Let’s Start Clearing the Smoke on Cannabis

In another 12 months, we’ll be dealing with the real world impact of the federal government’s legalization of marijuana. There are still lots of unanswered questions about how this will roll out. These are questions with huge economic and social implications.

While the Canadian Federation of Independent Business (CFIB) has conducted only one survey of its members so far on how recreational marijuana should be sold, comments from our members suggest there are still considerable divisions on whether legalizing marijuana is even a good idea.

While we have limited experience with cannabis per se, CFIB is a respected international leader on regulation, including how to get it right and what not to do. This includes considerable experience with liquor and tobacco regulation. The federal government has handed responsibility over to the provinces who will need to apply a laser focus on these key critical regulatory pieces.

Too often, governments examine a new area where regulation is needed and quickly expand the mandate to include every moving part. This automatically means proper enforcement is near impossible. We recommend focusing on a few critical regulatory priorities, such as preventing sales to minors, ensuring proper product safety information and rules, and prohibitions at work or while driving. Choose the most important aspects to regulate and then do them well. Leave the rest alone.

We also hope to see the same rules across the country. The provinces should be working together to ensure as much consistency as possible as legalization rolls out across the country.  As the new Canadian Free Trade Agreement works to undo the damage of multiple complicated regulatory schemes, the last thing we need is another patchwork quilt of rules in an emerging industry.

Additionally, while bringing recreational cannabis sales out of the underground economy will no doubt have positive revenue implications for the government (excise, sales, and corporate income taxes), there will be added costs for policing and health care. Government would be wise to resist the temptation to frame this as a giant cash cow.

That means getting the tax mix right. If taxes are excessive, particularly in early days, much of it will remain black market. High tax rates may discourage users, but they’ll also push sales into the underground economy. It is estimated that close to a third of tobacco sales are underground, often with links to organized crime.

Also, provinces would be wise not to let regulation get in the way of innovation. An above-ground private sector can stay much closer to customer preferences, the edibles market is a good example. It’s also a myth that only public sector employees can responsibly handle controlled substances. The private sector has held an important role in tobacco and pharmaceutical sales, as well as alcohol in some provinces.

CFIB is also recommending a central role for smaller, independent businesses within this emerging industry. We are already advocating for access to banking and payments services for smaller, independent businesses involved in legal cannabis retail and distribution as a measure to help achieve the goal of limiting the underground economy.

Even those who are involved in the emerging industry appear to remain unsure of where this is all going. A year out from implementation, we should be seeing some of the smoke begin to clear.

Jordi Morgan is Vice President, Atlantic of the Canadian Federation of Independent Business. CFIB represents the interests of 11,000 small and medium size businesses in Atlantic Canada.

Why Small Business is Concerned About the 15 Dollar Minimum Wage

Atlantic Canadian small business owners should start bracing themselves for the 15 dollar minimum wage campaign. The governments in Alberta and Ontario have both bought into the idea, and now British Columbia’s new ‘GreeNDP’ coalition is putting it on the table. It’s being driven principally by Canada’s largest labour unions and a coalition of the federal and provincial NDP and social activists.

Let’s be clear, the Canadian Federation of Independent Business (CFIB) is responsible for advancing the interests of our members, small- and medium-sized, independent businesses. Firms ranging in size from your mom and pop shop to companies with up to 500 employees. CFIB has led awareness on this 15 dollar minimum wage issue because these are the businesses who will suffer, shrink or die with such a sudden spike in labour costs.

Because of their size, the Loblaws, Walmart and Shoppers Drug Marts of the world will be much better positioned to absorb this shock, but make no mistake, they will also be shedding staff, cutting hours and eliminating opportunities for young, entry-level workers, who make up the vast majority of those who are earning a minimum wage.

Most CFIB members already pay well above minimum wage for employees as most small businesses understand the importance of valuing and retaining staff. CFIB certainly has no argument with improving pay and benefits for employees when appropriate and our members support these efforts.

Our argument is with a government mandated spike in the wage floor which will put the sustainability of small business in peril. Remember, this is not just about entry level workers, a 32 per cent increase in the wage floor will put enormous pressure on employers to increase the wages of all staff.

