Mike Abbott:
All right. Hello, everyone, and welcome. It's just after 1:00 PM here in Ottawa, and I think we are good to get rolling on this webinar. So, thank you for joining. And really, before we get going, a few quick housekeeping notes. If you have any questions during the session, please use the Q&A tab to submit them. For translation, click on the Interprefy tab, and for IT support, you can reach out to Erica Burgess by clicking the mail icon on the right. An on-demand link will be shared with you via email in the next few days.
So, before we truly start, I would like to begin by acknowledging the indigenous peoples of all the lands we are on today. While we meet on a virtual platform, I would like to take a moment to recognize the importance of the lands we each call home. This acknowledgement reaffirms our commitment and responsibility to improving relationships between nations and deepening our understanding of local indigenous peoples and their culture.
As I mentioned, I'm joining this from Ottawa, Ontario, which is situated on the traditional and unceded territory of the Algonquin Anishinaabe people. So welcome to our webinar. It is, I think, a really timely topic for everyone. I think there's been lots of news clippings that we've all seen, we've all read.
Interprovincial trade - what does it actually mean? What is it actually going to do?
I'm Mike Abbott, I'm a partner at BDO. I sit within our advisory business, and I sit largely within the work we do around regulatory. And what we're seeing right now with interprovincial trade and potential for change is regulatory change at a very different speed. We have a great panel today. I will be joined momentarily on stage by three guests.
So, Jesus Ballesteros, partner, strategy, value creation, and analytics here at BDO. Also, he happens to lead our manufacturing industry group. Gitane De Silva, former Alberta Deputy Minister of International and Intergovernmental Relations. She's the founder and principal of GD Strategic. And finally, Paul Lalonde, a partner with Dentons. He leads their regulatory business.
So, you're all on stage here, interprovincial trade, not much happening in the news on this. Welcome. Maybe what I'll do though, before we truly get into the questions and set the stage of what actually is interprovincial trade and what we can get from that, I'll get each of you and I'll start with Gitane you to introduce yourself. Maybe talk a little bit about yourself in just a real quick time and then we'll get into some of the questions.
Gitane De Silva:
Well, thanks so much Mike, and thanks for starting us off in a good way with the land acknowledgement. I'm joining you from sunny and smoky Calgary where it's still morning. So, as mentioned, my name is Gitane De Silva. I am a long-time diplomat. I served in Canada's foreign service and was posted to the United States three times. I also was, as mentioned, deputy minister for the province of Alberta of international and intergovernmental relations where I worked on both the agreement on internal trade and the subsequent Canada Free Trade Agreement. And then I was posted back to Washington as Alberta's senior representative to the United States under the first Trump administration where I worked on the new NAFTA or KUSMA or USMCA.
And then I moved back to Canada where most recently I was CEO of Canada's energy regulator, which is the national energy regulator of pipelines and power lines from coast to coast to coast, and of course, into the United States as well. Thanks for inviting me to join you today.
Mike Abbott:
Well, thank you. And I have to say when I hear that, I've read all that, but when you actually hear it, it's very impressive. And so, thank you for joining us today. Jesus, maybe I'll turn it over to you.
Jesus Ballesteros:
Thank you, Mike, and welcome everyone. Thank you for joining us today. As Mike mentioned, I am Jesus Ballesteros, a partner in our strategy and value creation team here at BDO. And essentially, what we do in our team is that we help clients preserve and create value by growing their top line, bottom line, or both. I've been in business advisory for over 15 years. I also spent some time in industry, and I've worked in Mexico, the US, Canada, and Chile.
I also, as Mike mentioned, serve as a co-leader for our manufacturing and distribution industry nationally, where we coordinate the efforts of all of our different areas of expertise to bring the latest and greatest offerings to our clients. Certainly, a very timely topic today discussing interprovincial barriers and one that is, of course, very relevant for the manufacturing industry. So, look forward to the conversation.
Mike Abbott:
Awesome, thank you for that, Jesus. Paul, last and certainly not least. And you are on mute, so we had to have somebody do it, and thank you for being the person.
Paul Lalonde:
It had to be me, didn't it? Well, hello everyone. Paul Lalonde, joining you from Toronto. I'm a partner with Dentons Canada, LLP, and I'm the head of the National Regulatory Practice Group for the firm.
My areas of focus are international trade, government contracts, and white-collar crime, and I'm the head of the international trade practice for the firm. Very happy to be here, thanks to BDO for the invitations. Thanks to you, Mike, for getting me in on this august panel, a very impressive crew to be included in. So, thanks very much for that, and look forward to the discussion, and kudos to BDO for its Tariff Readiness series and for the team you guys have put together, it's been very helpful to Canadian businesses. My acknowledgement of everything you've done on this front since the Trump administration has been in place, let's put it that way.
Mike Abbott:
Well, thank you for that. And I will say I've been in the business of professional services for 30 years and it is such... It's been a time that I've never seen before, certainly over the past four or five months, certainly of the changes, but not just the changes, I just think the inability for some organizations to make decisions, and understandably so because of all of the churn and the change and things that could change tomorrow.
