Canada: The Canadian Free Trade Agreement – "Old Wine In New Bottles" For Labour Mobility

Judging from the headlines touting the new Canadian Free Trade Agreement ("CFTA") as "the biggest step forward in removing barriers to internal trade...in the history of Canada," "the most ambitious free trade agreement this country has ever had," and "mak[ing] it easier for workers to take jobs in other provinces," professional regulatory organizations may well be questioning the effect the latest internal trade agreement will have on labour mobility and the regulation of the professions.

Background on the CFTA

The CFTA, the text and details of which were released on April 7, 2017, is a trade agreement between the governments of Canada, the ten provinces, and the three territories. The objective of the CFTA is "to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services, and investments within Canada and to establish an open, efficient, and stable domestic market."

The CFTA replaces the existing Agreement on Internal Trade ("AIT") which has been in place since 1995. Although negotiations on the CFTA are complete and the content of the agreement is finalized, the agreement will not take effect until July 1, 2017.

In negotiating the terms of the agreement, the parties were guided by the following principles:

  1. The need to eliminate existing barriers and avoid new barriers to trade, investment, and labour mobility within Canada and to facilitate the free movement of persons, goods, services and investments within Canada;
  2. The need to ensure non-discriminatory treatment of persons, goods, services and investments, irrespective of where they originate in Canada; and
  3. The need to reconcile occupational standards and regulatory measures to provide for the free movement of persons and the removal of barriers to trade and investment within Canada.

The negotiators of the CFTA used the AIT, as well as the New West Partnership Trade Agreement ("NWPTA"), a trade accord that harmonizes regulations and enables labour mobility between Manitoba, British Columbia, Alberta and Saskatchewan, as templates for the new agreement.

Like its predecessor the AIT, the CFTA continues to allow for provinces and territories to negotiate other bilateral or multilateral agreements so long as the secondary arrangement liberalizes trade, investment, or labour mobility beyond the level achieved by CFTA. Accordingly, the NWPTA will continue to apply to the relationship between Manitoba, British Columbia, Alberta and Saskatchewan. With respect to labour mobility, in the event of any inconsistency between the CTFA and the NWPTA, the agreement that is more conducive to labour mobility in that particular case will prevail.

What's New?

While the AIT utilized a "positive-list" approach and focused on removing trade barriers within the specifically enumerated eleven sectors1, the CFTA uses a "negative-list" approach meaning that it automatically applies across the economy and to every investment, trade in goods and services, and commercial activity in the provinces and territories except those specifically exempted. This means that sectors of the economy like financial services will now be included.

While this sounds admirable, the CFTA continues to not apply to a number of sectors and activities as there are 135 pages of specific exemptions. These exemptions include parts of energy sectors, natural resource development, and trade in alcoholic beverages. The exemptions also include some activities involving the provision of services by professionals. For example, the provision of legal services in Manitoba by an inter-jurisdictional law firm requires that the firm maintain at least one office in Manitoba and that at least one member of the firm principally practices in Manitoba.

The CFTA also introduces a regulatory reconciliation process aimed at reducing duplicate, overlapping or inconsistent regulations. Parties to the agreement are required to enter into negotiations to reconcile existing regulatory measures, identified by another party, which act as a barrier to trade, investment or labour mobility. This process allows regulatory requirements to be reconciled without resort to the formal dispute resolution process and is also intended to assist governments in developing common regulatory approaches for emerging sectors. However, any province or territory unhappy about a rule emerging from this process can opt out. If this occurs, the government is permitted to maintain an inconsistent regulation and the regulation is simply listed as an exception to the agreement.

In addition, the CFTA introduces new rules with respect to the procurement of services by governments. All governments have committed to providing non-discriminatory treatment to companies operating across Canada and to not providing any favourable treatment to local companies or providers. Under the CFTA, governments must act solely in accordance with commercial considerations in the purchase or sale of a good or service or the treatment of investors. Governments have also agreed to implement a single electronic portal, which will make it easier for all Canadian businesses to find procurement opportunities.

A change to the dispute resolution procedure is the empowering of compliance panels to summarily dismiss proceedings if they determine them to be frivolous, vexatious, or an abuse of process. The CFTA also increases the maximum monetary penalties for governments that act in a manner that is inconsistent with the CFTA. While penalties will vary based on population, the maximum penalty has increased to $10 million as opposed to the $5 million maximum under the AIT.

