TILMA: City of Regina identifies potential impact; report says trade agreement “vague and general,” may weaken standards and regulations

In a report to the Executive Committee for its May 23, 2007, meeting the City of Regina identified those clauses within the Trade, Investment and Labour Mobility Agreement (TILMA) “dealing with standards and regulations; investment; subsidies; and procurement have the most potential to impact the City’s operations.”

There also appears to be concern that some aspects of TILMA could result in weaker standards and regulations.

The eleven-page report Implications of TILMA on City Operations (May 2007) was prepared by the Office of the City Solicitor.

While the report discusses several areas of concern in detail it attempts to do so in a neutral manner.

The report states, “Whether or not the implications of TILMA on municipalities are positive or negative either taken individually or when viewed collectively are political determinations for City Council. This report does not advocate a position in this regard; it is merely intended to be responsive to the Executive Committee’s request for information on the effect of TILMA on City operations.”

“Items of concern to one city may not reflect concerns to all cities,” added the solicitor.

The report advises that the significant economic benefits of TILMA touted by some are not likely nor are the potential effects of the agreement on municipal operations to be as significant or catastrophic as others suggest.

“In summary, the only definite conclusions that can be made are that the agreement is vague and general and there are no precedents to look at to determine how municipalities may be affected. Ultimately, the implications for the City of Regina are unclear.”

With respect to specific areas of concern the City of Regina notes that TILMA requires the two provinces [BC & Alberta] to mutually recognize or reconcile existing standards and regulations. “New standards or regulations that operate to restrict or impair trade, investment or labour mobility would be caught by TILMA,” the solicitor warns.

According to the report “there is some potential” that the “requirement for mutual recognition of each province’s regulations could result in the application of the weaker regulations of the two regimes (which could mean no regulation if one jurisdiction did not have any regulation in an area). However, nothing in TILMA obligates either province to accept a lower standard as equivalent or acceptable.”

That a province is not obliged to accept a lower standard would entail overlooking the considerable pressure it might be under to do so if faced with fines of up to $5-million under the dispute resolution process for any measures ruled to be in violation of the agreement. The costs could eventually become too great to ignore.

The solicitor notes that “Article 6 allows a Party to adopt or maintain a measure that is inconsistent with TILMA if the Party can demonstrate that the purpose of its measures are to achieve a “legitimate objective.” Examples of a legitimate objective include public security and safety and public order.

The “burden” however, “would be on the municipality to show how the regulation would fit within the legitimate objective.”

The solicitor acknowledges that “Critics of TILMA…state that under other trade treaties, governments have not been very successful in defending their actions based on clauses that are similar to the “legitimate objectives” clause. Because TILMA is new and there are no precedents, it is impossible to say how much a municipality will be able to rely on the legitimate objective clause to justify its standards and regulations that exist in its bylaws, orders or resolutions.”

“Given that the City enacts many bylaws under provincial legislation for the purpose of regulating certain activities, there is the potential for City bylaws, orders or resolutions to conflict with the spirit and intent of TILMA,” the solicitor said.

Fire and building bylaws are two areas the City says “relate to public security and safety and public order” and that “given the objectives of both of these types of regulations, it is assumed that any restrictions on trade caused by these regulations or more stringent requirements in these areas could be justified.”

The solicitor cautions though, that “there are National Codes which most jurisdictions have adopted so there is already likely a fairly high level of harmonization between jurisdictions. To the extent that the City’s bylaws require more stringent requirements than another jurisdiction and to the extent that these more stringent requirements could not be justified on the basis of public safety, there is the potential for conflict with TILMA.”

Land use regulation is another area that the City of Regina has identified as a concern. The solicitor points out that some opponents of TILMA “argue that it will constrain land use restrictions, green space requirements to provide recreational areas for residents, building height restrictions and sign bylaws to preserve scenic views.”

“It is possible that some of these types of regulations would restrict trade,” the report confirms. “To the extent that these types of regulations in The Regina Zoning Bylaw do not work towards the enhancement of sustainable development, consumer and environmental protection and health, safety and labour standards or cannot be justified as a legitimate objective as defined in TILMA, there would be the potential for these regulations to conflict with the spirit and intent of TILMA. In such a case, the least restrictive land use regulations would apply.”

Another potential impact is business licensing.

“It is likely that some of the provisions of The Licensing Bylaw would restrict trade and that TILMA would require that the least restrictive business licensing rules (of all the jurisdictions) apply. It is less likely that these regulations could be justified under the auspices of public security and safety and public order than many of the fire and building standards. Where the City of Regina requires licensing and another jurisdiction does not, there would be an expectation that the differences in licensing would be minimized and that consequently the City of Regina’s licensing provisions (where more restrictive) might not apply.”

Once again it appears that the lowest standard would prevail.

The report does mention that over the last few years City Council has been reducing the business licensing requirements.

The solicitor states on page six that “One of the most significant provisions that would affect the City of Regina is the provision in TILMA that deals with business subsidies.”

“The City of Regina has a number of tax abatement and tax exemption programs which are undertaken to promote local economic development. These programs are intended to encourage businesses to locate in Regina and in some cases to even locate in specific areas in Regina. The provisions in TILMA, particularly Article 12, would prohibit these types of programs unless they could fit within one of the exceptions in TILMA or could be justified as having a legitimate objective as defined [in the agreement]. For the most part, where a tax exemption program exists to attract business to Regina or an area within Regina, the program would not likely fall into one of the exceptions or fit within the definition of legitimate objective.”

The concerns expressed by the City of Regina with respect to TILMA’s potential impact on business subsidies appears to concur with those raised by Saskatoon City Solicitor, Theresa Dust, in her February 2007 report to Saskatoon City Council.

Unfortunately, this section of Regina’s report also contains one significant oversight.

Although the solicitor acknowledges that subsidies or grants to aboriginal people or to individuals for social policy reasons and assistance for academic research, to non-profit entities and disaster relief are “exempted and therefore permitted” the report does not mention that Article 17 of TILMA requires a Ministerial Committee to “review annually the exceptions listed…with a view to reducing their scope.”

The exemptions in TILMA are meant to shrink over time and eventually be exposed to the full force of the agreement. It is disappointing that this important fact is not included in the report.

On the matter of procurement under TILMA the City of Regina states: “Additional costs for the City would come as a result of the additional time and costs involved in adhering to an open tendering process for contracts where the procurement value is low. Lower value contracts have traditionally been addressed by less formal competitive measures.”

Finally, the question of dispute resolution is addressed, more specifically “how would the Provinces ensure compliance with TILMA by government entities such as municipalities.”

The solicitor offers two scenarios. One would be for the Provinces to enact provincial legislation that would require municipalities to comply with TILMA. Another would be to make individual regulatory or legislative changes on a case by case basis to require compliance.

“In terms of indemnity, the Provinces could demand indemnity from a municipality that contravenes a TILMA provision that results in the Province having to pay a monetary award,” the solicitor said.

At up to $5-million per infraction this could prove to be expensive and is a compelling reason why some feel TILMA will create pressure on governments to weaken or abandon existing provincial regulations and standards that serve the public interest. This appears to be one area the City of Saskatoon did not address in its report.

Though it tries to be neutral the message that comes though loud and clear in the City of Regina’s TILMA report is that the agreement would definitely have an impact on local government and diminish the right to local choice.