But one of the things that we're going to try to do here today is hopefully give some practical guidance and practical advice. I don't think we're going to have the ability to answer every question. I don't think you're going to walk away in the next 60 minutes and say, "I've got all interprovincial trade figured out." We're going to make this more or less an industry agnostic discussion even though we have Jesus. I personally spend most of my time public sector, also have done a little bit in oil and gas, and a little bit in the financial services. So, I can speak to some other industries.
There are clearly some industries that are more impacted by interprovincial trade. You think of retail, certainly think of manufacturing, you think of agriculture, anything where people move and we'll do our best to add pieces to this as we go in the next hour. But maybe Gitane, maybe I'll turn it to you. Could you just maybe set the stage for us of really what are these interprovincial trade barriers at the highest level? And then we can start picking at them from there.
Gitane De Silva:
Great. Thanks, Mike. Just to remind people, I mean this has been in the news a lot, internal trade represents about 20% of Canada's GDP. That's why we're seeing so much attention finally placed on it now, given that we're having a bit of an existential crisis in our trading relationship with the United States. So, this is an opportunity for Canada to work better together and to grow our economy domestically. There's lots of studies out there, including one by Dr. Toohey here at the University of Calgary that estimates if we can get rid of all these barriers, we can grow our economy by about 7.8% or add about 200 billion to our GDP. Of course, very big numbers and none of that is going to happen overnight, but still useful that we're working towards getting rid of these barriers and doing what we can. And the greatest potential upside, of course, for the maritime provinces where internal trade represents the highest proportion of any region in Canada.
So, what are these barriers, and why are they so persistent? There's two main types. The first is differences in standards and regulations. Many of these are established at the provincial level, and I can use trucking as an example, as this is included in the current discussions. And of course, we found out during COVID that trucks are really what drive our economy in Canada. So, what happens is different provinces establish different safety standards. So, you have different rules around driver training, length of loads, which pieces of equipment can be operated when, and the challenges when each province is that independently, it causes problems when you want to move across borders. We have examples of heavy equipment that can only be operated in British Columbia at night and only during the day in Alberta. So, how do you actually cross that border? Examples where a flag needs to be changed for light, for safety reasons.
And so if you multiply this across sectors that it really does amplify, and every time you need to make a change like that, every time there is a difference, it costs time and costs money. So that's the first type of barrier.
The second type is what I would call domestic protectionism. And the most often used example here is alcohol. Say you are the premier of Nova Scotia and you want to grow your wine sector, and you know that you'll have a hard time competing with Ontario and BC, you'll put measures in place to protect that growing sector. So, you might either give Nova Scotia wine preferential treatment when you're buying it with provincial liquor stores, or you might give it preferential tax treatment. And these both are examples of why this problem is so persistent.
One, because these standards and regulations, there are hundreds and thousands of them. So, just getting the whole list together has been tricky for people. And the approach in the past has been to move towards harmonization, meaning to negotiate a new standard. Whereas what you're seeing now is a push for mutual recognition, where it's like you have a standard, I'll accept yours if you accept mine. And the other reality on the protectionism side is we know that there are winners and losers in trade agreements. So, it's hard politically for leaders to say, okay, I will reduce these barriers knowing that perhaps my sector of this economy cannot compete and people lose their jobs.
And that's why it's so important right now to have this conversation amongst leaders. We saw the conversation, Saskatoon, at their first minister's meeting, and now this legislation is we're seeing that political will to actually move forward and address some of these challenging problems. And of course, it'll also take support from Canadians to keep moving forward, because like I said before, there will be winners and losers. And so we need to have that conversation around how to support people as they transition to new opportunities. So that's my overview of why this problem has been so persistent, and the opportunity now going forward to grow the economy.
Mike Abbott:
Thank you for that. And I think when anyone hears the word thousands, one has to remember that it's been since 1867, we've had the chance to build these agreements. There's a lot to unwind and a lot in the detail. You talked about the harmonization and some of the standards that exist. I sit in Ottawa, you can go across the river and buy beer. There are signs that remind you that say, hey, you're not allowed to bring it back across the Ontario border, but of course, people do. I know there's some more commercial and practicality applications of that. So, thank you. That's a great overview.
Paul, I want to ask you a question about some of the legislative components that are behind this. And one of the bills that's floating around that probably has a relationship to this is the Ontario bill, C-5. Can you just talk about perhaps that, but also what are some of the most significant changes that you think will come through the interprovincial trade barriers? I know there's a bunch of things in that question, so I'll let you sort through.
Paul Lalonde:
Sure. And I assume you mean the federal bill C-5.
Mike Abbott:
Sorry. Thank you.
Paul Lalonde:
It was tabled last-
Mike Abbott:
Sorry, I was thinking of the... I had a reference to the Ontario one, but yeah, I'm thinking of the federal one. Thank you.
Paul Lalonde:
Sure, sure. So, as Gitane noted, there is, it seems, a strong political consensus that's emerged around reducing barriers, and easing the flow of trade in services and goods, easing labor mobility across Canada. And tapping into that energy, that political consensus, Minister LeBlanc last Friday, June 6th, introduced new legislation that represents one of the steps that the Carney government is taking, I guess the first big legislative step that the new Carney government is taking to, as the government puts it, build a stronger, more competitive, and more resilient Canadian economy. We'll see whether that objective is actually attained, but that is how they've stated the purpose.