Armine Yalnizyan, a principal advocate for the 15 dollar minimum wage and an author of the Canadian Centre for Policy Alternatives’ (CCPA) Inequality Project, clearly stated this week, “Yes there will be a reduction in some hours, some jobs, some businesses. No argument there. And most vulnerable workers (teenagers and newcomers) will bite the bullet first, particularly when there’s a downturn in demand.”

Her comments are remarkable unto themselves, but I would also ask, what is the acceptable casualty rate? How many hours should be cut and how many young workers should lose their first jobs? How many businesses are they prepared to sacrifice to hit this arbitrary target?

And where will this new money for wages come from? Will it come from increased profitability? That seems unlikely in light of increased labour costs. Will it come from stronger employment? That’s not happening as, it seems everyone agrees, these higher wages will inevitably lead to reduced hours and/or job losses. Will minimum wage workers suddenly become 32 per cent more productive? Unlikely.

Finally, our region’s economy is far more fragile than Alberta, Ontario or BC. If there are politicians musing about this here, we would ask they understand the repercussions of this kind of wage spike before we even think about such a move in Atlantic Canada. We’ll have the opportunity to watch how this experiment plays out in those other province’s economies first. Fortunate for us, not so much for them.

This originally appeared in the Chronicle Herald, June 9, 2017

Fall Back Up

In 1997 Brian Titus was in the navy working as a diver in Halifax…but he had a passion for making beer. At the time, the craft brew market hadn’t washed up on the east coast and he saw an opportunity.

Over the last 20 years, Garrison, along with Halifax’s other well established brand Propeller, settled as two of Nova Scotia’s best known craft beer operations.

However, in the last few years, the craft brewing industry has exploded around the world and other new Nova Scotia brands and brewery operations seemingly come on stream every month.

BRIAN-HS-2For Brian Titus, it’s been a pretty amazing ride and Garrison continues to grow, trying to compete with new entries into the market and a shifting landscape.

I dropped into Garrison Breweries at their headquarters located in a part of Halifax’s original immigration annex on the waterfront, next door to the Seaport Market. Brian and I grabbed a Spruce beer and settled in for a conversation as a couple of folks nearby worked on a collaborative brew…

What the parties are saying about small business in the Nova Scotia election

baillieburrillmcneil

As an advocate for small business, job one is getting issues in front of politicians. Prior to this election, the Canadian Federation of Independent Business (CFIB) presented each of the parties in the Nova Scotia election a small business “platform’ outlining key areas our 5,200 members in Nova Scotia have identified as priorities.

We sent out a survey to the leaders and they responded. While it wouldn’t be appropriate for CFIB to endorse any of the party’s positions during a campaign, it seems clear each of them understand the importance small- and medium-size business plays in the economy. It’s also clear their approaches differ, sometimes dramatically.

The areas we focused on in the creation of the platform were tax relief, regulatory reform (or “red tape” reduction), spending restraint and support for SME innovation activities to increase productivity and competitiveness.

You can find our platform here, the survey for the leaders here and the responses we received on these issues from the parties, by clicking on their logos.

Atlantica  Green Party of NS nslplogo NDP  Progressive_Conservative_Party_of_Nova_Scotia_2016

If you operate a business in Nova Scotia and are still considering your vote in this final weekend, it might be worthwhile to have a quick look at these documents. You can glean from them the importance each of the parties place on the issues we presented.

CFIB establishes its advocacy agenda based on responses to the many surveys we do of our membership to ensure we are focusing on the priorities that are important to small business. It’s our hope that any government elected on Tuesday, will do the same.

The future of our region depends on the prosperity of our small- and medium-sized businesses. We are not only the engine that drives the economy but are also the first to be impacted by bad government policy. I would encourage you to take few moments and have a look at where each of these parties intends to focus should they be given the opportunity to govern.

Winter is Coming

Game of Thrones

Nova Scotia’s electoral Game of Thrones is in full swing and while it may lack the dramatic flair of the HBO series, it has one thing in common, winter is coming. Unfortunately, the parties are either unaware of it or are seemingly oblivious to a stark reality.

All of the parties have launched their offensives by flinging open the doors to the treasury, each with new and creative ways to spend our tax dollars with the greatest political efficiency.

