On Friday, April 7, 2017, the federal, provincial and territorial governments wrapped up negotiations on the Canadian Free Trade Agreement (“CFTA“). This agreement, which takes effect on Canada’s 150th birthday, replaces the 1995 Agreement on Internal Trade (“AIT“).
Moving Towards A More Competitive and Cohesive Canadian Economy
The CFTA seeks to promote greater regulatory cohesion and cooperation across the Canadian economy, while aligning domestic trade commitments with Canada’s international trade agreements. The CFTA removes barriers to intergovernmental trade by encouraging free movement of persons, goods, services and investments between the provinces and territories of Canada. It also ensures non-discriminatory treatment of workers, goods, services and investments, irrespective of where they originate in Canada. The CFTA expands and improves on the AIT. The AIT focused on removing trade barriers within 11 specific sectors: procurement, investment, labour mobility, consumer-related measures and standards, agricultural and food products, alcoholic beverages, natural resources processing, energy (which was never implemented), communications, transportation and environmental protection. In contrast, the CFTA automatically applies to every investment, trade in goods and services, and commercial activity in the provinces and territories except those specifically exempted by one of the member governments. The CFTA lists a total of 144 specific exemptions including facets of the energy sectors, natural resource development, and trade in alcoholic beverages.
What Does the CFTA Cover?
The CFTA sets out a comprehensive framework with the intent of establishing a more open, efficient and stable domestic market. Similar to Canada’s commitments under the North American Free Trade Agreement and the Canada-European Union Comprehensive Economic and Trade Agreement, the CFTA’s core principle is that of non-discrimination. Member governments must not provide more favourable treatment to goods, services, investments and workers from its own province or territory than that accorded to other Canadian jurisdictions. In addition, the Agreement focuses on removing regulations that impede or prevent movement of goods, services and investments across Canada.
The Agreement not only removes regulatory measures that act as barriers to trade, but promotes greater provincial and territorial integration on regulatory measures such as consumer and worker protection, health and safety and environmental protection. Through a system of notification, reconciliation and cooperation, members will coordinate and seek public engagement to ensure no new regulations have a “significant impact” on trade or investment within Canada.
With respect to government procurement, the CFTA sets forth comprehensive rules establishing a more transparent, fair and efficient framework. Subject to exceptions for certain limited markets as mentioned above, member governments have committed to ensuring that Canadian contractors will be able to provide their services across Canada, without facing barriers such as local content provisions or discriminatory licensing requirements. Member governments expect that the new regime will result in an estimated $4.7 billion per year in public procurement open to broader competition (SOURCE: CFTA Technical Briefing Deck, http://www.ait-aci.ca/agreement-internal-trade/cfta-announcement/).
The CFTA’s chapters on dispute resolution, labour mobility and environmental protection borrow heavily from its predecessor, the AIT. The dispute resolution process has undergone some administrative and procedural streamlining. Furthermore, maximum penalties have been raised to $10 million for governments that act contrary to the CFTA. The labour mobility and environmental protection chapters continue to retain similar themes as the AIT. The labour mobility chapter focuses on encouraging worker mobility in regulated professions. The environmental protection chapter promotes sustainable trade that conserves resources and mitigates climate change impacts.
Within six months to a year after the CFTA is implemented on July 1, 2017, member governments will discuss greater opportunities to integrate financial services and trade in alcoholic beverages, among other areas, into the CFTA framework.
A full copy of the text to the CFTA can be found at the following links: