TILMA: Canadian Federation of Independent Business wants deal; former senior federal finance official says Conference Board estimates “not credible”

In an April 3, 2007, news release and open letter to Saskatchewan Premier Lorne Calvert the Canadian Federation of Independent Business (CFIB) urged Saskatchewan to join the Trade, Investment and Labour Mobility Agreement (TILMA).

The CFIB represents over 105,000 small-and medium sized business members across Canada with 5,250 in Saskatchewan.

Marilyn Braun-Pollon, the CFIB Director of Provincial Affairs in Saskatchewan, says TILMA will liberalize trade and “remove many frustrating trade barriers.”

Her announcement came on the same day the Edmonton Journal editorial board said there is “little in the way of genuine trade barriers remaining between the two westernmost provinces,” and Saskatchewan Party Leader Brad Wall saying Saskatchewan has “fewer trade barriers and restrictions—than either B.C. or Alberta.”

This effectively pulled the rug out from under Braun-Pollon’s claim.

In her open letter to Premier Calvert, Braun-Pollon said “TILMA excludes provincial laws and regulations governing water, taxation, royalties, labour standards, occupational health and safety, procurement of health and social services, social policy and aboriginal policies and programs.”

This ignores the fact that Article 17 of the agreement makes it quite clear that the “exceptions” cited by Braun-Pollon will be reviewed annually “with a view to reducing their scope.”

The list of “exceptions” in TILMA is meant to shrink over time not go up.

TILMA’s hit list includes some “exceptions” that Braun-Pollon didn’t mention: Assistance for recreation, academic research and to non-profit organizations; assistance for book and magazine publishers, sound recordings and film development, production and distribution; and compensation to persons for losses resulting from calamities such as diseases or disasters; environmental measures relating to the management and disposal of hazardous and waste materials.

Like the Edmonton Journal Braun-Pollon says “TILMA helps eliminate unnecessary rules and red tape.”

In The Myth of Interprovincial Trade Barriers and TILMA’s Alleged Economic Benefits (2007), the Canadian Centre for Policy Alternatives (CCPA) offers a legitimate solution:

“A more sensible approach to internal trade would begin with business organizations compiling publicly-available lists of interprovincial barriers. Citizens could respond by assessing the social, economic and environmental purposes of the alleged barriers. Provincial governments could then co-operate to remove barriers that entail economic costs, but do not serve important policy objectives. Whatever minor barriers to internal trade that do exist should be addressed through a democratic process rather than by the dictates of TILMA tribunals. Through the Council of the Federation, governments are already working to harmonize licensing by professional bodies to enhance labour mobility. Canada needs a transparent, incremental approach focused on particular problems rather than TILMA’s sweeping provisions.”

Has the CFIB considered this?

The CCPA report, which was authored by Marc Lee and Erin Weir, added “despite the rhetoric, there are few examples of interprovincial trade barriers and no evidence that they entail significant economic costs. Certainly, such barriers are not sufficient to justify a far-reaching agreement like TILMA, which would substantially curtail the capacity of provincial governments to act in the public interest.”

In their news release and open letter to Premier Calvert the CFIB wandered into the same minefield that Saskatchewan Party Leader Brad Wall did when he quoted the Conference Board of Canada in his party’s April 3, 2007, news release.

“The Conference Board of Canada has estimated that it will generate an estimated $4.8 billion in new economic activity and create 78,000 new jobs in BC alone,” Braun-Pollon said.

The problem is the Conference Board estimates have been shown to be flawed.

In their report Lee-Weir noted that the Conference Board made “no attempt to list, or estimate the cost of, trade barriers between provinces.”

In Death by a Thousand Paper Cuts: The Effect of Barriers to Competition on Canadian Productivity (2006), even the Conference Board concedes that there is scant evidence of interprovincial barriers, but feebly claims that such barriers are too numerous to measure:

"There has been little research to date on the many interprovincial barriers to competition in Canada. These barriers are found in all sectors of the economy and affect trade in both goods and services. No comprehensive listing of these barriers seems to exist – indeed, their sheer numbers present a daunting obstacle to any attempt to compile a full list or estimate the cost of each barrier to the Canadian consumer."