The number one priority for CFIB’s 5,200 members in Nova Scotia, consistently, is a reduction of the overall tax burden and the clearest path to this is through alignment of public sector wages and benefits to private sector norms and an overall reduction of the size of the public service. In other words, reduce the cost and the size of government.

For those who argue we have already been dealing with austerity budgets, here’s the reality. Since 2007 Nova Scotia government spending has risen from $7.3 billion to $10.5 billion, an increase of 43 per cent. Additionally, we’ve seen a whopping 22.5 per cent increase in our debt from $12.4 to $15.2 billion over the same time period. All this with an increase of only 16 per cent in the CPI (inflation) and our population flat-lining at 1.5 percent. This is not restraint and certainly not “austerity” by anyone’s definition.

Spending restraint is becoming more important than ever before. Perhaps because the weather is warming our politicians are floating sunny prognostications but there is an inevitable, relentless sociological cold front headed our way. Stretching our Game of Thrones metaphor, let’s call it “The Wall”.

According to Statistics Canada, that “wall” can be found in baseline population predictions. In 20 years, those over 65 years of age will make up fully 30 per cent of our population. A great majority of those will be out of the workforce and needing higher levels of healthcare. Keep in mind, in 2013, that same cohort made up only 17 per cent of Nova Scotia’s population.

By 2038, the forecasts indicate our median age will be nearly 50 and our overall population is expected to decline to under 934,000.

So who will carry additional tax load? If you’re a voter in your 20’s and 30’s, have a look in the mirror.

While efforts are being made to increase immigration, and claims are being made about having the largest population “ever”, the fact remains, unless we make some fundamental and dramatic changes to the way our government spends, we will be faced with some very, very difficult decisions indeed.

Absent in all of the spending promises in this election is a discussion of any long-term fiscal planning to deal with this issue. By long term, we don’t mean 4 years out, we mean 25 years out. Intergenerational forecasts which will set sustainable spending patterns.

Where are the real plans to deal with the inevitable decline in revenues from a shrinking and aging workforce? While some creative gains are being made through immigration, they are incidental and the problem is not getting people to Nova Scotia, it’s keeping them here. More than half of those who arrive leave within five years.

It’s not much wonder as we’ve been struggling with economic growth and carry the some of the highest tax burdens in the country. Our public service is nearly 5 points larger than the national average and their salaries and benefits are completely out of whack with private sector norms. Is anybody connecting the dots?

Meanwhile, the front pages are littered with political spending sprees.

Small business owners want politicians to have the courage to not just stop the bleeding, but begin to fix the problem through an actual reduction in the size of government, lowering the costs of doing business and a putting laser-like focus on better regulation and more efficient service delivery.

If not, we are sentencing our next generation to a cold, bleak future, on the other side of the wall.

This originally appeared in the Chronicle Herald, May 13, 2017

Cap and Trade for Nova Scotia Still Fuzzy for Small Business

cap-and-trade

The Nova Scotia government’s decision to go it alone with cap-and-trade to put a price on carbon raises more questions than answers.

This spring, government released a discussion paper, looking for feedback. They gave less than a month for responses and you needed a degree in environmental science to make any sense of what was being asked.

At an information session, executive director Jason Hollett of the climate change unit tried valiantly to outline a coherent picture, but he was working within an unreasonably tight timeline and without all the tools. In spite of a commendable effort, many left the session scratching their heads. Under questioning, somewhat ominously, he referred to the scheme as “a big regulatory beast.”

Without much heavy industry, Nova Scotia has few large greenhouse gas (GHG) emitters. Our coal-burning generating stations are pumping out the lion’s share (44 per cent). The transportation industry creates 27 per cent, followed by commercial and residential heat (combined 13 per cent) and the oil and gas industry (five per cent). The remainder comes from waste, agriculture and other industry.

For years, Nova Scotians have been paying through the nose to achieve GHG reductions through transition to renewable electricity generation and efficiency. We can pat ourselves on the back. After coughing up the highest power rates in the country over the last 10 years, our renewable portfolio has grown from seven to 27 per cent, exceeding our reduction targets.

