Yesterday’s Trouble with the TPP post focused on the possibility that the agreement could restrict the ability for the Quebec government to regulate online gambling, as it is currently seeking to do in Bill 74. While that might be a good outcome – the Quebec bill is ill-advised and sets a dangerous precedent – it raises the question of whether a trade agreement is the right way to dictate provincial laws.

In fact, the TPP leaves behind a complex array of regulations for services industries that is almost certain to result in unintended consequences. Many trade agreements feature obligations to specific service sectors based on commitments from negotiating parties. These are relatively clear and make it easy for business to understand the new rules and for governments to identify their regulatory requirements. The TPP adopts a much different approach that is likely to lead to confusion and regulatory complexity. It features a series of generally applicable restrictions or requirements for services (the big four are national treatment, most favoured nation, market access, and no local presence requirements) and then seeks to exclude specific sectors in the hope of identifying problems with the general rules. As the Quebec gambling example illustrates, however, there are invariably new sectors or new issues that fall through the cracks.

Another possible complication could come from demands to regulate ride sharing services such as Uber. In many jurisdictions, taxi and ride sharing services are regulated at the municipal or local level. The TPP excludes existing local government regulation from the scope of the four big service requirements in Article 10.7 (1)(a)(iii). This would also apply to renewals of existing rules and amendments “to the extent the amendment does not decrease the conformity of the measure.” Ride sharing services were not included in appendices that list non-conforming sectors.

Existing local regulations that restrict ride sharing services are therefore excluded from the TPP. However, local municipalities may face restrictions on future regulations should they further decrease conformity with the obligations. For example, if a municipality does not currently feature a local presence requirement in taxi regulations, instituting a new presence requirement could violate the TPP. Similarly, establishing new expensive licensing requirements that restrict the likelihood of Uber drivers entering the market might violate Article 10.8(5) which stipulates that “each Party shall ensure that any authorisation fee charged by any of its competent authorities is reasonable, transparent and does not, in itself, restrict the supply of the relevant service.” Indeed, the implications of the TPP for local rules is attracting growing attention.

The issue may be even more pronounced where ride sharing services are also regulated at the provincial level. For example, the Province of British Columbia has the power to regulate Uber and similar services through the Passenger Transportation Act. The province has thus far resisted mounting calls for it to act. The provincial regulations establish requirements related to licensing, safety, inspections, insurance, and establish the rates that may be charged by anyone operating a vehicle who charges or collects compensation for transporting passengers. Without a broad provincial government exclusion, these rules would presumably be caught by the TPP. The province has identified why it believes it needs to regulate the sector, but should the TPP apply, it could trump the provincial regulatory power given the absence of an exclusion and the difficulty in relying on public policy grounds for non-compliant regulations.

(prior posts in the series include Day 1: US Blocks Balancing Provisions, Day 2: Locking in Digital Locks, Day 3: Copyright Term Extension, Day 4: Copyright Notice and Takedown Rules, Day 5: Rights Holders “Shall” vs. Users “May”, Day 6: Price of Entry, Day 7: Patent Term Extensions, Day 8: Locking in Biologics Protection, Day 9: Limits on Medical Devices and Pharma Data Collection, Day 10: Criminalization of Trade Secret Law, Day 11: Weak Privacy Standards, Day 12: Restrictions on Data Localization Requirements, Day 13: Ban on Data Transfer Restrictions, Day 14: No U.S. Assurances for Canada on Privacy, Day 15: Weak Anti-Spam Law Standards, Day 16: Intervening in Internet Governance, Day 17: Weak E-commerce Rules, Day 18: Failure to Protect Canadian Cultural Policy, Day 19: No Canadian Side Agreement to Advance Tech Sector, Day 20: Unenforceable Net Neutrality Rules, Day 21: U.S. Requires Canadian Anti-Counterfeiting Report Card, Day 22: Expanding Border Measures Without Court Oversight, Day 23: On Signing Day, What Comes Next?, Day 24: Missing Balance on IP Border Measures, Day 25: The Treaties With the Treaty, Day 26: Why It Limits Canadian Cultural Policies, Day 27: Source Code Disclosure Confusion, Day 28: Privacy Risks from Source Code Rules, Day 29: Cultural Policy Innovation Uncertainty, Day 30: Losing Our Way on Geographical Indications, Day 31: Canadian Trademark Law Overhaul, Day 32: Illusory Safeguards Against Encryption Backdoors, Day 33: Setting the Rules for a Future Pharmacare Program, Day 34: PMO Was Advised Canada at a Negotiating Disadvantage, Day 35: Gambling With Provincial Regulation)