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                      Ontario And The New Canadian Free Trade Agreement  

 

By Randall White

If Ontario really does put Canada first, it has to be a big supporter of the new Canadian Free Trade Agreement (CFTA).  The agreement among the 10 provinces and three territories was announced early in April and is scheduled to take effect July 1 of this year. 

On the other hand, Canada’s most populous province might be forgiven a few sober second thoughts. 

Until the start of Canada-U.S. free trade in the late 1980s, the argument that industrial producers concentrated in Ontario prospered by selling to captive consumer markets in other provinces was a staple of regional protest. 

Yet Ontario had about 44% of the Canada-wide population in the late 19th century, and it still has about 38% today. The biggest advantage for its industrial base has arguably always been the size of its own provincial market, close at hand. 

As explained by the official statements, the CFTA “replaces the 1995 Agreement on Internal Trade (AIT) and is more comprehensive, covering nearly all sectors of the economy.” 

It was launched in December of 2014 by Canada's Premiers and the federal government in order to strengthen and modernize internal trade.

In keeping with the Canada First theme, Ontario’s Economic Development Minister Brad Duguid chaired the two years of federal-provincial negotiations that have gone into the CFTA since. 

All federal, provincial and territorial governments are parties to the resulting 335 pages of complex text that embody the agreement. And it does prescribe certain bold principles early on. 

Part I, for example, talks impressively about “the need to eliminate existing barriers and avoid new barriers to trade, investment, and labour mobility within Canada and to facilitate the free movement of persons, goods, services, and investments within Canada.”

Part II then advances such “General Rules” as “Each Party shall accord to goods of any other Party treatment no less favourable than the best treatment it accords to its own like, directly competitive or substitutable goods.”

Yet as free-market purists may aptly complain, Part II also allows that “A Party may establish the level of protection it considers appropriate to achieve a legitimate objective.” 

And a legitimate objective can fall into any of seven categories, from “public security and safety” to “programs for disadvantaged groups.” 

Part III then goes on to advance various “Specific Rules,” which further hedge the free-market integrity of the boldest General Rules in some degree. 

Furthermore, Part IV jumps directly into “Exemptions” — spelled out in 135 pages of annexes. 

However, at the same time, the agreement will keep working on traditionally contentious internal trade issues. 

The CTFA, then, lays out not so much a finished inter-provincial trade agreement as a commitment to principles, and a process for deciding on the devilish regulatory details of how the principles are applied, within various deadlines. 

Of special interest for Ontario, within six months after the July 1 implementation, the parties will begin exploratory discussions over the rules for financial services under the CTFA.  Those discussions are to be concluded within two years. 

Two key institutions here are the “Committee on Internal Trade” inherited from the 1995 AIT, and staffed by an Internal Trade Secretariat in Winnipeg, and a new “Regulatory Reconciliation and Cooperation Table (RCT)” — to be established within one year. 

From this standpoint, the real crux of the CFTA is in Part V on “Institutional, Administrative, and Final Provisions” — including dispute resolution, enforcement, and appeals.

Under these, any province or territory truly unhappy about a rule emerging from this complex process can just opt out of it!

So how will interested outside observers keep up with the changing details of the new Canadian Free Trade Agreement?

A lot of what transpires will be published on the CTFA website. 

But whatever happens, how (and how quickly) the CFTA unfolds in practice will remain a work in progress for some time.

A memorandum of agreement on a related Canadian cooperative capital markets regulatory system, ultimately embraced by British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island, the Yukon, and Canada, was signed in August 2014. But the resulting Capital Markets Regulatory Authority is not now expected to be operational until 2018. The less path-breaking CFTA extends the 1995 Agreement on Internal Trade. That should give it some stronger initial momentum. 

But the Ontario that really does put Canada first has to be hoping things move ahead as planned, when the Canadian Free Trade Agreement takes effect this Canada Day, on the 150th anniversary of the confederation of 1867.

 

 

 

 

 

 

 

 

 

 

About Randall White

Randall White is a former senior policy advisor with the Ontario Ministry of Finance, and a former economist with the Ontario Ministry of Municipal Affairs and Housing. He is the author of Ontario 1610-1985: A Political and Economic History and Ontario Since 1985. He writes frequently about Ontario politics.
Posted date : April 22, 2017

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