TILMA: A solution in search of a problem

Bilateral and multilateral trade negotiations often go hand in hand, with bilaterals able to achieve results that are more liberalizing than could be achieved on a multilateral basis. If the bilateral agreement is among two major players, however, it can be used to pressure others into signing on. The US is using this as its strategy for global trade talks, both in the Free Trade Area of the Americas and the World Trade Organization (although neither negotiation is progressing well).

We are now starting to see such a dynamic play out in Canada among the provinces. Back in the Spring, Alberta and BC signed the Trade, Investment and Labour Mobility Agreement (TILMA), due to come into effect April 1, 2007. Now we hear that Saskatchewan and Ontario are interested in signing on, too. If they do, other provinces may find TILMA irresistable for fears (false ones) of losing out.

This would become a de facto deepening of the 1995 Agreement on Internal Trade. Numerous attempts to relaunch negotiations on the AIT have been made since then, but have failed. TILMA may be the spur to get this moving again. (If you are interested in deeper background, I wrote a paper on the AIT several years ago; it is here.)

As mentioned before, there are no trade barriers among provinces. There two real issues at stake. One is labour mobility, in terms of the difficulties faced largely by professionals to have their credentials recognized if they move to another province (the provincial version of the problems faced by immigrants). TILMA may improve this situation, although some concerns exist about whether there may be lowering of standards for certain professions.

The other issue, the big one, is differences in regulation. And this is where TILMA is deeply problematic because it proposes a solution when there is no evidence that there is a problem. Under the AIT very few cases were ever brought forward that suggested that differences in regulation were impeding a company’s ability to do business in another province (most AIT cases were disputes over access to procurement opportunities). There do not even appear to be any good anecdotes (much less data) that suggest we need to resort to investor-state dispute resolution that would create a framework by which provincial regulations could be attacked.

And if anything, there is good reason to have a measure of regulatory diversity. Different provinces face different challenges and need to customize regulation to their circumstances. What works for BC may not be suitable in Alberta. This should not be seen as a bad thing, much less a barrier to trade. The push for harmonization is on, however, and also in the context of Canada-US integration where the Orwellian-termed “regulatory cooperation” has been given a lot of ink by the feds.

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Further to yesterday’s post on US ballot initiatives on “regulatory takings”, the Sightline Institute, based in Seattle, has issued a report called Property Wrongs, which looks at problems arising in Oregon from its 2004 regulatory takings referendum.