Proceedings in the
Douglas Fir Room

The House in Committee, Section A.

The committee met at 11:10 a.m.

[George Anderson in the chair.]

Committee of the Whole

Bill 7 — Economic Stabilization
(Tariff Response) Act
(continued)

The Chair: Good morning, Members. I call Committee of the Whole on Bill 7, Economic Stabilization (Tariff Response) Act, to order. We are on clause 2.

On clause 2 (continued).

Gavin Dew: In yesterday’s discussion, I believe we closed off on the question of whether, for British Columbian manufacturers that are following B.C. regulations, this could create an imbalance or an issue of competitiveness, if other provinces are not required to follow B.C.’s potentially stricter regulations.

I believe we had some cursory coverage of that question, but I wanted to specifically inquire as to what mitigation strategies would be underway to deal with the applicability of stricter regulations for physical manufacturing equipment that would have a significant capital switchover time.

Hon. Niki Sharma: I think I left off last meeting — and I want to thank my team again, who I introduced last time, for joining me here today — answering this question by saying that this is exactly why the bill is designed the way it is, for some of the reasons that the member poses in the question.

There are three ways that we can assess things like that or take care to make sure that we are supporting B.C. businesses in the economy. One is the regulation-making power that ministers are empowered to do. So ministers will be studying to see what…. I think we talked at length last time about the JEDI study that is happening and underway right now to try to understand the tariff impact to the economy and also how we can support B.C. businesses. So decisions will be guided by that.

Then the third level of protection and, I guess, thoughtfulness in how the work would be approached would be the long-term plans that would be necessary. So we remember that this legislation has a sunset clause attached to it. What that means is that ministers are tasked with the longer-term plans of transforming that legislative or regulatory framework that applies to that industry, whatever is in their purview of where they would like to protect or understand how we can respond with our regulation- or legislative-making powers.

Gavin Dew: While those are all important areas, what I don’t hear is any acknowledgment or strategy around the sunk capital costs associated with manufacturing.

If you have a manufacturing facility that could have millions, tens of millions or hundreds of millions of dollars in sunk costs on manufacturing equipment that is compliant with a B.C. standard but may not be compliant with another jurisdiction — or another jurisdiction may have different or lower standards that create a significant competitive gap because a B.C. company was previously, prior to any changes, required to act in accordance with a B.C. standard — there may be a significant carry-forward capital cost that’s being capitalized over the long term and cannot be recovered.

Or there could be significant capital cost to switching out manufacturing equipment in order to ensure that it is or to enable it to be compliant with a different standard that might allow for a more competitive cost of manufacturing.

[11:15 a.m.]

I hear a lot of talk about mitigation strategies, but I’m wondering whether any analysis has been duly undertaken in order to understand what the economic deadweight loss would be of those kinds of sunk capital investments that would no longer be relevant subsequent to the implementation of such rules and subsequent to more competition from other jurisdictions with different or lower standards around manufacturing and thus lower capital costs embedded in the long-term cost of manufacturing.

Hon. Niki Sharma: I’ll give a multi-manufacturing-specific answer based on the question. So we’ll start by saying I think when we understand what manufacturing involves is it always involves inputs from many different areas.

[11:20 a.m.]

In that context, the ability to access inputs to manufacturing and B.C.-made manufacturing through the dropping of interprovincial trade barriers is an opportunity for manufacturers to further their ability to source products or use products in B.C. to get to their end goal of manufacturing. That’s certainly something that I think is important to those businesses.

I already mentioned the safeguards that are in place in this legislation to allow ministers and teams to do the thoughtful work of understanding if such a scenario that was presented in the hypothetical does exist. I’m told by our team at JEDI that at this stage, our standards for the kinds of situations that the member was talking about are actually pretty equal across the country related to the inputs in manufacturing or the kinds of capital investments or the standards related to that.

But if there are specific examples that he wants to raise, I think the appropriate place for that is the work that we would do once this legislation hopefully passes, to be able to do that thoughtful approach with the safeguards I mentioned earlier that are in place to do that work.

Gavin Dew: Just to go back to the prior answer, the Attorney General made reference to the sunset clause as a positive. I do just want to query whether government is aware that business organizations like the Canadian Federation of Independent Business have flagged their concern with the sunset clause.

