NATIONAL

LET’S MAKE A DEAL, WESTERN-STYLE

COLIN CAMPBELL August 7 2006
NATIONAL

LET’S MAKE A DEAL, WESTERN-STYLE

COLIN CAMPBELL August 7 2006

LET’S MAKE A DEAL, WESTERN-STYLE

NATIONAL

An Alberta-B.C. trade agreement remakes our economic landscape

COLIN CAMPBELL

Colin Hansen, British Columbia’s minister of economic development, and his Alberta counterpart Gary Mar, the minister of international and intergovernmental relations, have developed a sound friendship over the past three years. That’s partly a result of the annual joint cabinet meetings between the two provinces, but also because they genuinely seem to get along, as do their wives, notes Mar. “When he calls me or when I call him, we always have time for each other.” This is the friendship that helped Alberta and B.C. sign a deal that solved one of the oldest, most deeply rooted trade irritants in Canadian history—a deal that threatened to collapse in the last 24 hours of its three-year negotiation process. And no, it wasn’t the softwood lumber agreement, signed just a few days before. This one, which received considerably less attention, is a wideranging interprovincial agreement known as TILMA: the Trade, Investment and Labour Mobility Agreement.

TILMA will effectively erase the border between B.C. and Alberta and, when it comes into effect next spring, will be what some economists call the most important free trade agreement in Canada since NAFTA. It’s a major breakthrough in a problem that has plagued Canada since Confederation— interprovincial trade barriers. While difficult to quantify, by some estimates these trade

barriers cost Canada about one per cent of its GDP, or $11 billion, a year. Under the B.C.Alberta agreement, virtually every barrier will be lifted, and everything and everyone from workers to businesses will be able to move and transact freely between the two provinces, creating a new western economic power. The deal is one of the clearest signs of the West’s growing confidence over the past three years (fuelled largely by the oil boom), and a signal that the days of “the West wants in” are gone. In a reversal of this

once-common western refrain, the deal has other provinces now looking to get in on the West’s new-found fortunes.

“We will become the second-largest economy in Canada,” B.C. Premier Gordon Campbell said after signing the agreement in April. “This will be noticed across the country.” It received ample attention from business lobby groups, who have heaped praise on the deal and premiers Ralph Klein and Campbell, but it has largely escaped broader public attention, likely overshadowed by the more publicized softwood lumber deal, say both Mar and Hansen. TILMA is what Robert Musgrave, B.C.’s chief negotiator on the deal, now calls a “sleeping giant.” It has the potential to reshape the balance of economic power in Canada by creating a western bloc that rivals Ontario in economic might. Alberta and B.C. estimate TILMA will save $4.8

‘WE CAN DO A LOT OF GOOD THINGS INSTEAD OF POUTING. LET’S SEE WHAT WE CAN DO TO LEAD.’

billion and create 78,000 jobs, adding to the already feverish growth in Alberta and B.C., both of which are currently facing labour shortages. The provinces are now urgently working to put the deal in motion by next spring. Its transition period ends in 2009B.C. and Alberta aren’t the first to try to tackle interprovincial trade barriers, but they are the first to achieve any significant success. In 1994, all the provinces and territories signed the Agreement on Internal Trade (AIT), an attempt to chip away at trade barriers. But in the decade it’s existed, little has been achieved. And there is no shortage of AIT critics. “I think it’s completely dysfunctional,” says Nancy Hughes Anthony, the president and CEO of the Canadian Chamber of Commerce. “It’s interesting that the same premiers who get on a plane and go off to do business with China cling to barriers when it comes to local commerce.” Far more effort in Canada has gone into developing ties with the United States (with deals like NAFTA). “Some people say it’s easier to trade north-south under NAFTA than it is to trade interprovincially,” says B.C.’s Hansen.

