Canada: Senate Committee Report Promotes Dismantling Internal Trade Barriers Within Canada

Last Updated: August 17 2016
Article by Jamie M. Wilks

The Objective of Eliminating Internal Trade Barriers

Last month, the Standing Senate Committee on Banking, Trade and Commerce (the "Senate Committee") released its Report (the "Report") entitled "Tear Down these Walls: Dismantling Canada's Internal Trade Barriers". In choosing this title, the Senate Committee evoked President Ronald Reagan's powerful Cold War speech made at the Brandenburg Gate in West Berlin on June 12, 1987, challenging the Soviet Union's leader, Mr. Gorbachev, to tear down the Berlin Wall that impeded the freedom of movement by people and commerce between West Berlin and the Soviet controlled East Berlin. The Senate Committee called for the elimination of inter-provincial/territorial barriers that impede the free flow of people (labour mobility), goods, services and investments between the provinces/territories.

What are Internal Trade Barriers?

Different categories of internal trade barriers exist. Prohibitive barriers prevent certain inter-provincial/territorial activities. Examples of these barriers are the federal, provincial and territorial laws that explicitly prevent certain trade of alcoholic beverages from one province or territory directly to consumers of another province or territory. There are also regulatory and administrative barriers, such as the need for compliance with different safety standards in multiple provinces/territories and federally. Each province/territory and the federal government may impose its own administrative requirements to certify that a business complies with its respective standards to operate in the particular jurisdiction.

The Benefits of Eliminating Internal Trade Barriers

Inefficient, overlapping and unnecessary multiple layers of regulatory and administrative requirements emanating from different jurisdictions add to the costs of doing business across the provinces and territories. Based on recent estimates, eliminating internal trade barriers could increase Canada's annual gross domestic product by between $50 and $130 billion. The Senate Committee was appalled to see that Canadian goods had freer access to foreign markets through free trade agreements than to the domestic markets.

Report Recommends Modernizing and Enhancing the Agreement on Internal Trade (the "AIT")

Disappointed that the federal government, provinces and territories missed their self-imposed March 2016 deadline by which to re-negotiate a more robust AIT and in their failure to set a new deadline, the first recommendation in the Senate Committee's Report is for these governments to "urgently work towards concluding the negotiations for a renewed" AIT, which "should be finalized by July 1st, 2017, and should contain the following six characteristics:

  • negative list approach;
  • mutual recognition;
  • a formal mechanism to facilitate regulatory harmonization;
  • a binding investor-state dispute-resolution mechanism with enforceable prescribed remedies;
  • improved consideration of trade in services; and
  • the federal government as a permanent co-chair of the Committee on Internal Trade."

The Senate Committee symbolically chose the 150th anniversary of Confederation as the deadline for the conclusion of the re-negotiated AIT as a way bringing to fruition the ambition of the Fathers of Confederation to create a true economic union. The original AIT currently in effect, signed in 1994, "has, to some extent, created a framework for eliminating internal trade barriers within specific economic sectors. However, progress has been too slow and a great deal remains to be done."

Under a negative list approach in a renewed AIT, "the AIT would cover all people, goods, services and investment unless they are explicitly exempted." Under mutual recognition, a person, good, service or investment that conforms with a regulatory standard in one province/territory would be deemed to be conforming in another one. Under regulatory harmonization, the federal "and provincial/territorial governments should share the common goal of ensuring that the country has the best possible sets of laws and regulations, and that new laws and regulations are genuinely needed to meet clear public policy objectives and do not represent unnecessary barriers to trade."

The Senate Committee "is strongly of the view that the AIT's dispute-mechanism is ineffective". In the Senate Committee's opinion, an improved dispute-resolution mechanism should

  1. allow private parties to have access to the complaint and adjudication process; and

  2. adjudication decisions should be binding, with enforceable prescribed remedies to address situations of non-compliance by governments with these decisions.