Apparently unsatisfied with this progress, the Trudeau government, riding its mandate to legislate away climatic catastrophe, told Nova Scotia to put a price on carbon by 2018 or we’ll do it for you. The McNeil government initially balked, then came up with what it felt was the best option, a go-it-alone cap-and trade-system.

Using cap and trade, the premier successfully avoided the “carbon tax” narrative, opting instead for what appears to be a more saleable version.

The proposed Nova Scotia cap-and-trade model is fairly simple, but its administration is expected to be complex and therefore, presumably, costly.

Government will cap the amount of GHGs emitted into the atmosphere, hand out free credits for that tonnage to this handful of larger polluters and they can trade among themselves. When someone needs more, they can buy in this tiny market of emitters. How that will affect price is unclear.

A central tenet of carbon pricing is revenue neutrality. But with this plan, at least for now, there is no clarity in respect to dollars changing hands or how it will affect the price of electricity or fuel. Other questions: Will the incentive to be greener simply be higher energy and transportation costs? What would be the offset?

Moving ahead without the required evidence in respect to cost and competitiveness will frustrate business owners. In spite of a stated intention by government to measure and cost all regulation prior to application, none of these calculations are yet available.

While public servants are trying to align regulations between provinces to break down trade barriers, Nova Scotia’s approach (in spite of the premier’s openness to having the other Atlantic provinces jump on board) could result in two, three or four carbon pricing schemes in the region.

cap and trade chart

CFIB members support environmental initiatives. Seventy-nine per cent believe it is possible to grow the economy and protect the environment at the same time. But 80 per cent say government must consider the cost to small business before implementing a mechanism to price carbon. That means measuring and communicating real economic costs and environmental benefits and establishing a reasonable window for consultation and implementation.

In light of the work by this government to improve the regulatory environment, introduction of a “regulatory beast” feels counter-intuitive and environmental and economic impacts are still fuzzy. For something of this size and importance to be a cost of doing business in Nova Scotia, we need clarity.

This originally appeared in the Chronicle Herald, April 26, 2017

Cutting Red Tape: An old problem finding new solutions

scissor-red-tape

I was having coffee with an old political warhorse recently and we were talking about red tape. He told me a story about how after John Buchanan won the 1981 election, his government promised to cut red tape. The classic line from Digby Liberal Joe Casey in the legislature was, “He sure is cutting, but lengthwise.”

This is to say, there’s nothing really new about politicians promising to cut red tape. The idea has been kicked around for years because red tape is a horrible drag on the economy. What’s new, however, is after years of hounding federal and provincial governments, the Canadian Federation of Independent Business (CFIB) is beginning to see some results.

To give credit where it is due, during John Hamm’s government, there was some movement on red tape, but it was no secret the bureaucracy regarded the project as bothersome. The “Better Regulation” initiative was largely ignored, then quietly shelved during Rodney MacDonald’s years and completely jettisoned during the Darrell Dexter years.

However, under Stephen McNeil regulatory reform has been revived and Nova Scotia’s grade on CFIB’s annual Red Tape Report Card has climbed from the “D” he inherited in 2013. As it is Red Tape Awareness Week, CFIB is announcing Nova Scotia is receiving a mark of “B” for 2016 putting the province back in the top half of Canadian jurisdictions.

The improvement in the mark is not because we’ve seen significant regulatory burden reduced for business, it’s because of the political leadership and excellent groundwork completed by a small group of dedicated individuals led by Chief Regulatory Officer, Fred Crooks.

We were very pleased to see Regulatory Accountability and Reporting Act passed, the creation of the Joint Office of Regulatory Affairs and Service Effectiveness, the Premiers’ Charter of Governing Principles for Regulation adopted, the creation and implementation of the ground-breaking business economic impact analysis tool and the initiation of a “Business Navigation” project to help new businesses get off the ground.

In particular, the Premiers’ Charter is a beacon of hope for small businesses in Nova Scotia. The commitment to enact fewer and better regulations, as well as the cost-for-cost rule, should keep the current regulatory burden in check. It’s now also been adopted by the three other Atlantic Provinces with mirror legislation as part of their participation in the Joint Office.

While this is all good, to see improved satisfaction levels from business owners, the government must begin producing results in time and/or money saved. With new technologies designed to make secure, online transaction readily available, there are tremendous opportunities for government to find creative solutions to cut costs, fix the government customer service experience, measure improvement and deliver real results.

