Did Brad Wall break trade deals by inviting a Calgary company to Saskatchewan?

The political bickering between Alberta and Saskatchewan reached a new level Thursday, as Premier Rachel Notley accused her Saskatchewan counterpart of breaking a trade agreement by inviting a Calgary-based company to relocate to his province.

Speaking in Red Deer, Notley said her government is considering a response to Wall ‘likely’ breaking trade rules under the New West Partnership, but that she’s not planning on pulling out of the agreement.

“If we’re going to grow prosperity throughout Canada, what we need to do as government leaders is invest in growing businesses in our own provinces, not try to steal businesses from other provinces,” she said, adding the strategy is short-sighted and self-defeating.

“It doesn’t really demonstrate a great deal of wisdom if one embarks upon an economic strategy that flies right directly at key provisions of a trade agreement, that otherwise generates prosperity for businesses that are actually in your province, that’s not helpful.”

Earlier this week, the Canadian Press obtained a letter written by Wall to Calgary-based Whitecap Resources inviting the company to relocate to his province, while offering to subsidize relocation costs and suggesting Whitecap use unused government buildings.

Notley is referring to Article 12 of the deal, which states parties shall not directly or indirectly provide business subsidies that “entice or assist the relocation of an enterprise from another party.”

University of Calgary Economics Professor and School of Public Policy Research Fellow Trevor Tombe said the clause is pretty explicit, but a business subsidy means something very specific under the agreement.

Depending on how Saskatchewan structures their incentives he said, it may not be a subsidy.

But that doesn’t mean it’s not out of bounds.

“This is clearly a violation of the spirit, if not the letter, of these types of agreements that try to ensure that we have free trade and open economy across provinces in Canada,” he said. “We shouldn’t want to allow provinces to compete for businesses with subsidies.”

Speaking in Regina, Wall said he’s not breaking the rules.

“I think we’re letting folks know about existing policies, I think all provinces will continue to do that and have done that,” he said. “We haven’t got a specific relocation program we’re putting in the window that we’ve developed that would be counter to the spirit of those trade deals.”

New West may not be the only agreement involved.

Under the Agreement of Internal Trade from the mid-90s, one of the obligations is that “a government is prohibited from offering incentives that: entice a business to relocate in that province or territory.”

Canadian and American trade lawyer Mark Warner said the problem is although relocation subsidies are prohibited, they’re not subject to dispute settlements.

“So basically yes, you’re not supposed to do it, but you’ve got no remedy is the short answer,” he said, adding Alberta would probably have a better case under New West.

“But it wouldn’t be a slam dunk, I think people would be arguing that it’s not covered by the dispute settlement features.”

Under New West, there’s a structured consultation process if a violation occurs and if that fails, a government can request that a panel be enacted to hear evidence and consider arguments before delivering a judgement.

If the two sides still can’t come to agreement, one party could be subject to financial damages, but Tombe said it could be an extremely long process.

“We should all as provinces agree that we’re in one country and we should have one economy, too and we shouldn’t enact policies that distort trade or try to make businesses located in areas where they wouldn’t have otherwise located,” he said.

Like Tombe, Warner is very interested in the details of the upcoming Canada Free Trade Agreement this summer to see if it will have more teeth when it comes to enforcing clauses.

“This is not a good thing to do, this is not a nice thing to do, but apparently up until this point, it’s a thing that they are allowed to do,” Warner said. “We really don’t want our provinces to be doing this against each other, but unfortunately at the end of the day, you have to distinguish between the ethics and the legality.

“Somewhere between ethics and legality is where you find politics.”

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