No evidence that ‘Canada works’ in new internal free trade deal – Full Comment
April 7, 2017.   ANDREW COYNE

They all spoke, of course, every last one of them, some representing jurisdictions with fewer people than your average federal riding, the Minister of Economic Development and Lottery Tickets from this province and the Minister of Small Business and Tapwater from that territory, making doe eyes at each other and praising each other’s “leadership” through the 21 arduous rounds of negotiations that had led to this “momentous” and “historic” day until someone said this showed that “Canada works,” which was when I lost it.

Perhaps there is some sort of mathematical inevitability to it — the more politicians are on hand to announce something, the less there is to announce — but for all the attempts to paint the new Canadian Free Trade Agreement as a heroic achievement there was no disguising the fact that what the ministers were here to announce was a failure. Indeed, one might say a historic failure, the kind that floods cities and brings epochs to a close.

I don’t want to be mean. I don’t doubt that lots of talented people worked extremely hard to produce this mess, long hours deep into the night dickering over Paragraph 4, Clause F of Annex 309 and the meaning of “phytosanitary measures.” And it isn’t as if they have made no progress at all. The agreement will impose important limits on the ability of governments in Canada to discriminate against each other’s companies and workers, whether by regulation, subsidy (here called “incentives”), or in procurement. Beyond the basic principle of non-discrimination, moreover, there are pledges to harmonize provincial regulations with one another, where the differences between them needlessly impede trade.

So yes, the CFTA is an improvement over its predecessor, the 1995 Agreement on Internal Trade, now widely seen as a bust though it was trumpeted with no less fanfare at the time. Importantly, unlike the AIT, which applied only to 11 specific sectors, the supposition in the new agreement is that it applies across the board, except to those practices and institutions explicitly excepted — the so-called “negative list” approach. Which would be fine, if there were not almost as many exceptions to the rules as there are rules.

Not only are whole sectors walled off for future negotiations (financial services, alcohol) or simply excluded (supply management) but more than half of the 329-page agreement — at least 167 pages, by my count — is taken up listing all the other exceptions insisted upon by one government or another. Even the chapters devoted to freeing trade are riddled with limitations, caveats and exemptions, some perfectly sensible — regulation of safety, for example — some simply contradictions in terms.

For example, provinces will only be prohibited from offering “incentives” where these are provided on an overtly discriminatory basis, or are intended to “directly” lure a company from one jurisdiction for another. But the whole point of a subsidy, whether or not it is announced as such, is to divert economic activity from one business to another, one sector to another, one region to another. There’s no such thing as a non-discriminatory “incentive.”

Likewise, it’s nice that the agreement will require each province’s monopolies to purchase from the others’ providers on a non-discriminatory basis. But the whole notion of a state-owned or state-enforced monopoly, except for natural monopolies like electricity distribution, runs contrary to the principle of a common market. The point of a monopoly is to forbid trade, and while it may forbid it as much to a province’s own enterprises as to any other, it’s still a restriction on trade.

In sum, for all of the participants’ labours, we are left, 150 years after Confederation, with an economy in which internal trade remains markedly less free than it is within other federations — or indeed between the separate countries of the European Union.

Even the chapters devoted to freeing trade are riddled with limitations, caveats and exemptions

Hard work it may have been, but it was essentially useless labour, busywork; it only appears worthwhile within the bizarro world of federal-provincial relations, and the strange assumptions on which it operates:

that provincial policies that restrict competition and raise prices are not an obvious blight on its consumers and taxpayers, but something to be resolutely defended and surrendered only with great reluctance;

that we should rather be amazed that trade within the same country has been so far liberalized, rather than that it should have been so restricted in the first place;

and most particularly, that the business of ensuring there is a single market within a single country should be left to negotiations between its constituent parts, as if between sovereign states, rather than simply enforced by the federal government, as part of its normal duties.

That was indeed the point, in large measure, of Confederation: to create a common market, overseen by a federal government, to whom the Fathers assigned all the constitutional powers necessary to strike down provincial trade barriers on its own — not with their permission, but as of right. That is how it is done in any normal federation — not to say within the EU, which isn’t even a federation.

That the feds cannot summon the nerve to use those powers; that they do not, in part, because we will not let them, because we do not see ourselves as one people, who would no more think of imposing barriers to trade with one another across provincial lines than between city blocks; that the best the framers of the new agreement could boast, pathetically, was that trade will now be no less free between the provinces than it is between each of them and the outside world, is not, I submit, evidence that “Canada works.” It is evidence of profound dysfunction.

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