The CFTA's Impact on Labour Mobility and Professional Regulatory Organizations

While the CFTA has been touted as the "most ambitious free trade agreement" and "the biggest step forward," and while it has been stated that it will make it easier for workers to take jobs in other provinces, the CFTA's impact on labour mobility and on professional regulatory organizations is actually quite limited.

Although the CFTA will improve the ability of professionals to compete for government contracts through the new procurement process, there have not been significant changes to labour mobility or the way that professional regulatory organizations are required to treat professionals.

The CFTA incorporates all of the elements of the AIT with respect to labour mobility and the agreement's chapter on labour mobility is almost identical to the AIT, with the exception of minor language changes which do not impact the substance of the provisions. The central labour mobility provisions from the AIT have been carried over to the CFTA as follows:

  • The purpose of the provisions is to eliminate or reduce measures that restrict or impair labour mobility and to enable any worker certified for an occupation by a regulatory authority of one province/territory to be recognized as qualified for that occupation by all other provinces/territories (Article 700 of the CFTA);
  • The governments of each province/territory will ensure compliance with the provisions by non-governmental bodies such as professional regulatory organizations (Article 702 of the CFTA);
  • Residency within a jurisdiction cannot be a condition of eligibility for employment or the certification of an occupation (Article 704 of the CFTA);
  • Any worker certified for an occupation by a regulatory authority in one jurisdiction shall be certified for that occupation in another territory without any requirement for additional training, experience, examinations, or assessment (Article 705(1) of the CFTA);
  • A regulatory authority may, as a condition of certification, impose requirements on a worker certified in another jurisdiction, such as paying an application fee, undergoing a criminal background check, providing evidence of good character, etc., so long as the requirements are similar to and no more onerous than those imposed on workers from the home jurisdiction as part of the normal registration process (Article 705(3) of the CFTA);
  • A regulatory authority may refuse to certify a worker certified in another territory if such action is necessary to protect the public interest due to complaints or disciplinary/criminal proceedings, so long as the treatment is similar to and no more onerous than what would be imposed on workers from the regulatory authority's home jurisdiction (Article 705(4)(a) of the CFTA);
  • A regulatory authority may also impose additional training or assessments as a condition of certification if a person has not practiced the occupation within a specified period of time, so long as the treatment is similar to and no more onerous than what would be imposed on workers from the regulatory authority's home jurisdiction (Article 705(4)(b) of the CFTA);
  • A regulatory authority may assess the equivalency of a practice limitation, restriction, or condition imposed on a worker in their certifying jurisdiction and apply a similar limitation or condition to the worker's certification, or refuse the certification if there is no provision for applying an equivalent limitation or condition (Article 704(d) of the CFTA); and
  • A measure may be inconsistent with the labour mobility provisions of the CFTA if the purpose of the measure is to achieve a legitimate objective for labour mobility (Article 707) of the CFTA).

In addition, while the dispute resolution process has undergone some administrative and procedural changes, it relies heavily on the AIT and the NWPTA. Disputes can still only be heard by a compliance panel after mediation and consultation have been exhausted and penalties may still be imposed only if a party fails to comply with the CFTA after being put on notice by a compliance panel. The CFTA also maintains both the government-to-government and the person/business-to-government dispute mechanisms which existed under the AIT. As with the AIT and the NWPTA, the respondent to any complaint remains the government, not a regulatory organization. In addition, any monetary penalties are deposited into a fund intended to advance internal trade, and not paid as compensation to the complainant.

Conclusion

While much has been made about the CFTA and the impact it will have, the CFTA will not result in significant changes for professional regulatory organizations as the labour mobility provisions are essentially those which existed under the AIT. While regulatory organizations should acquaint themselves with the requirements of the CFTA, these requirements will feel familiar. For professional regulators, the CFTA is "old wine in new bottles."

Footnotes

1 Procurement, investment, labour mobility, consumer-related measures and standards, agricultural and food products, alcoholic beverages, natural resources processing, energy (which was never implemented because negotiations were never completed), communications, transportation and environmental protection.

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