The threat of U.S. tariffs on Canadian imports is driving governments across the country to look inward to see how we can improve shared productivity and boost the country’s economy.
“One of the profound ironies of Canada’s focus on foreign trade is that, in many cases, it is actually easier for Canadian companies to do business across international borders than it is within our own country,” says the Business Council of Alberta.
So, with the imminent threat of American tariffs, the federal Committee on Internal Trade, including federal Transport and Internal Trade Minister Anita Anand and her provincial and territorial counterparts, met at the end of January to look at what can be done to further eliminate internal trade barriers.
The principal aims the ministers reviewed included:
• Mutual recognition for goods and services across Canada so a good or service sold in one jurisdiction can be sold in another without the need to satisfy additional requirements.
• Improved labour mobility so a registered worker can work in any location across the country without delay.
• Improving the Canadian Free Trade Agreement (CFTA), signed in 2017, by reducing exceptions and addressing sectoral priorities.
What are the barriers and why do they persist?
Regulatory barriers include differences in licensing requirements. For example, nurses and financial planners must acquire separate licenses in each province where they want to practice. The provinces have a combined total of about 600 professional credentialing bodies that regulate goods and services within their borders — so these protectionist barriers exist in virtually every industry.
Health and safety rules that vary by jurisdiction can also result in barriers. One specific example is provincial regulations requiring the driver of a commercial vehicle to get a second inspection after crossing the border between British Columbia and Alberta.
What do gin, toilet seats and eggs have to do with it?
Provincial liquor boards restrict the sale of alcohol across provincial borders. Consumers cannot easily purchase wine from another province, limiting the market for small wineries. For example, Nova Scotian wine is rarely found in British Columbia. Similar restrictions apply to craft distilleries and breweries, making it hard for them to distribute their products across provinces. B.C. gin is not commonly sold in Quebec.
Provincial marketing boards control the supply and pricing of dairy and poultry products, making it difficult for producers from one province to sell in another. This includes products like milk, eggs, and chicken. For instance, a dairy farmer in Quebec will have to get over hurdles to sell milk to processors in Ontario.
Fruits and vegetable producers must comply with different packaging and labeling regulations in each province, which increases costs and complicates trade. For example, a B.C. fruit producer may need to adjust packaging for Ontario.
One example of internal trade barriers involves Manitoba beef producers facing delays based on varying inspection protocols and transportation permits when trying to sell into Quebec.
Small-scale artisanal food producers face challenges due to differing food safety regulations across provinces. For example, Quebec and Ontario do not recognize each other’s standards, limiting the sale of foods like duck tourtière across provincial borders.
Some barriers are small and strangely unique. Here are some examples:
• In B.C., certain types of trucks can only be driven at night, but in Alberta, they can only be driven during the day. That leaves truckers only a small window of time when they can cross provincial borders.
• Different provinces have different rules on the kinds of toilet seats that can be used on construction sites.
• Quebec, Nova Scotia, and Newfoundland & Labrador restrict the export of live snow crabs. Each province requires the crab to be processed in-province before being exported.
• In some cases, a person cannot provide legal services in Manitoba unless they maintain a physical office in the province.
What’s the value of interprovincial trade?
There are good reasons to reduce internal trade barriers beyond the U.S. tariff threat.
Provincial protectionist policies reduce competition by favouring local businesses, which can lead to higher prices and lower quality services for consumers, according to a study by Deloitte Canada.
Interprovincial trade represents about one-fifth of the country’s gross domestic product, wrote Alan Morantz in the August 2024 edition of Smith Business Insight, a publication of the School of Business at Queen’s University.
He notes it has been estimated by the International Monetary Fund that full liberalization of interprovincial trade could increase Canada’s GDP per capita by four per cent. To make it real for consumers, he writes, interprovincial trade barriers add between 7.8 and 14.5 per cent to the price of goods and services we purchase.
Another significant number representing the benefit of removing barriers within the country came recently from the federal-provincial-territorial Intergovernmental Secretariat: Eliminating barriers could add up to $200 billion to the Canadian economy.
Why are the provinces slow to change?
Unsurprisingly, provincial politicians face in internal pressures to prioritize local industries. So, despite the CFTA, progress has been slow due to numerous exceptions and lack of full implementation, according to the report card released by the Canadian Federation of Independent Business in August 2024.
However, some of the efforts made to reduce internal trade barriers through the CFTA agreement include:
The Regulatory Reconciliation and Cooperation Table, which has been instrumental in addressing trade barriers. Since its inception, it has advanced and endorsed 17 Reconciliation Agreements, focusing on removing provincial exceptions and harmonizing regulations across provinces.
“Most of the exceptions removed relate to federal government procurement, providing Canadian businesses with more opportunities to be competitive across the country,” reported the Intergovernmental Secretariat in a July 2024 press release.
Tearing down barriers requires understanding of what is happening across the country. To that end, the Canadian Internal Trade Data and Information Hub was launched in April 2024 to centralize data on internal trade and labour mobility, enhancing transparency and analysis.
Previously, an online stakeholder portal was opened in February 2023, allowing businesses and individuals to provide feedback on internal trade barriers. Otherwise, research projects have been completed to identify barriers and solutions, particularly in areas like food trade and security in the Northern Territories.
What efforts have the provinces made?
Some provinces have progressed without Ottawa’s help. The western provinces have the New West Partnership Trade Agreement, which began in 2010 among B.C., Alberta and Saskatchewan. Manitoba joined in 2017. It recognized standards and lower thresholds for public sector procurement and opened energy markets. Ontario and Quebec agreed to the Trade and Cooperation Agreement in 2009, which focused on financial services, public procurement and labour mobility.
What else must be done?
The Canadian Chamber of Commerce says work with the provincial and territorial governments must involve “mutual recognition of regulations, rules and policies” that will allow free movement of labour, goods, and services in Canada, and reduce exceptions within the Canadian Free Trade Agreement.
The federal government must step up, using conditional funding to incentivize provincial action and convening clear timelines for reform, writes Anil Wasif, manager of research at Infrastructure Ontario, in the January issue of Canadian Politics and Public Policy. A unified internal market would not only defend Canada against external economic shocks but also realize the long-held promise of Confederation — a union of shared prosperity, Wasif adds.
And finally, echoing a famous line from 1987 international geopolitics, Wasif urges: “Premiers, it’s time to tear down these walls.”
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