TILMA, Ontario and Quebec: The Price of Freedom is Eternal Vigilance

A significant challenge in the TILMA debate has been that journalists often uncritically accept the premise that alleged inter-provincial barriers are a serious problem. Murray Campbell bucked this trend in Saturday’s Globe and Mail, where he drew the link between TILMA and last week’s Ontario-Quebec initiative.

Electronically, his column appears under the headline “Premiers try to fix something that isn’t really broken”. In print, the headline was “Trade talk seems like the same old song and dance, but watch the leaders’ steps”. An excerpt follows:

. . . This is a deeply boring subject but there are a couple of reasons why Mr. McGuinty and Mr. Charest should be watched.

For a start, it’s not at all clear what the itch is that they’re trying to scratch. Despite the premiers’ rhetoric about trade barriers, there is scant evidence that there are any meaningful impediments to interprovincial trade. Yes, Quebec has funny rules about the colour of margarine and you don’t get the full glory of B.C. wines in an Ontario liquor store. As well, professional accreditation is sometimes difficult and the provinces have varying regulations for highway trucking.

But, as the mainstream C.D. Howe Institute noted in October, the research – and rhetoric of business groups – overstates the impact of measures that increase inefficiency, raise consumer prices and restrict consumer choice. “Barriers impose only a small cost on the overall economy,” the institute said, estimating that removal of barriers would increase Canada’s gross domestic product by less than 0.5 per cent.

It’s noteworthy that Ontario’s Economic Development Minister, Sandra Pupatello, agrees with those who think there are fewer barriers than supposed. She said, for example, that Ontario manufacturers selling to Alberta’s oil patch have encountered only physical barriers, such as bridge overpasses in Saskatchewan that are too low to deal with heavy equipment.

Given all this, it’s a mystery why Ontario and Quebec still seem so keen on the bilateral Alberta-B.C. trade pact called TILMA that critics contend undercuts the ability of governments to impose regulations to deal with local issues.

Both Mr. McGuinty and Mr. Charest have expressed enthusiasm for TILMA, which is philosophically much different from the 1994 agreement on internal trade. Whereas that earlier document required negotiations among the provinces, TILMA would require provinces to align their regulations to the lowest common denominator among signatories or face damages from aggrieved companies of up to $5-million.

Both Ms. Pupatello and Quebec trade official Laurent Cardinal say any decisions on joining TILMA won’t be made until the pact is finalized in April, 2009. Meanwhile, the cabinets of the two provinces are scheduled to meet next spring – a full year earlier – to push their project forward. They will have to be watched carefully.

Although the C. D. Howe Institute ultimately came down in favour of TILMA, I think that we have succeeded in changing the debate’s tone. Meanwhile, the Government of BC is having trouble enacting the legislation to implement TILMA’s financial penalties. (Although Premiers can sign whatever agreements they want, money bills must go through the legislature.)

If either BC or Alberta withdraws before any other jurisdictions join, TILMA will disappear. However, as Murray Campbell concludes, we must be vigilant to ensure that the Ontario-Quebec negotiations do not lead to joining or replicating that deal.

UPDATE (Dec. 3): Murray Campbell was on top of TILMA more than a year ago. In fact, he quoted Marc in his column of November 7, 2006.