Specifically, the CFIB said that the amendments to Bill 7 proposed by government “would lower B.C.’s internal trade barriers for just one year, creating an unpredictable investment environment at a time when certainty matters most for small business.” The government amendments to Bill 7 that we have seen would make it challenging for small businesses to plan ahead and invest in interprovincial trade to and from B.C.

I return to the broad theme of capital investment which I raised in the prior question. At the end of the day, major companies that are making capital investments do so on the basis of having an understanding of what the rules are going forward. Nobody allocating capital in their right mind would do so on the basis of rules that exist for only one year.

Given that she has raised the sunset clause as being a positive, I’m wondering if the Attorney General could expand on what actual thinking has gone into trying to understand the implications of the sunset clause for long-term capital investment on the part of B.C. companies.

Hon. Niki Sharma: When we get to clause 29 on the sunset, I’d be happy to go into detail about that.

The Chair: We’re on clause 2. Shall…?

Oh. Recognizing the member for Kelowna-Mission.

Gavin Dew: Thank you. No rush. We want to actually make sure we ask the right questions here.

The Chair: You’ll always need to stand up.

Gavin Dew: I guess it was a rush to stand up, then.

I do just want to continue on that question. That same CFIB research shows that red tape, including internal trade barriers, “tilts the playing field toward larger corporations that have the financial and regulatory resources to navigate complex legislative schemes.”

With changes happening, including these kinds of changes, one of the main issues, which is always the case when legislation changes, is that those companies that are larger, that are more resourced, that have regulatory and policy departments, are often more equipped to navigate complexity and change, particularly complexity and change that is short term or that is uncertain relative to small businesses that don’t have full-time compliance departments dealing with these matters.

Can the Attorney General expand on what efforts and consultation were undertaken to make sure that the level playing field that we’re trying to create is also a level playing field for small business?

[11:25 a.m.]

Hon. Niki Sharma: Actually, it’s small businesses that have the least level of ability to respond to administrative and regulatory burden compared to large businesses and the capacity to shift. So the dropping of interprovincial trade barriers, I think, a lot of organizations see as a bigger benefit to smaller businesses than larger businesses.

[11:30 a.m.]

Just to the point that the member made, it probably creates a leveller playing field just by dropping regulatory requirements and admin burdens that are placed on businesses.

Just to note that CFIB has commented on part 1 of this legislation as a much-needed step. No province has gone this far in liberalizing interventional trade and aligns with long-standing recommendations from the business community, along with other B.C. business leader organizations that represent small businesses, like the B.C. Chamber of Commerce and the Business Council of B.C., who have expressed support for part 1 of this legislation related to dropping interprovincial trade barriers.

Gavin Dew: Just to follow up on the Attorney General’s remarks, would the Attorney General agree that, while they have supported part 1, both of the organizations she just cited have actively pushed back on other parts of the bill?

Hon. Niki Sharma: I believe I answered that by just noting that it was part 1.

Gavin Dew: I will restrain myself from reading back my list of quotes from business organizations expressing their frustration with the broader context of Bill 7 and its sweeping powers, only to note that a decontextualized quotation is not the best.

I will, on that note, also bring up, once again, since the Attorney General has quoted from the CFIB, the CFIB has specifically flagged their concern about the one-year sunset clause. As we talk about small business, I think what the Attorney General is not acknowledging is that absolutely the burden of interprovincial trade barriers disproportionately impact small businesses.

But what I believe we’re hearing from the small business community, what I’m seeing in writing in front of me, is that the one-year sunset clause would significantly limit the potential positive impact because of the amount of time and involvement and complexity involved with adjusting or retooling or repositioning a small business with finite resources in order to take advantage of a one-year period.

So just trying to understand, again, what work has been undertaken and what consultation has been undertaken in order to determine that a one-year sunset clause is appropriate and that the benefits exceed the detriments?

The Chair: Member, I appreciate that you have asked this question regarding the sunset clause. The minister has given her response with respect to what has been done. If you would like to reframe your question, that would be, I think, appropriate at this point in time. I’ll give you the floor again. Recognizing the member for Kelowna-Mission.

Gavin Dew: Thank you. Simply having acknowledged the fact that if there is talk of small business support for the bill, it should also be couched in an understanding that there is a significant desire to see the elimination of the one-year sunset clause by those same organizations.