Lee-Weir also found that “Rather than using standard economic techniques, the Conference Board infers huge benefits from a tiny survey of business organizations and government ministries.”

Finally, Lee-Weir determined that the “Conference Board doubles its estimate of TILMA’s benefits through a simple arithmetic error. Even after correcting this error, most of the projected gains are from industries exempt from the final agreement or from industries that barely engage in interprovincial trade.”

On April 2, 2007, Lee-Weir’s work was validated by Patrick Grady a former senior official in the federal Department of Finance who did his own analysis of the Conference Board’s estimates.

According to Grady “the Conference Board of Canada prepared “An Impact Assessment of the BC/Alberta Trade, Investment and Labour Mobility Agreement” for the British Columbia Ministry of Economic Development in September 2005. More specifically, it estimated that the TILMA agreement would increase BC GDP by 3.8 per cent or $4.8 billion and create 78,000 jobs (based on the assumption that the average employee in BC produced $62,091 worth of goods and/or services in 2004).”

“To understand exactly why the Conference Board’s TILMA estimate is not credible, it is necessary to examine its methodology,” said Grady.

“The Conference Board sent out the survey to 24 organizations, 11 from government ministries and 13 from industry organizations, but only got responses from 10: 6 from government ministries, and 4 from the private sector. And 3 of those that did respond provided no regional detail and 2 no industrial. Needless to say, this small response particularly from the private sector undermines the reliability of the information collected because it means that most of the respondents are likely to have no specific industrial or regional expertise to contribute to the estimate. In addition, it’s not clear from the documentation that the respondents were actually informed of the intended relationship between the ranking and the numerical score later assigned by the Conference Board.”

Grady goes on to say that “the Conference Board estimate appears implausibly high in relation to previous estimates and in relation to BC’s exports to Alberta. Again, the Conference Board must have even thought so themselves as it seemed to have disregarded its estimate of the impact of the TILMA in preparing its latest forecast for the BC economy. And, if even the Conference Board doesn’t believe its own estimate of the impact of the TILMA on BC, those who continue to cite this estimate as evidence of the large magnitude of the benefits to be derived for British Columbia from the TILMA don't really have a leg to stand on.”

Despite his preference to use the term “adjustment” rather than “arithmetic error” Grady says his analysis and the one done by Lee-Weir “ends up being pretty much the same.”

In CFIB says pact cuts red tape, but labour strongly criticizes it (Leader-Post April 4, 2007), Braun-Pollon said she was “disappointed” with the opposition to TILMA by the Saskatchewan Federation of Labour, Saskatchewan Urban Municipalities Association and other groups.

“Their opposition is high on rhetoric and low on substance,” Braun-Pollon said.

One wonders whether Braun-Pollon has taken the time to read TILMA or study the careful analysis put forward by Marc Lee and Erin Weir, Steven Shrybman, Ellen Gould and the Canadian Centre for Policy Alternatives not to mention Patrick Grady’s new analysis of the Conference Board’s estimates.

On the contrary the Saskatchewan Federation of Labour, Saskatchewan Urban Municipalities Association and CCPA should be commended for their work. They have exposed to a wider audience what TILMA is really all about.

In his recent analysis for the Ontario Federation of Labour Steven Shrybman wrote:

“The likely impacts of TILMA represent a fundamental assault on the capacity of present and future governments in BC and Alberta to serve the public interest. We have also been unable to find a credible rationale for TILMA, other than one that espouses the cause of wholesale de-regulation. When considered in light of the lack of public consultation that preceded it, TILMA represents a reckless betrayal of the public interest and responsible government. Clearly Ontario and other provinces should reject the invitation of British Columbia and Alberta to join the TILMA club.”