Inter-provincial trade barriers are a disgrace

Hurdles cost up to $130 billion each year, may affect international relations, write Sen. Jane Cordy and Sen. Diane Bellemare.

Canada’s framework for interprovincial trade is patchy at best. While Canada has signed on to free trade agreements with countries around the world, there are significant barriers to the free flow of goods and services within our own borders. Studies have suggested that these interprovincial trade constraints cost the Canadian economy up to $130 billion every year — and may negatively impact international trade relations.

While federal, provincial and territorial governments signed on to the Canadian Free Trade Agreement (CFTA) in April 2017 with the aim of mitigating interprovincial barriers, almost half of the agreement’s 345 pages are filled with exceptions to the agreement and opt-out measures.

So have interprovincial trade barriers really improved? And what measures should be taken to further eliminate barriers to trade, investment and labour mobility to keep the Canadian economy robust?

At a recent Senate Open Caucus forum on the topic, we asked stakeholders for their views. We got an earful. One thing became clear across sectors: interprovincial trade is a national embarrassment.

Examples of Canadian companies finding it easier to import goods and services internationally than trading with their neighbouring provinces are far too plentiful — and absurd. Why should imported wines be frequently easier to buy in Canada than out-of-province Canadian vintages, for example?

The barriers to interprovincial trade are many and complex — but they are not intractable problems. They are resolvable with political will and federal leadership.

The Hon. Perrin Beatty, president and CEO of the Canadian Chamber of Commerce told the forum, it’s “now more important than ever for Canada to ‘get our house in order’ in light of the global trading and competitiveness challenges facing our economy.” We couldn’t agree more.

He cited the “cautious optimism” in the business community for the CFTA. Cautious, because many believe the deal is contingent upon the success of the new Regulatory Reconciliation and Cooperation Table (RCT) at the heart of the deal, a federal/provincial/territorial body that will help to advance regulatory alignment across jurisdictions.

According to Beatty, most of the trade barriers are regulatory differences, “divergent sets of rules and processes between provinces that have created a tyranny of small differences for businesses.” The need to harmonize regulations is critical. Unfortunately, progress under the RCT has been slow so far, he told the forum.

Monique Moreau, VP National Affairs for the Canadian Federation of Independent Business, noted that it should be “at least as easy to trade within Canada as it is with another country,” but that’s often not the reality.

In a recent CFIB survey, Canadian businesses flagged that regulatory and administrative barriers were the “most prominent barriers to trade.” Close on the heels are the differences in tax rules across different jurisdictions.

So what needs to happen to see improvement? The 2016 Senate report, Tear Down These Walls still offers many solutions and several were echoed by forum participants.

Beatty and Moreau called for regulatory alignment through “mutual recognition” — a good or service legally provided in one region is permitted in another even if they have differing regulations Moreau also supported the “negative list approach,” used in the CFTA, which allows all cross-border trade to occur unless otherwise prohibited.

One thing is clear: We can’t continue as we’ve always done. The time is ripe now to make the Canadian economy competitive, free flowing and robust. Beatty was right when he urged that we need provincial and federal counterparts to tackle internal trade barriers with the “same urgency” they demonstrated with the United States-mexico-canada Agreement.

As one forum attendee put it: We need to give CFTA a chance, but we also need to “give it a push.” Let’s hope the Prime Minister Justin Trudeau does just that.

Cordy is from Nova Scotia. She is vice-chair of the human rights committee and is also a member of the energy committee and the foreign affairs and international trade committee in the Senate. Bellemare, PHD, is a non-affiliated senator of Quebec; she is the legislative deputy to the government representative in the Senate and an ex-officio member of all committees.