I will move on to my next question. Having canvassed the matter of the issue of competitiveness, can the Attorney General tell us how this bill is intended to ensure that British Columbians and B.C. businesses are prioritized even with the reduction of interprovincial trade barriers?

Hon. Niki Sharma: I’ve canvassed many times the work that’s happening with ministries to do exactly that, which is the whole point of the work that we’re doing, which is to make sure that we stabilize our economy and support B.C. businesses. I’d be happy to get into it more in clause 5.

Gavin Dew: And what precedent does clause 2 set for future trading partnerships with other provinces?

[11:35 a.m.]

Hon. Niki Sharma: I also think that we can share quotes back and forth, but the business community has really been advocating for the drop of interprovincial trade barriers for decades. This part 1 sends a message to them that we take this seriously and we want to move quickly when it comes to doing that.

The Chair: We are on clock.

Rob Botterell: One of the aspects of clause 2 relates to, and it’s related to the ability to move quickly within this first year, is the ability through cabinet order to override amendments, which includes legislation — which is a significant power that that is embodied in this legislation.

My question then is: what legislation does JEDI see being impacted by these types of regulations over the next year? That’s my question.

Hon. Niki Sharma: The process that is undertaken in this legislation is the creation of that negative list that we talked about through regulation. So it will be very clear and transparent whenever this power is used under this section. It also creates the time for the bigger work that we talked about all the time.

I’m told by JEDI — and we mentioned the different tables that are happening, as this is coming at us pretty quickly — that the work is underway right now to work with different ministries to understand what that negative list might entail but also to do the study that we talked about yesterday about the economic impacts of the tariffs but also interprovincial trade barriers and where exactly that work needs to land.

So that’s the process that would be included and that would show what was being used in terms of the section 2 powers described.

Rob Botterell: Thank you, Attorney General, for the answer.

The work that JEDI is doing is really foundational in terms of identifying the negative list and, when we get into future sections of the legislation, how ministers and ministries will approach exemptions and application within a regulatory environment.

You mentioned yesterday that JEDI is working on, effectively, impact analysis, and I think you mentioned industry impacts, GDP and employment as we look at particular measures.

My question is: will JEDI also look at the impacts of particular regulations on the environment, on low- and middle-income families and on Indigenous nations, in order to have a full picture of the impact that a change in regulation under this act will have.

[11:40 a.m.]

Hon. Niki Sharma: Just confirming from JEDI that they will be looking at all impacts and all aspects of those impacts of removing trade barriers, including the ones that the member noted. Just to also say that DRIPA, as a piece of legislation in this province, applies and would continue to apply with any regulatory-making authority.

Gavin Dew: Can the Attorney General confirm, just for my clarity, that if there is a conflict between a B.C. regulation and this act, this act prevails?

Hon. Niki Sharma: Yes, the way the act is designed, this section works in collaboration with them when these regulations are brought into force, when the section is brought into force. So when it is brought into force, it’ll be very clear what that negative list is out there for the public. Therefore, it’ll be clear that if any conflict that arises, these provisions or any regulation made under this provision would prevail.

Gavin Dew: Again for clarity, if anything can be sold into B.C. through this clause, is it still required to go through regular sales channels? The example being that liquor stores are required by regulations to be stocked by the Liquor Distribution Branch. Through this legislation, could a liquor store branch purchase liquor from New Brunswick to sell in British Columbia that doesn’t come through the LDB as per regulations?

Hon. Niki Sharma: We canvassed liquor yesterday, and I talked about the work that’s going on right now to do some of the things that the member is asking. So what I would say is that that work is underway right now with JEDI, and really, the answer is it depends, right?

[11:45 a.m.]

What the minister has the ability to do is design a regulation and a negative exemption list that does certain things — I’m speculating because the minister is not here — that may make it easier to put things from different provinces on our shelves.

Oh, she’s here. She can’t talk, though.

But it would be designed in a way that protects the things that you would want to protect, in terms of supporting B.C. businesses, and drops the barriers that you would want to drop.

The Chair: Minister, I believe you want to move something right now.

Hon. Niki Sharma: I move that the committee rise and report progress and ask leave to sit again.

Motion approved.

The Chair: This committee stands adjourned.

The committee rose at 11:45 a.m.