So, what is this new legislation, and what does it do? The new bill, titled the One Canadian Economy Act, and it's tabled as Bill C-5 in the House of Commons, is a government bill by Minister LeBlanc. And it has two main parts; in fact, it's two laws in one omnibus piece of legislation.
And the first part is called the Free Trade and Mobility in Canada Act. And the stated purpose of that first part of the bill is to promote, as the title would suggest, trade and mobility, by removing the federal trade barriers to interprovincial movement of goods and the provision of services that might apply within Canada. So, we've talked about provincial barriers. There's also federal regulations that can impact the freer movement of goods and services across the country and labor mobility across the country.
So, what does that piece of the legislation do? Well, with respect to goods, the central idea here is that a good produced, used, or distributed in accordance with a provincial or territorial requirement will be automatically, once this law is passed, automatically considered to meet any comparable federal requirement. So, where there's overlapping requirements, federal and provincial, if you meet the provincial one, you're automatically going to be deemed to meet the federal one without any additional requirements to be met, and so on.
So, in some areas, that might be a bonus, that might actually reduce the administrative or regulatory burden that companies might have to meet where their goods have to meet both federal and provincial requirements. One area where I think there might be some real measurable benefits, there are meat inspection where a lot of facilities are subject to both provincial meat inspector work and federal meat inspector work. So there might be some benefits there. The government's talked about organic designations being applicable at the provincial and federal level. People who are interested in that might benefit from those measures. The government's also talked about energy efficiency standards, for example, for appliances and things of that nature. There might be a lot of areas where companies that have to deal with the double burden of meeting provincial requirements and federal requirements might have those burdens eased, and their overhead and regulatory compliance costs might go down as a result.
That's goods. On services, it's a similar concept. The idea is that a service provided in accordance with provincial or territorial requirements will be considered automatically to meet any comparable federal requirements that might apply to that service. So, that's goods and services.
On labor mobility, what the act does is that it prescribes that federal authorities will automatically recognize and authorization to practice an occupation that's issued by a provincial or territorial regulatory body. So, if there's a comparable additional federal authorization that's required in order to work on a federal project, for example, or on an international or interprovincial work, the federal regulatory body will automatically recognize the credentials that are issued at the provincial level. So that might help as well.
One example where there might be obvious benefits is nursing. Nursing is a provincially regulated profession, but the federal government can also impose certain licensing requirements on nurses that work in federal institutions. We might see that disappear and it might be easier for nurses to move around the country and work in federal institutions and provincial institutions across the country.
That's the first big part of C-5, the labor mobility, goods and services stuff. And then the other part which is probably getting more media attention is what they call the Building Canada Act. That's that part of the One Canadian Economy Act. And the stated purpose there is to enhance Canada's ability to approve and move forward with major projects. As the Prime Minister said, we seem to not be very good anymore at building big things, at least not quickly, and the government is focused on moving on that.
How does the act do that? Well, it allows for the designation of certain major projects to be in the national interest.
And if a project's designated to be in the national interest, its development can be accelerated compared to current timelines in the following way. So when a project is designated, it's conditionally approved upfront and the process will go through some of the existing review process, but with a focus on how we get it done as to whether or not we get it done. So, as opposed to a green light, red light system through each of these reviews, it gets an upfront green light and then we work out how to make it work under the various approvals that are required, whether that's environmental, or otherwise.
The idea is there'll be a federal national projects office set up and that office will take charge of the project and work on a one project, one review concept to get it through all the necessary approvals, whether it be at the provincial, federal, or other levels. They claim that they're going to be able to reduce the approval regulatory processes required to do major infrastructure projects from five years to two. We'll see. The devil will be in the details, but certainly, I think most observers, observers who have been watching this have taken this as a positive step.
I could go into a bit more detail on that, but I am cognizant of time. I did want to express a couple of cautions though. The minister that's going to be responsible for running these projects will need to consult with other ministers who have subject matter authorizations under current regimes. So, the Minister of Energy will need to be consulted, the Minister of Environment will be consulted, the Minister of Indigenous Affairs will need to be consulted, and so on. And there's really no set timeframe within which all that consultation is going to happen, so it's a little bit open-ended to as to how much time that's going to take. But presumably that's where they're talking about saving two to three years in the overall process. But there isn't a lot of detail, and there aren't set timelines set in the legislation about that.
The other caution is that one of the main risks and delays that have afflicted major Canadian projects is litigation, whether that be from environmental groups, indigenous groups, and so on that have attacked projects, that's not addressed in this legislation.
And I think that's lacunae, that's a deficiency in the legislation that I hope might be addressed through the parliamentary process. Right now, a decision under the act could be the subject of judicial review, and presumably that would go in first instance to the federal court of Canada, possibly federal court of appeal on appeal, and then the Supreme Court of Canada. Now, if a project is held up by that kind of litigation, that could take up five years right there. So, it would be nice to see in the legislation something trying to address that to short circuit it, whether it's take out the first instance, go straight to the federal court of appeal, or have a reference mechanism straight to the Supreme Court of Canada.
