5 things to watch in today's interprovincial trade deal

As economic development ministers gather in Toronto today to release the final text of the new Canada Free Trade Agreement, here's a quick guide to what it willand won't do.

Free the wine and beer? Not yet

Federal minister NavdeepBains says he's heard plenty from Canadians about how frustrated they feel at the restrictions provincial liquor monopolies place on their ability to buy beer, wine and spirits from outside their own province. Brewers, wineries and distilleries don't like the constraintseither.

But it's one thing for the federal minister to say he wants to make liberalizingtrade in alcohol a priority. It's another for provinces who reap a lot of revenue from their monopolies to dismantle theirsystems.(Recent, small steps have put more beer and wine in grocery stores and made it easier to order out-of-province wines online.)

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CFTAmakes no immediate changes. It does, however, setup a working group that willreport back within a year with "recommendations to enhance trade in beer, wine and spirits within Canada."

Meanwhile, aNew Brunswick fightto decide if provinceshave the right to set cross-border alcohol limits isheading to the Supreme Court.A decision there could force the provinces to movefaster thanCFTAdoes.

Another complicated sector, financial services, will see "exploratory discussions" within six months on provincial regulations for things likeinsurance and credit unions. (Alberta and Quebec already refused to join a national securities regulatorthat's set for 2018.)

Red tape remains, for now

Canada's interprovincial trade barriers are well-documented.

Food labelling standards don't match. Trucks have to stop at provincial borders to adjust for different rules in neighbouring jurisdictions. Companies, professionals and tradespeople face fees and paperworkto expand or transfer into another province.

None of these barriers disappearwhen CFTA takes effect on July 1.There is a process to tackle them down the road, however.

A new "regulatory reconciliation and co-operation table" will identify divergentor duplicative regulations and prioritizesomefor renegotiation.

The committee will be in charge of dealing with the effort to standardize rules across the country, on anything from how the word "organic" is used in food labels to what constitutes an energy-efficient appliance.

But there's a catch: this process isn't binding. If a jurisdiction doesn't like the compromise reached, it can opt out as other provinces proceed.

Bigger, broaderbut expect exemptions

The 1995 Agreement on Internal Trade (AIT) covered specific sectors. This deal, which replaces it, covers the entire economy unless a government negotiatesa specific exemptionand puts it in writing in the deal's annex(called a"negative list," in trade jargon.)

"We'll be a cheerleader of this one for sure," saidDan Kelly from the Canadian Federation of Independent Business. As an advocate for small businesses, he'soften critical of government policy. But hethinks CFTA's impactmight be "fairly profound."

Why? The way the deal covers the entire economy by default, forcing provinces and territories to state clearly what they want to exempt and why.

It may seem unsexy, but "that is giant," he said, becauseit makes it harder to justify new regulations over the long-term."My gut instinct is that it will be quite effective in liberalizing trade."

Levels playing field for contracts

Ross Laver, asenior vice-president for the Business Council of Canada, said that one of his organization's bottom lines and a driving concern forpoliticians, too was making sure that as government procurement opens up under the CFTA,Canadian companies have at least the same rights as foreign companies are offeredin international trade deals.

"That's been achieved and that's important," he said this week. "(Canadians)were always offside in that sense."

In fact, more access is offered to Canadian companies under the interprovincial trade deal. Out-of-province bidders can compete on goods contracts above $25,000, a thresholdmagnitudes lower than the access European companies got under CETA.

CFTA also opens up contractingfor Crown corporations like energy utilities.

Engineers and architects will be able to compete for out-of-province business. More competitive bidding usually saves taxpayersmoney.

"To the extent that interprovincial barriers have tended to keep companies small by restricting their ability to tap new markets ... one of the wonderful things about CFTA is it will encourage more smaller businesses to grow," Laversaid.

"If you're a small businessin province Xand you're thinking of going after an international customer, it sure helps if you can gain some scale in Canada first."

Businesses can fight back

The AIT createda system of arbitration panels to resolvedisputes. But to avoid frivolous cases, a province had to endorse a complaint before it could proceed.

CFTAremoves the need for this pre-screening, making it easier for companies and individuals to seek compensation if they think the government has made an arbitrarydecision that violates theagreement.

The maximum penalties payable have been increased: up to $10 million for a large province like Ontario.

"It's kind of a document of economic freedom for Canadians," Laver said, comparing it to a constitution settingout rights.

"The rulings that will be handed down in years to come will further clarify and in all likelihood extend those freedoms, as provinces are forced to defend longstanding but restrictive practices."

It's unclear, however, what kind of panels will judge these disputes.

Cases against the federal governmentwill continue to be handled by the Canadian International Trade Tribunal, but provinces appear to want to set up their own arbiters rather than use a single system.

The New West Partnership trade agreement between Western provinces, for example, has its own dispute resolution regime. Ontario and Quebec have another.

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