To advance this, CFIB is recommending the province establish a baseline measurement of the existing red tape burden faced by Nova Scotia’s small businesses, set clear targets for its reduction, and publicly report on how it’s going. We believe only accountability will force this innovation.

If the Premier really wants to make Nova Scotia “the best regulatory environment in Canada”, we need to get at it, and now. The groundwork is done, it’s time to take action. Let’s navigate away from bureaucracies that are simply held accountable for process and move to a service oriented public sector that is held accountable for results.

This article was originally published in the Chronicle Herald on Thursday, January 26, 2017 

Council candidates on a Living Wage ordinance…leaving more questions than answers.

confusion

Halifax journalist/blogger Tim Bousquet has re-opened up a particularly interesting debate during this municipal election by asking candidates for council their opinion on a living wage ordinance.

On his Halifax Examiner site, Tim is dedicating a page to a couple of questions, one of which is, “Will you support a living wage ordinance?”* Tim provides some background where he argues his position in favour of such a policy and also includes another link to material promoting the idea at Living Wage Canada. There are no counter arguments presented.

*This might be behind a paywall, so if you really want to read the responses…click here

I’ve commented about this before, but here we go again.

For anyone unfamiliar with the idea, the Living Wage for Halifax was identified by the Centre for Policy Alternatives in a report commissioned by the United Way in 2015 and set at $20.10 per hour. The study sets the wage by establishing a baseline standard of living for a family of two working parents with two school aged children.

It weighs the needs of the family to live what the CCPA considers a dignified life with opportunities for advancement. There are a great many reasons to question the methodology, but for our purposes, let’s accept the figure at face value.

Bousquet sells the idea, explaining how he is puzzled how anybody not paying employees over 20.00 per hour can “look at themselves in the mirror” and goes on to note that at his publication, the Halifax Examiner, he pays everyone a living wage.

As a small business owner, Tim’s desire to see those he employs earning a fair wage is admirable. It is also not particularly uncommon. Most small business owners try to do the same. However, many small business owners do not have the luxury of meeting an arbitrary living wage target by simply employing part-timers and freelancers on an ad hoc basis.

Employers with full-time employees base their salaries on a variety of economic factors including the industry standards, the economic value and availability of labour, revenue and business costs, the profit margin of their company, payroll taxes, benefits and a myriad of other market-driven external economic pressures beyond the employer’s control.

Living wage ordinances are nothing new. They’ve been in place in many jurisdictions in the US since the 90’s but it is difficult to compare the Canadian and US experiences as the minimum wage rates and labour standards, in most states, have historically been much lower than the levels we have in Canada.

The beachhead for these living wage policies in Canada is in British Columbia. New Westminster has had a living wage ordinance in place since 2011, followed by Port Coquitlam.

Vancouver also recently approved a plan to become a living wage employer. However, interestingly, evidence now shows almost no one will earn more under this policy. Why? Because Vancouver established much stiffer criteria around who should be paid a living wage. Among other restrictions, only contractors who have an annual service contract with the city more than $250,000 and provide regular and ongoing services on city sites fall within the scope of the city’s guidelines.

The result is the Vancouver living wage policy is little more than a feel-good, public relations campaign so politicians can say they are doing something about wage inequity or poverty.

For municipal employees and large-scale suppliers, such as is the case in Vancouver, it won’t matter a whit. The vast majority, if not all, already are making more than $20.10 per hour already. In Halifax, many make much, much more, but for smaller firms where profit margins are slim, costs continue to escalate and labour is hard to find, it would matter a great deal.

Without the sort of restrictions we’ve seen in Vancouver, a living wage ordinance would be highly discriminatory for many small businesses who want to bid on city contracts.

It is a simplistic notion to think all companies doing business with the city can set an arbitrary full-time wage floor of $41,808 annually. Adopting a municipal ordinance to enforce such a notion would be disastrous for some small firms, which as part of their business model, do business with the municipality.

What would such an ordinance mean for employers who pay their seasonal employees $15.00, $17.00, $19.00 per hour? Are they simply be disqualified from the tendering process? It stands to reason a policy of this sort would also force employers wanting to be compliant to eliminate full-time positions and replace them with temporary, contract positions to meet the $20.10 per hour threshold.