If these projects are really this big and in the national interest and of compelling national public interest, maybe going direct to the Supreme Court of Canada to sort out whether it can go ahead would be a good way to go. The legislation's silent on this, and I think that's something that I hope parliamentarians are going to focus on. I hope that gives you a bit of a snapshot of what the legislation does, and I'll pass it on.
Mike Abbott:
Well, I think between the first piece around we've got thousands of these different pieces to it through to the level of complexity, Paul, that I think you've outlined of some of the challenges that I think will be there, I would like to come back to that to this point probably in a couple of questions.
Jesus, I wanted to get your take on this. You got a chance to hear the setup of this. Practically speaking for whether you're an enterprise level organization down through a small, medium business or owner managed enterprise. Talk to me from your vantage point of where you see the biggest opportunities coming in the Canadian marketplace.
Jesus Ballesteros:
For sure, Mike. So, as Paul eloquently has described, there's lots of details that need to be still sorted out, but I think this is overall good news for the Canadian economy. I'm stating the obvious. By removing barriers, one of the things that companies can expect to see is cost savings. That is one of the biggest opportunities here is as you bring down those barriers, at least between the federal level and provinces, you are removing essentially red tape, requirements, delays, and all that is money. As to the extent that these things do take place and happen, companies should see a benefit in their bottom line in the sense that they don't need to spend as much money in working through all those regulatory requirements. So, that's one of the greatest opportunities is being able to capture the cost savings of that.
Now the other big opportunity, of course, is opening up new markets, it's growing the top line. For companies in many sectors, it has not been possible or it has been burdensome to do business in a different province because of these regulatory requirements and because of these different barriers. By removing some of these, and granted some of these will require cooperation between the provinces, but as these barriers start to come down, it will make it possible for companies to start operating and selling into other provinces. Now that, of course, requires you understanding the market, doing the proper analysis, looking at the opportunities, but certainly, there are many, many sectors in which this will become an opportunity. And instead of or/as, barriers are being erected down south it gives another outlet for Canadian companies that are looking for different markets, and especially as Canadians have definitely woken up to the fact of buying Canadian strongly. I guess this certainly... It is an opportunity that many businesses will be able to take up.
On the cost side, certainly cost savings we should expect there. And obviously, on the growth side, new markets available for many sectors across the country.
And then finally, I should also mention that the investment in infrastructure is an important part of this, too. It's not just about the trade and labor mobility, but also the investment in infrastructure because to the extent that Canada invests in its infrastructure to make the flow of goods easier across our country, then that's also going to reduce costs, and it's going to make it easier for companies to sell in other provinces and markets. That is exciting. And then of course, if it is possible to bring down the approval of large national interest projects from five years to two years, as long as they don't get caught up in all the legislation or litigation as Paul mentioned, then this is essentially pulling forward a lot of investment.
So, for a lot of companies that are in the services industry or that sell goods for these large projects, by pulling forward all of this investment, that's just business that companies were not necessarily expecting to see in the short term. So taken together these things can be certainly very exciting and can be a shot in the arm for the Canadian economy.
Again, yes, devil's in the details, but to summarize, I think we can see cost savings, and it will vary. It will vary across sectors and industries, but we should see some generalized cost savings as barriers come down. We should see opportunities for growth, for companies to sell their goods in other provinces. And then third, with the flow of goods, the easier flow of goods with investments and infrastructure, we should also see some of those costs hopefully come down. So, opportunities in different areas. The final thing I'll say here, of course, is that with opportunities come some challenges; it's important to keep that in mind. Gitane mentioned this in her opening remarks is free trade always has some winners and losers and it's important for companies to make sure that they're ready to be able to tackle both the opportunities and the challenges that they might face as a result of this.
Mike Abbott:
Thanks for that, Jesus. I'll come back on some of those opportunities probably near the end when we open it up for a few other Q&A.
Gitane, maybe I'll throw a question to you. Given your experience, whether it be political realm, legislative realm, regulatory realm or being an entrepreneur, this must be a really unique time of having all of these things converge. Given the opportunities that could be there or maybe share where you see some of the opportunities and how to help navigate to get towards some of those to actually unlock those opportunities for organizations. Because this is going to continue to be, I think, a very fluid topic certainly for the next period of time.
Can you maybe share, given your unique experience how you might see an organization navigating towards some of these opportunities?
Gitane De Silva:
Great question, and I think it is said that strategy shapes structure. We have to remember that when we signed the NAFTA, we made a conscious decision to integrate our economies north-south as opposed to east-west, and Canada does not have an interstate commerce clause in the Constitution like Americans do, so to the point since 1867. But that reflex was reinforced with the NAFTA. And so we have to build the reflex now to trade across provincial barriers. And I think there is great opportunity. I mean, we also need to note that about 60% of the trade within Canada is trade in services. The effort that is being made to recognize professional credentials across jurisdictions I think will really be key. And depending on the service you're providing, I think there is real opportunity there. There certainly will be carve outs. The legal profession is one where we know that Quebec has a different... They've got a civil code, and so obviously lawyers operating all across Canada, there is a different legal system in Quebec and we need to be cognizant of that.
