Quebec and Ontario End Trade War With Pact to Drop Barriers

FREE trade is developing between Canada, the United States, and Mexico; the latest General Agreement on Tariffs and Trade deal should reduce world protectionism; but solid trade barriers still exist between Canada's provinces.

There are more than 500 barriers to interprovincial trade in Canada, according to the Canadian Manufacturer's Association. This has caused two sets of neighboring provinces to do battle in the past few months: Ontario versus Quebec and British Columbia versus Alberta. This past week there was a truce and some of those barriers started to come down.

The Ontario-Quebec battle started over the issue of construction workers. All Quebec construction workers belong to a closed shop: no union card, no work. That has created a huge black market for construction workers.

Ontario workers were forbidden to work in Quebec, although thousands of Quebec workers, unable to find work in their own province, traveled to Ontario - in some places only a 10 minute drive away - to find jobs.

THERE were other restrictions as well. Quebec shut out firms from outside the province from bidding on government business and on lucrative contracts from other government organizations, such as school boards. Quebec school buses were made in Quebec and no outsiders were allowed to bid.

The larger, richer Ontario decided to fight back in September, passing a law that barred Quebec companies from bidding on public contracts. Most Ontario towns and cities, as well as government-owned companies - such as the giant Ontario Hydro, an electric utility - have since written into their purchase orders that Quebec companies need not apply.

This was bad news for construction workers and many manufacturing firms in Quebec. Finally Quebec cried ``uncle.''

Ontario and Quebec signed an agreement Dec. 24, setting down the outlines of a truce, which they will negotiate in the new year. It will mean construction workers can move between provinces and companies from each province will be allowed to bid in both jurisdictions.

``We see light at the end of the tunnel about bringing down trade barriers in Canada,'' said Frances Lankin, Ontario's trade minister, who signed the pact with her Quebec counterpart, Gerald Tremblay.

``There are no more barriers in Quebec,'' Mr. Tremblay said. That statement raised some eyebrows.

``I'll believe it when I see it,'' says a skeptical William Watson, an economics professor from McGill University in Montreal and a staunch advocate of breaking down barriers to trade in Canada. ``This is an armistice that is full of holes.''

Professor Watson says municipal governments in Quebec have a great deal of purchasing discretion. ``Quebec governments still buy a lot of services,'' he says. ``When we see a lot of Ontario contractors selling various services in Quebec, then we'll know we have free trade. The proof is in the purchasing.''

Businesses in Quebec were happy with the news.

``A trade war made no sense within a Canadian common market,'' says Ghislain Dufour, president of the Conseil du Patronat du Quebec - the Quebec business leaders council.

In the construction area, Ontario workers will be allowed to work in Quebec as long as they are qualified in their home province. The same rules apply to Quebec workers in Ontario.

``This is reciprocity, the same as in the European Community,'' Watson says. ``Instead of each province imposing its own standards, they accept each other's standards.''

Quebec companies will be allowed to bid in Ontario again. The two provinces say they will negotiate a broader agreement by March 31 on government purchases of goods and services. The protected market for school buses will end Jan. 1, 1998. A meeting of 10 provinces in Ottawa in January aims at demolishing more interprovincial trade barriers.