In addition, given the "technological advancements and commercial innovations since the AIT was signed in 1994", the renewed AIT should place greater emphasis on breaking down the barriers that prevent the free flow of services between provinces/territories.

To break the logjam in the negotiations, the Senate Committee proposes that the federal government take a leadership role in the negotiations by becoming a permanent Co-Chair on the Committee on Internal Trade (the "CIT"), which oversees the implementation, operation and re-negotiation of the AIT. Under the current system of a rotating CIT Chair, the ongoing changes to the CIT Chair have resulted in the negotiations losing momentum and direction. In a permanent leadership role, the federal government may be in a better position to advance the negotiations and balance various provincial interests and sensitivities.

The Contingency Plan

If a reinvigorated AIT is not concluded by July 1st, 2017, or if the re-negotiated agreement is inadequate, then the federal government should pursue a reference of section 121 of the Constitution Act, 1867 (the "Constitution") to the Supreme Court of Canada. The reference would focus on two questions concerning whether section 121 constitutionally protects the free flow of trade, commerce and investments between provinces/territories against non-tariff/non-duty barriers.

In this regard, the recent New Brunswick Provincial Court decision in Gerald Comeau v. The Queen1 ("Comeau") lays the groundwork for such a reference case. Mr. Comeau was charged under the New Brunswick Liquor Control Act for bringing alcoholic beverages into New Brunswick from Quebec where he purchased the beverages. To protect the New Brunswick provincial government's monopoly over the distribution and sale of alcoholic beverages within the province, the New Brunswick liquor legislation prohibited (i.e., established a prohibitive trade barrier against) Mr. Comeau's cross-border purchase, unless the law was determined by the Court to be unconstitutional. The Court found Mr. Comeau not guilty of the charge because the law that he violated was unconstitutional. Specifically, the purported law impeded the constitutionally protected free flow of goods from one province to another under section 121 of the Constitution. For a more detailed analysis of this case, refer to our Bulletin at

Other Recommendations

The Committee recommends other ways to enhance the role of the federal government in breaking down non-tariff/non-duty barriers. The federal government should:

  • "work actively with provincial/territorial governments to ensure that laws, regulations, rules and policies do not unnecessarily restrict the free movement of people, goods, services and investment in Canada";

  • "consult with professional regulatory bodies, including Engineers Canada, to identify ways in which it could assist these bodies in adopting mutual recognition";

  • increase funding for the Internal Trade Secretariat for the purposes of research and monitoring progress on removing internal trade barriers, and also increase funding to Statistics Canada for the purposes of expanding and improving data related to internal trade;

  • conclude an agreement with provincial/territorial governments that wish to participate in a shared securities regulation regime; and

  • support the creation of a "national corridor" that would allow the transportation of property and services through various means, whether pipelines, railway, fibre optic cables or other appropriate means.

What Happens Next?

The Senate Committee has challenged the federal, provincial and territorial governments to conclude by July 1st, 2017 a re-negotiated, re-invigorated AIT that meets the criteria and standards set out in the Senate Committee's Report. It will be interesting to see whether they can rise to the challenge. If the deadline is not met or the re-negotiated AIT is inadequate, the question will be whether the federal government resorts to the contingency plan laid out by the Report for a reference to the Supreme Court of Canada of section 121 in the Constitution. In this regard, the federal government may take a "wait-and-see" approach regarding the outcome of the Comeau appeal, which may ultimately go to the Supreme Court of Canada, giving the Supreme Court an opportunity to rule on whether section 121 covers non-tariff/non-duty barriers (contrary to Supreme Court precedent). Finally, the remaining question is to what extent the federal government assumes a leadership role in breaking down provincial/territorial barriers in accordance with the recommendations made in the Report.

We may soon know whether the federal, provincial and territorial governments intend to meet the Senate Committee's challenge. The Prime Minister and Premiers hope to approve a deal for a robust, renewed AIT when they meet later this month in Whitehorse, Yukon.


1 2016 NBPC 03, File: 05672010.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2016

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Jamie M. Wilks
In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions