History being made in Charlottetown…again.

fathers_confederation

There was a time when many in Nova Scotia opposed joining Canada. In fact, Nova Scotia’s greatest and best-loved politician, Joe Howe, led the fight against Confederation. So, in the lead-up to the Charlottetown meeting of 1867, several conferences were convened to sell the idea. In September 1864, at one these prefatory confabulations in Halifax, Father of Confederation George Brown said in full arm-twisting rhetoric, “A union of all Provinces would break down all trade barriers between us.”

It was a simple and compelling idea, the creation of a strong economic union, free of internal trade restrictions. It was so convincing, the framers of the constitution unequivocally penned section 121 of the Constitution Act; All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces. It was a good idea, unfortunately torpedoed after The Great War.

There have always been parochial interests fighting free trade and it was during the height of the prohibition era the Supreme Court of Canada (SCOC) jumped in and gelded section 121. As the story goes, the Canada Temperance Act (CTA) governing the sale of liquor finally came into force in Alberta in January of 1921. In February of that year, Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver liquor to some customers outside of Alberta. Dominion Express refused because it felt that to do so would violate the federal CTA. So began Gold Seal Ltd. v. Alberta (Attorney General) which eventually made its way to the high court.

With the Gold Seal decision, the SCOC’s interpretation of section 121 limited its application to prohibiting only inter-provincial “customs duties”. The interpretation conveniently ignored that no inter-provincial customs duties had ever been imposed in the history of Canada and, for what some have advanced were political reasons, the SCOC kicked section 121 and intention of the Fathers of Confederation to the curb. Since then, successive politicians, courts, government officials, special interests and political constituencies have used the Court’s interpretation of section 121 to successfully create trade schemes and regulation on everything from eggs, wheat and coffee creamers to truck parts and, of course, liquor.

Fast forward 150 years from Confederation and the importance of internal free-trade is once again a priority. International trade agreements, i.e. the Comprehensive Economic and Trade Agreement with Europe (CETA) and the Trans-Pacific Partnership (TPP), create more urgency to cut the Gordian knots of red tape between our provincial borders. Why? Because foreign companies may now have access to opportunities in Canada that companies in a neighbouring province or territory may not. Inter-provincial squabbling continue to undermine our economic competitiveness.

CFIB released a report in 2014 showing that small- and medium-size businesses want internal free trade to be a top priority. According to Transforming Trade, 87 per cent of small businesses said the premiers need to reduce trade barriers between provinces. Nearly one-third of business owners surveyed experience conflicting rules and regulations when trying to move goods or workers between provinces.

Regionally, provincial governments seem to be getting the message and we are seeing steady progress. One example is the Premiers signing the Provincial-Territorial Apprentice Mobility Protocol. This new measure notably follows the principle of “mutual recognition”. Rather than a lengthy bureaucratic process of harmonizing each and every regulation across each jurisdiction, the Premiers said “if it’s good enough in Province A, it’s good enough for Province B.” While God is in the detail, this is the gold standard for modern day trade agreements and is precisely the direction we want our provincial governments to go when removing barriers.

CFIB applauds the decision of the Council of Atlantic Premiers to create the Atlantic Red Tape Reduction Partnership to align business requirements throughout the region. This eventually grew into Premiers Gallant and McNeil, taking the step of creating the Joint Office of Regulatory and Service Effectiveness to streamline regulation between New Brunswick and Nova Scotia.

Today’s announcement of PEI joining with New Brunswick and Nova Scotia to work on red tape reduction demonstrates significant willingness on behalf of all three governments to tackle this issue. CFIB is very encouraged to see all three provinces adopting common regulatory principles. One framework to look at regulatory reform, one regional approach to regulation, making regulation a last resort rather than a first resort are all exceptional strides forward.

The fact that all three Atlantic Provinces will adopt a common system of measurement and reporting will not only give each province the ability to assess the costs of regulation they will be they will also be able to track red tape reduction regionally. We’re very pleased each province will bring forward legislation committing to publicly report their progress.

CFIB is very pleased to be working together with other business organizations across the region to assist the Partnership in recommending both important structural changes and specific actions to eliminate red tape between provinces.

While we wait around for the federal government to exert some constitutional authority, we are also encouraging all four Atlantic governments to table legislation committing to setting targets, measuring success and reporting publicly on these red tape reduction efforts. Atlantic Canada is facing serious economic challenges. With the world of trade changing around us it’s becoming increasingly important we work together to break down barriers between our provinces to make the best possible use of our economic and human resources.

As the country has now shifted to a Liberal government, who knows, maybe a reminder from the Grit’s founder, George Brown, is very timely.

Nova Scotia business needs clarity from Minister on any new recycling fees

PPP
25 years ago, Swedish academic and environmental economist Thomas Lindhqvist coined the term “Extended Producer Responsibility” (EPR). The concept is fairly simple; shift the responsibility and cost for disposal and recycling of products from the general tax base onto producers. Initially, the concept was applied to automobiles, large appliances and electronics. In the simplest of terms, the thinking is, producers will change the design of their products to ensure they are more effectively recycled, creating less waste destined for landfills or other environmentally degrading destinations.

Under the EPR law, brand owners must take responsibility for the complete life cycle of their product from inception to disposal. Driven by the polluter-pays principle, EPR has provided the foundation for new administrative, informative or economic policy instruments being developed or already implemented in other countries and by provincial and municipal governments across Canada.

