Economic growth depends on the removal of internal trade barriers
Last month I had the privilege of participating in the inaugural Atlantic Economic Forum hosted by the Mulroney Institute at St. Francis Xavier University. The most important takeaway for me was a response from Canadian Immigration Minister Sean Fraser to a question about the folly of barriers to interprovincial trade, investment and labor mobility.
Fraser revealed that when he was parliamentary secretary to the Treasury Secretary, he asked department officials what specifically the federal government could do to have the greatest positive impact on our economic growth, competitiveness and productivity. The answer was to provide childcare and remove interprovincial trade barriers.
Although a national childcare plan has since been established, internal barriers to trade remain. As CEO of the Business Council of Canada (BCC), I regularly meet with foreign diplomats and visiting dignitaries, and those meetings rarely end without expressing disbelief that it is easier for Canadians to do business belownational then intranational.
Canada today has 15 free trade agreements covering 51 different countries, with many more currently under negotiation. We are the only country in the world that has free trade agreements with every other G7 country and most of the G20. It is therefore utterly absurd that we cannot have free trade between our 13 provinces and territories.
While Canada has two internal trade agreements – the Canadian Free Trade Agreement and the New West Partnership Trade Agreement – they are partial solutions at best. The CFTA has a limited scope, leaving too many interprovincial barriers. The NWPTA is limited in scope, covering only British Columbia, Alberta, Saskatchewan and Manitoba.
To be clear, this problem is almost as old as the Confederacy itself. The number of reports and studies devoted to this topic could easily fill a large library, all arriving at the same inescapable conclusion: the lives and livelihoods of Canadians and their families would be greatly benefited if we got rid of all the barriers between all the provinces.
A November 2021 report from Deloitte — whose CEO, Anthony Viel, is a member of BCC — found that existing inter-provincial barriers have the same impact as a 6.9 percent tariff on goods. If removed, it could lead to a 3.8 percent increase in Canada’s gross domestic product ($80 billion) and a 5.5 percent increase in wages, resulting in a 5 percent increase in household income. per cent.
Again, none of this is new. The cost to Canadians of interprovincial trade barriers is one of the most openly and widely recognized facts – one widely accepted among political leaders of every party line. The reason they still exist is equally well known: to remove them would require almost unprecedented unanimity between provinces.
I say “nearly unprecedented” because the federal government has a successful example it can replicate. That’s what Secretary of State Fraser pointed out in his response to the Atlantic Economic Forum: the national childcare plan. The federal government should take the same approach to removing intranational trade barriers as it does to establishing national childcare facilities.
More specifically, the federal government should use federal transfers and work with business, unions, and other community groups — as it did to make childcare a reality — to convince all provinces and territories to sign up to a national framework to facilitate interprovincial free trade, investment and labor mobility.
While it is true that the government has recognized the problem of interprovincial trade barriers in successive federal budgets, its efforts to address them have often been ad hoc, piecemeal, and little more than token half-measures. It’s time for a bold new strategy: a focused Team Canada approach on the same scale that we apply in international trade negotiations.
Every day I speak with business leaders – both foreign and domestic – who are thinking about investing in Canada. While we offer tremendous benefits, including proximity and preferential access to the US market, a highly skilled workforce and abundant natural resources, our internal trade barriers remain a huge deterrent.
We live in a time of massive geopolitical shifts, where events around the world can result in a sudden, severe impact on our domestic economy. Very few things are exclusively within our control. Removing barriers to inter-provincial trade, investment and labor mobility is one of them, and it’s the best thing Canadians can do to drive national economic growth.