But to the point about nurses, this legislation recognizes provincial accreditation federally. What we'd like to see is that same thing happening in every jurisdiction across Canada. And if we're going to be building major projects, we will need to see skilled trades people move to where the work is. And so that will be key. I think that is a tremendous opportunity. I think too, just looking at... We have seen this, we've gone from elbows up to by Canadian to whatever the case may be, and there is an opportunity there as we look for our markets that are most impacted. Of course, energy is a tricky one. That infrastructure exists. We're not going to disentangle ourselves from the United States overnight, but if we can build these other pieces of infrastructure: roads, ports, rail, all of the things that we need to move things across the country, there is a real opportunity and everything from agricultural products to manufacturing to really be working together better.
I think the other thing we haven't talked about here is government procurement, which actually could go back to the root of Canadian free trade. It goes back to something called the TILMA between BC and Alberta, which was actually focused on procurement between those two orders of government because then there's the potential to actually make taxpayer dollars go further. Of course, you want to make sure that people are very mindful of Canadian tax dollars being spent in Canada, but there are rules about procurement in Alberta and in BC and in Ontario. And so, if you can figure out ways to develop economies of scale and then use tax dollars in other ways, I think there's lots of opportunities.
I think people just have to be smart, look for the opportunity, also identify those risks that we talked about. If you're from a smaller jurisdiction, are you prepared to compete with... Ontario's economy is huge, so are you ready for that, or what is the niche product or service that you have that you really can scale? I think it's the opportunity, you got to take a step back, really be strategic, and then think about how you want to do this because it won't happen overnight. We need to build those reflexes, but I think there is tremendous opportunity on a range of fronts.
Mike Abbott:
Maybe one quick follow up on that. Your earlier point you mentioned about being some domestic protectionist, some of the barriers that exist, you highlighted Atlantic Canada. I'd like to maybe get a sense of, are there a couple of areas specifically that you think may still be challenges of where you continue to see that protectionism? Are there some industries that stand out over some of the others where you see this being a challenge?
Gitane De Silva:
Well, the Canada Free Trade Agreement has a whole chapter on exceptions, so chapter eight, and it does allow for protection of language, protection of culture, protection of social services, all those things which are crucially important. But then there is actually a chapter that essentially allows for supply management. I'm sitting here in Western Canada where we do not have a lot of supply managed producers. And so that is one that I think continues to be a perennial challenge in the agriculture sector, both in terms of Canada's trading agreements around the world, but it does also cause tensions domestically.
But every jurisdiction, state, province, country, all protect part of the agriculture industry or maybe it's seafood. So I think that's one we'll have to work through, and we'll have to figure out what supports we want to put in place to help those producers as they face increased market competition. I think that's one for sure we have to watch.
There's also an exemption in the act for water, and we've seen a lot of talk, this rhetoric about access to critical minerals and other things. There's also a greater attention on water. So that's one, I think that... Canadians will have to decide what they still want to protect, and I think water would likely be among them. But I think the opportunity side certainly outweighs the challenges, but certainly, some difficult conversations when things are so enshrined. It's a bit like the switch from a taxi medallion to an Uber, right? You have some people that have invested a lot of money in a license or in growing something with certain measures in place. And so as you bring those barriers down, how do you facilitate that transition in a way that allows these people to remain economically successful? And that's why we have to keep the pressure up on our elected officials and support them through this because it really is going to get tricky. We're making progress, but it's going to get bumpy, too.
Mike Abbott:
Now, I may put this question out for Paul just on this. I love that comparison of taxi and Uber. I think a lot of us can remember when that happened. It happened very fast. If you're sitting there as an organization, you've got to navigate through this. My observations in the marketplace has been organizations with the trade talk with the US didn't know what to do. A lot of decisions, a lot of capital being held back, a lot of investment decisions, not really sure what to do.
But now with interprovincial trade, and this will continue, what would you recommend, Paul, companies do today to keep informed, to make sure they understand how it's going to impact them? Because clearly sitting on the sidelines and doing nothing and waiting for it to come to you doesn't, to me, feel like a winning strategy or a winning activity. Can you-
Paul Lalonde:
Yeah, I know. Totally agree. One of the notes I'd made to myself about this is don't expect people to come to you informing you about developments. If we've learned anything from the last several months, is that we're in a new environment where massive change can happen very rapidly and without any meaningful notice, if any notice at all. The initial tariffs to be imposed by the US came with three days notice on virtually everything that Canada makes and sells into the US. That's mind-blowing from the perspective of a trade lawyer who's used to the glacial pace of trade negotiations. So, expect significant change, expect it to come with little or no notice, and the best you can do is be in a state of readiness. Make sure you're properly monitoring, make sure you've got the right feelers out, you're using technology properly to make sure you're getting the right information.
Make sure you engage with officials that are relevant to your world to the extent that the opportunity is there. Participate in proactive consultation processes that governments may be engaging in. Make sure your MP knows, and your MPP, knows about your business and the impact that regulatory changes might have on it. Be proactive, be engaged, participate in industry associations that are relevant to you, and make sure that to the extent they're engaging with officials, they're communicating messages that are actually beneficial to you, that it actually makes sense for your business.
I mean, you have a business to run, that's mission one, and keeping tabs on regulatory developments and trade negotiations, and so on, is not necessarily what you're the best at or used to doing. You'd rather be busy making and selling your stuff. I totally get it. But given the environment that we're in, it's prudent to make sure that you engage not in a status quo kind of way, but understanding that we're in a new environment where the rug can be pulled out from under you pretty quickly, or where really massive opportunities might open up quite quickly in a way that you didn't anticipate.