Nova Scotia was drawn into the EPR discussion after the signing of a memorandum of agreement in 2010 by provincial environment ministers. The plan was to have EPR in place in all 10 provinces by the fall of 2015. Quebec, British Columbia, Manitoba, Ontario and Saskatchewan have already implemented EPR but none of the Atlantic Provinces have rolled out their programs … yet.

Over the past couple of years, the Environment Department has been gathering information on how to adopt such a scheme in Nova Scotia. To date, no clear plan has emerged, however the Minister of the Environment, Andrew Younger has taken pains to say it’s coming, but not before better consultation and some form of economic impact analysis has been completed. None has yet been done.

The results of the previous EPR consultations were of concern, as CFIB felt they didn’t adequately represent the views of small business. So, this July, CFIB surveyed its members on the issue, based upon “the British Columbia model” that was deemed “best practice” by the department. The results stated 82 per cent of small business owners were not aware of a new EPR program, 99 per cent said they had not been consulted and 70 per cent said that they were not supportive of the ideas we presented from the BC Model. Interestingly, on October 23rd, at a meeting of the Union of Nova Scotia Municipalities, Minister Younger told municipal representatives when and if they move ahead with EPR, Nova Scotia’s program will look like the BC’s, which is not particularly comforting.

He also floated a couple of trial balloons about exemptions including a “one or two million” dollar “de minimus” (the revenue line under which business would not be captured by regulation), the single retail point exemption and the 1 tonne of paper or packaging threshold. None of these ideas had been brought up before the UNSM meeting. Prior to the Minister running these up the flagpole, the Department’s regulatory framework was working on the premise that everything and everybody would have been captured.

When these exemptions were applied in BC, it reduced the number of affected businesses under their EPR system from upwards of 80,000 to just about 3,000. If the Nova Scotia government is going to apply the same standards, it too will have to look at what is the acceptable casualty rate among small businesses.

So, why are we making such a fuss? In a portion of the EPR policy that deals with printed paper and packaging, producers or first importers are expected to weigh, measure, record and forecast all of the packaging they sell in their business. If a small business receives goods from outside Nova Scotia, it could be deemed the first importer of goods in Nova Scotia. Let’s take for example a small independent pharmacy, perhaps part of a small group of small town pharmacies operated by one owner. With annual revenue above 1 million dollars, 3 locations and “producing” more than 1 tonne of paper and packaging, this business would not be exempt from the EPR law as Minister Younger has envisioned it.

Next time you drop in for a prescription, have a look at the shelves and imagine categorizing all the packaging, measuring it, reporting it and paying a fee to have it recycled. When that’s done, wait for an end of year compliance report and hope that your forecast was accurate so you won’t be fined. Oh, and all of this will be handled by a third party “stewardship” body which is unaccountable to government. It’s not hard to start seeing how the regulatory burden, compliance and cost might become worrisome.

If a small town in rural Atlantic Canada wants a pharmacy under EPR, it might just end up looking like the bulk barn.

Bulk Barn

This new scheme would be piled on top of taxes businesses already pay for the disposal and recycling of materials now being handled through municipal waste management programs. Retailers and franchisees are being hardest hit with EPR, as many of these smaller firms have little or no control over the materials generated. Market forces or franchise agreements don’t allow for arbitrary price increases to offset these additional costs.

Nova Scotia is already dealing with some of the highest cumulative business and personal tax rates in the country. Adding more fees and red tape is certain to harm employment and economic growth and put inflationary pressure on consumer goods. The question must be asked, what problem is government trying to solve?

Currently, Nova Scotia leads the country in waste diversion and recycling. Attitudes are mixed on what EPR is even meant to achieve. Is it to increase the recyclability of products? Promote recycling? Reduce toxic substances? Or is it to simply shift the financial burden of recycling from municipalities to “producers”? It is worth noting the Minister is pleased with the recycling progress in Nova Scotia, but he adds, it’s very expensive. Nova Scotia pays an average of $657 per tonne to recycle, more than double what New Brunswick pays. (New Brunswick is watching Nova Scotia carefully to see how their program unfolds and there are those who speculate a similar scheme is probably not far behind in that province.)

Even if we accept the solution is to shift the burden of recycling over to industry, one also has to understand that small- and medium-size businesses downstream from manufacturers caught in this regulatory maze will be punished for something they have little or no control over. For that matter, at this point, it isn’t even particularly clear who qualifies as a producer. Is it the importer, the manufacturer or the retailer?

From the perspective of some municipalities, this is could be a gift from above. With accumulating fiscal pressure, having the responsibility of waste management paid for by business is a release valve. For others, having recycling taken away from them may remove an important source of revenue. One thing is certain, if the government is foolish enough to force further costs of recycling onto small businesses, consideration absolutely must be given on the taxation side of the ledger. Surely municipalities could not expect small business to simply pick up the tab for waste management and not provide commensurate tax relief.

Until the provincial government can provide more clarity on the direction it wishes to take on EPR, CFIB will continue to be wary of plans the Environment Minister is pushing. We look forward to assisting small- and medium-size business stay out of the way of the EPR trawler by providing input to government through their next consultation phase.

As we are also working with other partners in the Atlantic Red Tape Reduction Partnership we remain adamant Atlantic Canada cannot afford to be walking blindly into a new set of punitive regulations and costs for small business, especially in the current economic environment.