn't actually be able to do the same work in Canada because their credentials can't be recognized. Even if they're capable of doing exactly the same work, they cannot get a licence to practise.

Is that true? Can you expound upon that gatekeeping in our labour market?

[The Chair, Liberal, Sherry Romanado]

Answer very quickly, Mr. Donald.

[Robert Donald]

Yes, it is true, Mr. Poilievre. It's because Transport Canada doesn't recognize the academic training that the individual took, regardless of their competency. If Transport Canada funded the development of a competency-based assessment system, that problem would go away.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll now go to MP Lambropoulos.

You have the floor for six minutes.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Madam Chair.

I'd like to thank all of our witnesses for being here today. There's lots of interesting content.

Mr. Tombe, you're the first person I'll be asking questions of.

You spoke a lot about interprovincial trade and the regulations that create barriers to companies from doing this type of trade. You mentioned that basically there's an added cost of between 7% and 15% for many of the different industries that do wish to do this kind of business. Obviously, a lot of these regulations—all of them—are imposed by provinces.

We are the federal INDU committee, so I'm wondering if you could give us any suggestions as to what role we can play in helping provinces move towards this direction in making sure that Canadian companies have less red tape with regards to interprovincial trade.

[Dr. Trevor Tombe]

Thank you for the excellent question.

You're right to note that the source of trade frictions in Canada between provinces stems from differences between one jurisdiction and another in terms of the rules, regulations, standards and so on that a business needs to abide by. Ultimately, that does mean that provinces need to act to smooth out those differences. That's what the Canadian Free Trade Agreement is meant to do.

Currently, through the regulatory co-operation table, it is a slow but important process of identifying barriers, negotiating harmonization agreements or mutual recognition agreements and then implementing them. The federal government can play a role there, first by ensuring that federal regulations that directly affect interprovincial trade are not adding to burdens that businesses face.

A recent example where some progress has been made is agricultural inspection. If you're shipping food products from one province to another, it needs to be inspected by the provincial government agencies and the federal government, potentially adding three different inspection regimes to a single transaction. Having the feds step back and at least trust in the provincial inspection agencies may make sense in some cases.

More broadly, the Canadian government can ensure that the capacity exists within the free trade agreement so that working through the regulatory differences line by line can be done expeditiously. That does take staff in the secretariat. It does mean providing assistance to provinces, especially smaller provinces that might lack capacity themselves.

The federal government can also play a role in ensuring that this issue remains at the top of the national agenda in discussions between federal, provincial and territorial leaders.