So, participate in industry associations, engage with officials, make sure you're, I don't want to say 24/7 monitoring what's going on, but to the extent you have a team in place that you can share the load, and make sure that there's always someone on watch or on call. Making sure that if there are announcements, if there are developments, you're aware of them as quickly as possible. And again, don't expect the information to be pushed out to you. Make sure you're taking necessary steps to get that information to you.
Is that helpful?
Mike Abbott:
Yeah, super helpful. As I think about really what organizations can do, one of the leading practices that I've seen dating back to before the inauguration of Trump as the 47th President was scenario planning by organizations, like picking some different outcomes or different possibilities of where they could be. One caution I would always put out to that is you've got to limit the number of scenarios that you put out there because you just don't know. But I think on interprovincial trade, if you're not and you don't have a scenario or thought about that, to me, this would be one of those areas.
Jesus, you and I spent a fair bit of time talking about some of the changes in supply chain, and what do those things look like? Maybe I'll put a question out to you, some of the leading practices that you've seen of organizations doing right now to prepare themselves for really what is an unprecedented, just overall uncertainty. And again, we hope that more clarity comes as more information comes out, but Jesus, maybe can you talk a little bit about what are some of the things that you've seen as leading practices?
Jesus Ballesteros:
Yeah, for sure, Mike. And speaking of supply chain, one thing that we have been observing is how companies are paying a lot more attention to their supply chains. This has certainly become very important since the pandemic. I think it just put a spotlight on how important it is to understand our supply chains, and the risks that are inherent in bringing stuff from different places. But also more recently with the tariffs is understanding where your goods are coming from and obviously be more strategic about supply chains. One of the practices that we're observing now that companies are engaging in is better understanding and mapping that supply chain. Who am I buying from? But not just understanding your tier one supplier, but also who that supplier buys from. Because as we know, sometimes the tariffs have second or third order impacts that may find their way into your costs.
That is certainly top of mind right now for companies is mapping supply chains, understanding where my products were coming from, and trying to understand whether they are exposed to any tariffs. And that's where the scenario planning comes in, of course, as you mentioned. And on this supply chain topic, one of the things to add to what Paul was saying earlier that I would recommend companies do is engage with your vendors, and especially your logistics and transportation vendors to understand what they are doing in response to all of this, and what savings they might expect to see as a result of these barriers coming down. Because some of those savings should be passed on to the companies themselves. So important to keep that conversation open and flowing so that you can see some of those savings come back. But yeah, back to practices, certainly mapping supply chain is important, doing level of scenario planning to understand what your level of exposure is if tariffs do happen, and obviously, making sure, another best practice, is that you are up-to-date on any documentation that you need in order to protect your margins.
For example, ever since the tariffs came about and the exemption for KUSMA qualified goods was announced, every company is making sure that they have all of their KUSMA qualification documents in place and in order, because now they're going to be asking for them at the border to be able to give you the exemption for the tariffs. So another best practice is make sure all of your documentation is in order so that you don't get caught up in potentially being applied a tariff because you don't have your paperwork in place. So, supply chain mapping, documentation in order, doing scenario planning, certainly.
And another one that I would throw in there is making sure that you are being as efficient as possible with your costs, in general. What are your pools of costs, your larger ones, especially those that might be related to supply chain and how can you reduce them? Are you, for example, doing unnecessary movement of goods between warehouses that you shouldn't be doing and starting to cut on that, because companies before, they didn't necessarily pay attention to those things as much. And now with this, they need to start paying attention to where can I find some cost savings in making my own operation more efficient so that I can better take the burden of any tariffs that might come or take advantage of opportunities that may arise as a result of the interprovincial barriers coming down.
Mike Abbott:
Yeah, thanks for that. One of the other items that's there, I'm going to try to draw this into a slightly different direction, but it's very much I think related. Gitane, I'm going to throw this question to you. There will be a question in this, I promise.
One of the things that we've seen in the marketplace is AI and leveraging AI in really what are the use cases that can be deployed, whether it be for cost savings and efficiencies, curb the hiring of new employees, all of these things as tactics. We see a lot of questions out there of how can we best deploy AI in my business setting. And obviously, there's different use cases that are best situated in different industries. We know the G7 is getting together, it's next week, which I think is this weekend.
Gitane De Silva:
[inaudible 00:44:05].
Mike Abbott:
That's right. And so we also know that KUSMA negotiations at some point will happen over the next year. And given your experience, and I was at the B7 conference, Jesus, you were there with me, and we saw a lot of questions and guidance around AI and the regulatory play for that.
How much will adding new regulatory burdens, do you think, on Canadian organizations will be part and parcel of the interprovincial trade discussions and the overall positioning of government? This is truly an opinion question, I apologize for that, but given your experience on both sides of the border, I'm curious to get maybe some direction because there will be new things that people will perceive regulatory change as being less regulation, but it may not in every case. I'm just curious on what your opinion might be on that.