For provincial premiers, there has never been much to gain politically in opening doors to outside competition. “Interprovincial barriers are about one thing—protecting turf,” said Alberta’s Mar, speaking at the Richmond Chamber of Commerce last month. (TILMA, which was negotiated over three years, would not have happened without the high degree of political goodwill between Alberta and B.C., says Musgrave.) The broader lack of provincial harmony has been AIT’s downfall, along with its lack of a strong, binding dispute resolution mechanism. “It has its limitations,” acknowledges Anna Maria Magnifico, the executive director of the Internal Trade Secretariat, the body in Win-

nipeg that oversees the AIT. “In the end, the agreement is only as credible and as effective as the 13 parties wish it to be.” But the Alberta-B.C. agreement is an important first step towards promoting other regional free trade agreements, adds Magnifico. Ontario and Quebec recently announced an agreement on labour mobility in the construction trades. An agreement like TILMA is now being considered in the Atlantic region, and there is mounting pressure on Saskatchewan and Manitoba to join Alberta and B.C. Saskatchewan has already written the other western provinces, expressing interest. Further discussions on this front are planned for the premiers’ Council of the Federation meeting in St. John’s, Nfld., this month.

Interprovincial trade barriers have persisted in part because they are so deeply ingrained in Canada’s economic structure. Under the Constitution, economic and regulatory powers are spread between federal and provincial governments. Over time, each province has developed its own rules and ways of doing things, slicing the country into

13 different economic jurisdictions. The costs of these barriers are not easy to measure. “No comprehensive listing of these barriers seems to exist—indeed, their sheer numbers present a daunting obstacle to any attempt to compile a full list,” said a report this year by the Conference Board of Canada, entitled “Death by a Thousand Paper Cuts,” in reference to the barriers’ cumulative effects.

One of the more extreme examples of interprovincial trade barriers is Quebec’s margarine law. Margarine in Quebec can’t be the same colour as butter—a rule that serves to protect Quebec’s dairy industry and riles margarine makers in Western Canada. Other barriers have evolved that seem to serve no purpose whatsoever: for example, the differing regulations between B.C. and Alberta over the way hay must be stacked on trucks. It forces truckers to stop at the border and adjust loads, adding needless shipping costs between the provinces. It would be easier to ship the hay down through the United States, says Mar. This will change under TILMA.

Under the pact, everything from professional and trade designations to the financial

services industry will be unified. Companies, for example, will no longer have to register or have separate filings and separate offices to operate in or win government procurement contracts in both provinces. “If you’re a foreign company saying, ‘where do I want to locate,’ B.C. and Alberta have made it more attractive to locate in one of their provinces,” says Jason Clemens, director of fiscal studies at the Vancouver-based Fraser Institute. “B.C. and Alberta now have an inherently more efficient economy than the other eight provinces that still maintain artificial trade barriers.” The most anticipated impact of the Alberta-B.C. agreement is labour mobility. Efforts under TILMA to make the western labour pool more mobile are being welcomed in both provinces, with surprisingly little resistance from provincial labour groups. B.C. and Alberta will now recognize each others’ standards in over 60 professions and trades, and in some cases seek to harmonize qualifications. Initial fears that labour in B.C. would flee to Alberta’s oil patch are largely baseless, say observers. “There’s always been that kind of mobility,” says Keith Sashaw, the head of the Vancouver Regional Construction Association. This agreement simply makes moves more seamless. “It’s a very positive step forward,” says Sashaw.

In the longer term, economists expect there to be much broader implications, particularly as the West seeks to forge closer ties to Asian economies like China. Both provinces are focused on efforts to build up the port in Prince Rupert, B.C., which shaves shipping times to the Far East, and the rail line and highway from there through to Alberta. Economists say the pact will also piggyback on current growth trends in the West. This year Alberta for the first time surpassed Ontario as the No. 1 creator of high-quality jobs, according to a recent CIBC study. Other economic indicators like investment, GDP, exports and migration are also on the rise in the region. “Not only are they going to maintain a very strong western bias, they’re going to increase that bias,” says Clemens.

While there is a sense that the western energy boom won’t last forever, it has brought with it a new level of confidence in the West over the past three years, says Todd Hirsch, chief economist at the Canada West Foundation in Calgary. “TILMA is a further step, saying, we can do a lot of good things just by co-operating instead of sitting in the corner pouting and saying the West wants in and all this crybaby business. The West is in—now let’s see what we can do to help lead this country.” M