Role of Government in Business
• High tariffs on imports in order to protect Canadian manufacturing
• Encourage east to west trade
• Railway to connect the country
• Mixed economy (both businesses and government influence the economy)
• Companies owned by the federal or provincial government
• Provide services not offered by businesses
• Bail out a major industry
• Provide special services not otherwise available, as in the case of Bank of Canada
• Typically, crown corporation owns province’s electric power company
• Ex. Canada Post, OLG, LCBO
Financial Role of Two Special Provincial Crown Corporations:
• Alberta Heritage Savings Trust Fund
o established as a result of Alberta economy prospering due to oil boom
o government set aside part of its oil royalty revenue to start the fund
o fund’s assets worth $17.2 billion
o must operate on a sound financial basis but, it makes investment decisions that will benefit
• The Caisse de dépôt et placement du Québec (Quebec Deposit and Investment Fund)
o giant fund that was established to handle the monies collected by the Quebec Pension Plan
o $214 billion in total net assets under management, one of the largest pools of funds in
o set up parallel to the Canada Pension Plan
o must operate on a sound financial basis
• Selling publicly-owned corporations
• Ex. Air Canada, Hydro One
• Deregulation – Withdrawal of laws and regulations that hinder competition.
• Government agencies and like for-profit organizations, are looking at ways to lower costs
and improve efficiencies. Senthuran Senthilnathan
Law and Regulations:
• Each level of government has their own unique set of responsibilities. Some could be shared.
• Created by politicians who have been elected
• Political parties in power can greatly affect the business environment
• Power to make laws is based on the British North America Act, 1867. The BNA Act was
passed by the British Parliament in 1867. It is the law that created the Canadian
Confederation and it sets the legal ground rules for Canada. In 1982, the BNA Act become
part of the new Constitution and was renamed the Constitution Act, 1867.
The Competition Bureau: Chocolate Conspiracy:
• Canada’s largest candy bar makers were involved in a class-action lawsuit based upon the
claim consumers paid inflated prices for products.
• Companies paid $23.2 million to settle the lawsuit
• This is an example of how the Competition Bureau protects consumers from artificially high
prices for goods and services.
• Critics claim that the Competition Bureau is anti-consumer because it is just as likely to force
companies to raise their price as lower it.
• Organizations that control the supply or pricing of certain agricultural products in Canada
• Canadian governments sometimes grant substantial loans with favourable conditions to
enable these countries to pay for their imports of our wheat and other agricultural products
• Canadian Dairy Commission controls the output and pricing of milk and other dairy products
• The Canadian system of marketing boards has been under attack by various organizations
because it does not permit normal competitive conditions to operate in this field.
• It is argued that this distorts the whole industry and raises prices for Canadian consumers.
• The EU-Canada Comprehensive Economic and Trade Agreement (CETA) will allow 92% of
EU agriculture to be imported duty free.
• Impact citizens across Canada. Responsibilities that may affect business operations include:
o Trade Regulations (Interprovincial and international)
o Banking and monetary system
o Incorporations of federal companies
o National defence
o Hospital insurance and medicare – grants were given to provinces and territories on
condition that their plans reach certain standards of service. Canada Health Transfer
(CHT) is the largest major fund transfer to provinces and territories.
o Public debt and property Senthuran Senthilnathan
o Criminal law
• Competition Act – aims to ensure that merger of large corporations will not restrict
competition and that fair competition exists among businesses
• Competition Bureau –
o Independent law enforcement agency that ensures a competitive and innovative
o Price fixing (conspiring with other businesses to raise the public)
• Consumer Protection Laws (i.e. Food and Drugs Act)
o Maple Leaf Foods
• Government has role of setting both standards and enforcement. Enforcement (government
have the power the shut down companies that do no meet standards)
• Regulation of provincial trade and commerce
• Natural resources within their boundaries
• Incorporation of provincial companies
• Direct taxation for provincial purposes
• Licensing for revenue purposes
• Administration of justice
• Health and social services
• Municipal affairs
• Property law
• Labour law
• Education – retention for provision of elementary and secondary school education and the
accommodation of religious and linguistic preferences has resulted in various school systems.
• More merging of public and private philosophies in public-private partnerships.
• Governments are clear supporters of privatizing public services
Free-Trade Between Provinces and Territories
• Interprovincial trade barriers are damaging to Canada’s economy and Canadian’s standards
• Agreement of Internal Trade (AIT) is the intergovernmental trade agreement signed by
Canadian First Ministers. Reduce and eliminate barriers to the free movement of persons,
goods, services and other investments within Canada.
• AIT does not avoid all barriers but it is a step in the right direction. Senthuran Senthilnathan
• Roughly 4,000 municipal governments across Canada
• Utilities and infrastructure (Ex. Roads, sidewalks, garbage collection)
• Role in consumer protection – regulating food establishments, zoning laws, parking
• Need for government oversight
• Future is uncertain
• Need for a quick spark
• We can’t just wait for the market
• Let the economy do the job
• Don’t bail out the losers
• Don’t need a series of bubbles (result of government intervention)
• With alternative, no end to the cost
Which one will we choose?
• We have