Gitane De Silva:
So many thoughts on AI and regulation. I mean, I would start by saying I think AI could actually be very useful in this conversation around interprovincial trade barriers. If you used a large language model and you fed in all the standards and regulations for each province and territory and said, show me where they overlap, and then we can just focus on the really sticky ones, I think you could make tremendous progress. I would start with that.
Second, I would say in the G7 context, we have to be aware that Americans view the race on AI as an existential threat. They need to beat China to build this tool, to fuel this tool, to deploy this tool. As Canada approaches regulations around AI, we need to be cognizant. We're being pulled into a geopolitical spat between the US and China, and we don't want to be caught unawares as happens every time we put tariffs on EVs and they slap canola and pork in Canada.
We just need to go into this with our eyes wide open. Like on a digital services tax, there could be blow back, so we need to be mindful.
Third, I would say in defense of regulation, I was a regulator. I believe there is a role for it. And the fundamental role of regulation is to do two things. One, to keep people safe, and it should be to incent competition, to set fair rules of play so that companies can fairly compete and grow their businesses. And so if Canada takes an approach with those two fundamentals in mind, like we need to be... We need to acknowledge the fact that the world dropped the ball on regulating social media. We know for a fact that social media is dangerous to children and we have put no rules around it. I think we will look back and say that social media was the tobacco of our generation, we should have acted sooner.
We need to learn our lessons from that and be smart about the regulations we want to put in place around the ethical use of AI. I was listening to something just last night about post-secondaries and how can a professor know that a student actually wrote a paper or did their work, right? And so making sure... There's a whole societal need here to make sure we're putting the right regulations in place, so we're in fact... If you keep with that post-secondary example, you're making sure that students graduating actually have the skills to do the jobs they're going to need in the workplace. So I think if we are smart about it, and if we take that approach, if we go back to fundamentals, we want to keep people safe, and then set competition, set fair roles of play. I think if you develop and implement outcomes-based regulations, engage some experts, I think that regulation can actually facilitate interprovincial trade if it's done right.
Mike Abbott:
I swore I knew I was going to have a question in there, but as you were going through your initial piece, I was like, wait, there's a really interesting piece around AI really links, in my opinion, to what organizations can do. One of the strategies that any organization can do is if you don't have a plan for it, figure it out. How can it make you more competitive? It is one of the activities, so you're not just sitting by the sidelines.
Just doing a time check. We've got about 12 minutes left. I haven't seen any questions come through, so anyone, if you have questions, please put them through. But I'm going to go around the table and get everyone's view of what's some practical, your top two things that you would be advising organizations of all shapes and sizes in all industries. What are the one to two things you'd be directing them to do over the next couple of months as the story continues to unfold, and hopefully, opportunity starts to present with some activity in action.
Paul, maybe I'll start with you.
Paul Lalonde:
Sure. Well, in addition to the things I talked about earlier about engaging and monitoring and so on, this is me about to get on a bully on a pulpit here and preach about something. But I would really like to see Canadian industry companies and industry associations press the federal government if it's really going to get behind promoting internal trade to develop something like the trade commissioner service we have internationally to promote interprovincial trade. It can be just as daunting for a company in southwestern Ontario to sell into Michigan, then into Alberta or BC or the Maritimes. And there's support. There's government-funded trade commissioner support to sell into Michigan. There isn't to sell into Alberta or BC or the Maritimes for an Ontario company.
Why not? If we are really going to meaningfully grow exports interprovincially, this is a role the federal government could absolutely play.
It already plays it in promoting exports to other countries. Why not have the federal government pitch in with some money and some resources to support that kind of thing within Canada? So that's something that I think would be great to see industry get behind and press for. So that's on the opportunities for government program enhancement and supportive industry.
The other thing that I would, I guess, caution companies or advise them to be mindful of as they explore greater opportunities within Canada is that the provinces are still there. And no matter how much we bring down the barriers, there's still going to be different laws, different court systems, different local customs and practices. Be mindful of that. And if you're not used to selling out of province and you're wetting your feet into it, think of it a little bit like selling to export, and think about things like what are your terms of sale? When does title transfer? Who's carrying the risk of what? Who's dealing with provincial taxes? Who's dealing with provincial regulatory burdens that might apply to the goods in question?
Think about all those things and make sure you've got good... You do some good old-fashioned lawyering with your good old-fashioned lawyer to make sure you've got those things sorted out in the same way that you'd think about it if you were selling, like I said, into Michigan or into Hong Kong or into Europe, you'd think about those things. Well, think about it if you're selling into New Brunswick from Manitoba. It's the same kind of idea. There's great opportunities there, but do be mindful when you're selling into another jurisdiction to dot the Ts and cross the Is as we say.
Mike Abbott:
I think that's wonderful advice. I will come back on... There's one in particular, I'll come back, but Gitane, maybe I'll turn it to you. And then Jesus, don't worry, I will not have forgotten about you.
Gitane De Silva:
So the first thing I would say is we all really need to be paying attention. I fully understand the instinct right now or the desire to stick your head in the sand or be an ostrich because there's just way too much going on, right? The pace of change is overwhelming. I, for example, don't actually... I'm not addicted to Twitter anymore. I wait and listen to podcasts on the weekend. I wait for things to settle because it's just too much. But you can't actually do that. The risks are too high. And so you need to pay attention however you are comfortable doing so. Whether that is, as was mentioned before, joining an industry association. I've seen great policy analysis come out of the business council of the various provinces, the national, the chambers of commerce. There are ways for you to get information, but you need to pay attention because the world is just changing so quickly and we cannot... The past is gone, we're only moving forward.