Also, how would such an ordinance be enforced? How much red tape is required? Would the city demand all businesses submit their payroll to the municipality to confirm they employees are meeting the requirement or do they just sign a declaration? Does CRA get involved? Also, how would it affect the competitive tendering process?

And what happens to employment opportunities for lower-skilled workers? Certainly, employers are not going to be providing entry level positions at that pay scale. This means employment opportunities will simply dry up for youth and entry-level employees.

There would also be job losses with larger employers.  CentrePlate has a contract with the city and provides both part-time and full-time employment. Their workforce employs many youths and other entry-level or lower-skilled workers. For some, it’s an all-important first job, for others, it’s additional household income.

If the city were to institute a living wage policy, even one with the sorts of exemptions we see in Vancouver, CentrePlate would be captured. By almost doubling the wage floor from the current minimum wage of $10.70 to $20.10, a significant labour market distortion is created. CentrePlate would then have decisions to make. They would either reduce staff, cut service or operate at a loss. What do you suppose would happen?

My guess is the more experienced workers would keep their jobs, all full-time entry level positions would be eliminated, workers hours would be reduced and service levels lowered. How exactly does this help? Would council decide to exempt Centreplate? If so, what then becomes the criteria for exemption?

A municipal living wage ordinance would also mean private sector service providers would lose competitive advantage against municipal unions, which (in case the connection is not clear) is why CUPE, Unifor, and other labour organizations are funding these Living Wage campaigns.

There could be other unintended consequences as well, including upward pressure on other salaries. If $20.10 is the new base rate, experienced employees will rightly be asking for higher levels of compensation for their work. As labour costs rise, so will inflation.

With increased costs to government, businesses would also be forced to absorb higher taxes in this equation. Along with the higher wages, there will be additional payroll taxes in higher EI and CPP contributions and additional municipal property taxes.

So the two options emerging are; adopting a living wage policy with many exemptions such as in Vancouver or; adopting a universal living wage for all municipal staff and contractors. The first option is a do-nothing, status quo, public relations exercise, the second is an arbitrary, inflationary tax grab and job killer. Take your pick.

Money obviously just doesn’t magically appear when a policy like this is adopted. For most small businesses trying to grow, there is no money tree they can harvest or a pot of unused cash to make up these wages.

I do applaud Tim and the Examiner for injecting this question into the municipal election. While we don’t agree on this, there is no doubt it will be an important public policy debate in the months and years ahead. The labour movement is plowing lots of money into this campaign and there are lots of social activists cheerleading this as a poverty reduction measure, so it isn’t going away.

For those prospective councillors who have provided answers, I would respectfully suggest it might be a good idea to go back and do a little more research and then make up your mind. From the answers I read, for many, there appears to be confusion around what is a minimum wage, a living wage and for that matter, where and how the idea is being adopted.

You can find other background material here and here. I also don’t think it’s unreasonable as citizens to expect well thought out responses to complex problems from our prospective politicians after they’ve taken the time to evaluate more than one argument.

 

Of Trade and Liquor and Lawyers.

http://www.cbc.ca/news/canada/new-brunswick/gerard-comeau-border-alcohol-ruling-1.3554908
Gerard Comeau after a judge dismissed a charge of bringing too much alcohol into New Brunswick because it violated free trade provisions in the Constitution. (CBC NB)

A few years ago, Gerard Comeau, a retired steelworker from Tracadie, New Brunswick, went on a 185 kilometre booze run to Pointe-à-la-Croix, Quebec. Like countless other folks in New Brunswick, Gerard opted to make the two-hour drive to cross over the Restigouche River into the neighbouring province to pick up cheap booze which often sells at half the price of the same product in the New Brunswick Liquor Corporation (NB Liquor) outlet.

When Gerard brought his 14 cases of beer and three bottles of liquor back home that day, little did he know he was triggering a series of events which would place him in the company of our Fathers of Confederation. Sir John A. MacDonald and George Brown’s healthy taste for tipple notwithstanding, Gerard had something more in common with the framers of the Constitution: the desire to promote free trade. Gerard’s free trade efforts, however, led to him being charged with illegal importation of alcohol.