And so you need to pay attention, and then you need to figure out how you're comfortable to engage. And whether that is writing a letter to your member of parliament, whether that is developing some type of advocacy campaign, whether that is changing your own supply chain practices to insulate yourself or to encourage certain changes in behavior. You need to pay attention. You need to be engaged.
The second thing I would say is you need to take a look at your enterprise risk management. What was in the past not very probable is probably more so now, right? So take a hard look at where you've identified your risks and where you think those threats are and what the opportunities are and make sure that is up-to-date. And then the third thing I would say is update your strategy accordingly. It does feel a little bit like now we're walking through a tornado or being sucked into one. And so the way to survive and thrive in these situations is to actually understand your strategic interests, and to keep walking to towards them. That's not so you won't get blown slightly off course, but there's so much noise right now. You need to actually go back to basics, go back to basic principles, know what matters to you, know what your bottom lines are, and keep walking towards them despite all the noise and chaos you might feel is happening around you.
Mike Abbott:
I think that is certainly how a lot of us feel with a whirlwind of information that comes in every day. Jesus, last and certainly not least, and then we'll see if there's any questions that we haven't answered from the audience, but I haven't seen any come through.
Jesus Ballesteros:
Well, Mike, I'd like to emphasize some of the points that Gitane just made. First of all, strategic clarity. I think this is an important concept for companies really to make sure they internalize is how important it is, especially in times like this to have strategic clarity. What is the strategy for the company? What is the growth trajectory? What are the growth aspirations? Because that will dictate a lot of the actions that the company can take, and where the opportunities that will arise from the interprovincial barriers, and those coming down will come into play. So yes, make sure that you spend some time clarifying that strategy. Be proactive. Again, Gitane said it very eloquently, but be proactive about staying up-to-date on what is happening. But I would add just understanding the basics.
While lots of company owners and leaders, they already have a sense of what those barriers are. A lot of companies, because exporting to the US has been so easy, they've just defaulted to doing that and not paid attention to the Canadian market. But I think now, of course, it's important to know what those barriers are or have been, and so that when the time comes so that those barriers are removed, that then you can more quickly see the opportunity. So, get up to speed on what those barriers are in your sector and how big could it be when those barriers start coming down.
And finally, take a look at the Canadian market. Start paying more attention to different provinces for your specific products or services. Which provinces are the most attractive for you, and where do you think you could be competitive with your products and services and start doing some of that market research or understanding so that when the time comes, you have a value proposition ready to go to be able to enter other markets. It's just complementing a lot of what was said, but I think it's really being proactive, being strategic, and being ready to take advantage of those opportunities when they arrive.
Mike Abbott:
Listen, I'm going to draw us near to the close. We've only got a few minutes left. A couple of things that I just wanted to go back on because I think there were really, really important items. I think the engagement with industry associations I think is critical. I'm going to add a couple others to that because I heard a few.
Paul, you didn't quite come out and say make sure you talk to the legal firm, but that's okay, you should, right? I'm going to add you should talk to your advisors-
Paul Lalonde:
Talk to your advisors, your professional advisor.
Mike Abbott:
Right. Talk to your professional service providers. I would also add to that because it goes in line with your industry associations. Talk to your peers, and that's one of the reasons you would talk to your professional service providers. We talk to a lot of clients. We see what other clients are doing. One of the things, I had a conversation on Friday morning with a CEO of a client, and just talking about what other organizations are doing in the moment becomes comforting. You understand it. You get to know, oh, that's what they're doing. Okay, maybe I should think about doing something else. It's a time where I think sharing those stories as a business community is really something to do. The business council was a great suggestion and the Canadian Chamber, I've stayed relatively close with them. Very good source of information. There's a lot of information that's out there.
The quote I wrote down is be active and pay attention. I think that's a great one. And then the opportunities are going to be out there. I would be remiss if I didn't talk about the enterprise risk management and keeping up-to-date with that one. There's a lot of ways you can do that. You can do it through scenario planning. You can do it very formally. Tie it back to your strategy, tie it back to what you think things might look like in a few years.
My hope is that today... We certainly didn't answer all the questions for what the barriers will look like. We didn't talk about what are strategies for trucking and logistics companies, how are they going to manage that? I think the agriculture one is super interesting. I think the alcohol one is super interesting of how is that really going to traverse?
Are you going to see Ontario companies moving into Quebec? Because we didn't talk about... We talked about the civil law being different, but there's some other barriers that would exist in going to other provinces, labor laws being one of them. There are still a lot of questions. Don't hesitate to reach out to the networks that are around you. That's really what this is intended to help you do.
You'll have access to this. You'll see contact information. You want to talk about any of these things. I'm sure all of us would be more than happy to chat. I know I could chat about this topic for quite a long time, so I really want to say thank you to the panel. Paul, thank you so much for joining us. Gitane, thank you so much for joining us. And Jesus, thank you so much.
And with that, I didn't see any questions come in, but I guess that means we left none on the table. Okay. Thank you.