Three years later Mr. Comeau showed up for court. With the help of some constitutional experts and lawyers, Gerard argued that Section 134 of the New Brunswick Liquor Control Act is unconstitutional.

New Brunswick’s regulations, like Nova Scotia’s complex assortment of liquor laws, are empowered by a 1928 federal statute, the Importation of Intoxicating Liquors Act. It demands alcohol only move in or out of provinces with permission from its liquor control board. It was designed primarily to stop bootlegging as Prohibition was lifted at different times in different jurisdictions. It’s also a pretty handy law should a province want to enable a monopoly and jack up its prices without having to consider all that messy stuff like supply, demand and other market forces.

When they got together in Charlottetown, this isn’t quite how the founding fathers envisioned our free trading Dominion.

In his decision, Provincial Court Judge Ronald LeBlanc dusted off our history and ruled that New Brunswick’s restrictions on bringing alcohol into the province violate the Constitution’s free-trade provisions. LeBlanc cited 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.”

Judge LeBlanc correctly recognized and emphasized free trade between the provinces was the intention of the signatories and a founding principle of Canada.

To find the turning point between the signing of the Constitution and when our free-trader Gerard was charged, we need to go back to the 1920s. During the height of the Prohibition era, the Supreme Court of Canada (SCOC) was asked to rule on an interprovincial trade dispute and, in the process, essentially gelded the free trade provisions in Section 121.

As the story goes, the Canada Temperance Act (CTA) governing the sale of liquor finally came into force in Alberta in 1921. In February of that year Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver some liquor to 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.

In the Gold Seal decision, the SCOC’s interpretation of Section 121 limited its application to prohibiting only interprovincial “customs duties.” For what some have advanced were purely political reasons the SCOC kicked Section 121, and with it the free trade intention of the Fathers of Confederation, to the curb.

Since then, successive politicians, courts, government officials, special interests and political constituencies in every province have used the Supreme Court’s ruling to successfully impose a myriad of trade schemes and regulations on everything from eggs, wheat and coffee creamers to truck parts and, of course, liquor.

However, the LeBlanc decision in the Comeau case has drawn back the curtain on a very important and equally inconvenient truth. Provincial liquor control regulations, which provide the foundation for our provincial liquor monopolies, including the NSLC, may not pass muster according to intention of the constitution.

Last Friday, the New Brunswick government announced it is seeking leave to appeal the Comeau ruling directly to the New Brunswick Court of Appeal. The federal Conservatives are also calling on the federal government to act as an intervener if the Court of Appeal agrees to hear it and are also asking the Trudeau government to refer the case to the Supreme Court to clarify Section 121.

So what does this all mean for entrepreneurs and small business in Nova Scotia? It could mean a great deal.

As a backdrop to all of this, the Premiers are embroiled in retooling the Agreement on Internal Trade (AIT). A deadline for an agreement passed March 31, 2016, but hope remains something will eventually get hammered out. There is some urgency as international trade agreements, such the Comprehensive Economic and Trade Agreement (CETA) with Europe and the Trans-Pacific Partnership (TPP) are coming into play. Why the urgency? Without change, under these new agreements, we may end up with foreign companies having greater access to opportunities in Canada than firms located in a neighbouring province or territory.

We’ve seen some regional progress on this front with the New West Partnership between B.C., Alberta, Saskatchewan and Manitoba and last year the Atlantic Premiers signed the Council of Atlantic Premiers’ (CAP) Red Tape Reduction Partnership and opened the Joint Office of Regulatory Affairs. All moves aimed at streamlining the flow of business between provinces.

In fact, just last month at a CAP meeting in Annapolis Royal, in an under-reported but nonetheless significant development, Premiers McNeil, Gallant, MacLauchlan and Ball agreed to advance three specific recommendations to reduce trade barriers brought forward by business groups led by the Canadian Federation of Independent Business, the Atlantic Chambers of Commerce and Canadian Manufacturers and Exporters.

So while the Premiers seem to collectively understand internal free trade is an urgent priority, the Comeau case could force the issue. If the case is referred to the SCOC and should that ruling be upheld, it will have profound implications for not only liquor regulations, but it might well call into question the constitutional validity of the tens of thousands of other interprovincial trade restrictions, prohibitions and conditions on business now in place; restrictions which are estimated to cost our national economy upwards of $14 billion every year.

It’s also encouraging the Atlantic Premiers are asking business for concrete recommendations to address regional trade problems. CFIB believes this is another step in the right direction. We encourage business owners to bring forward red tape and trade issues which require attention and we will be monitoring to ensure governments respond with solutions. If you do business in more than one province and you’re running into red tape between jurisdictions, CFIB wants to know about it.

With liquor regulations under the microscope, perhaps now is the best opportunity to assist our burgeoning local wine, craft beer and boutique distilleries. These small businesses are providing important economic growth opportunities, especially in rural areas. Eliminating archaic, Prohibition-era liquor regulations is something the Atlantic Premiers should get out in front of now.

This could have enormously positive impacts downstream in the accommodation, food and beverage and tourism industries. More and more entrepreneurs in Nova Scotia are risking their own capital and creating ventures in these sectors which are showing tremendous possibilities. Government needs to create the right environment for business and then get out of the way.

Eliminating cross-border restrictions on trade of alcohol products being manufactured throughout our region is a good place to start looking for solutions. It is one example of a broader need to remove barriers to business. Allowing more competition and freeing up the flow of commerce by eliminating restrictions on internal trade is an idea whose time has arrived.

Originally published in the Chronicle Herald, June 7, 2016

 

Construction regulations shouldn’t leave small firms in the dust

construction zone

The Canadian Federation of Independent Business (CFIB) is welcoming an important milestone in our long-term effort to have Halifax adopt a construction mitigation policy.

CFIB launched this effort two years ago, acting on concerns small businesses were being devastated by extended construction activity. On Monday, HRM unveiled their work at a public consultation.

Protracted construction projects have damaged and in some cases caused nearby businesses to go under.

Witness the demise of the popular Emma’s Eatery in Eastern Passage after months of ongoing interference from Halifax Water’s storm system upgrades. It may seem counter-intuitive, but the problem with recent collateral damage from development and infrastructure shouldn’t be placed at the feet of developers and contractors. It’s a lack of thoughtful planning by HRM. To find why, follow the money.
Developers can be charged hundreds to tens of thousands of dollars for permits, encroachment fees and other charges related to their projects. In the past five years the city has collected $1,822,944 in encroachment fees just in the downtown and Spring Garden Road areas. Nova Centre has paid more than $640,000 alone.

Add demolition permits, building permits, plumbing fees, development permit fees, occupancy permits, lot grading fees, solid waste charges, blasting permits, street and service fees and deposits and inspection fees, regional development charges and capital cost contributions (CCC).

These taxes, fees and development charges are, in principle, meant to offset costs to the city for administration and service delivery.

In the case of CCCs, the fees are to ensure development related to growth should pay for itself and not impose a burden on existing residents.

However, it’s time to ask if that’s what they do. Are we are meeting any real policy objective with these taxes, fees and charges? If there is any identifiable policy objective, how are these monies being applied to achieve it?

Most important, why does the city accept no visible responsibility to protect other taxpaying businesses affected by work the city approves?

Due to experiences across the country of businesses taking huge financial hits or going under, CFIB is in the process of creating a national construction mitigation best practices Guide. The purpose is to provide more clarity around the responsibilities of municipalities, developers and construction companies to better protect small businesses from the impact of adjacent major projects.

As part of this, we think arbitrary charges should be reduced so builders can efficiently re-direct money, which amounts to little more than fines and taxes, to create a less damaging environment adjacent to construction sites.

In developing the HRM construction mitigation plan, CFIB worked for many months with HRM planning officials and stakeholders from the development, construction and small business community.

CFIB also co-ordinated efforts of downtown business suffering from the impact of the Nova Centre development to ensure their voice was heard during the process.

We believe in clear, outcome-based regulation and only when necessary. That means less red tape, not more.

We also feel the city must ensure money being collected from development is being used to meet well defined policy objectives and not simply being poured into the black hole of general revenues.

With major projects such as development of the Cogswell Interchange lands and billions in Halifax Water upgrades, we need to take thoughtful action now to ensure small businesses aren’t left to die in the dust.