Heather Stefanson, third from left, Chair of the Council of the Federation and Premier of Manitoba, speaks to media during the closing news conference at the Council of the Federation Canadian premiers meeting at The Fort Garry Hotel in Winnipeg on July 12.JOHN WOODS/The Canadian Press
At the conclusion of last week’s summit of premiers in Winnipeg, the leaders of our nation’s provinces talked a good game about the need for co-operation “to achieve Canada’s full economic potential.”
Mostly, that meant agreeing to push Ottawa to sit down with the provinces and hash out a new co-ordinated strategy to fund and build “strategic infrastructure” for Canada’s international trade. (Naturally, this would entail a considerable financial commitment from the federal government.) They stressed the need to build and improve Canada’s trade corridors as critical to “our ongoing competitiveness” and “the economic prosperity of all provinces and territories.”
Few would dispute that. Yet sitting over in the corner – lonely, unnoticed, warranting nary a mention in the meeting’s concluding press statement – was the issue of the trade barriers between provinces that continue to hinder trade within Canada’s borders.
There, the premiers have a source for improved competitiveness, productivity and prosperity staring them in the face. As it has for years. Yet they’d still rather talk about almost anything other than cleaning up their own protectionist backyards.
It’s been six years now since the provinces signed the Canadian Free Trade Agreement, a landmark deal that was supposed to have cleared a path to a serious, meaningful opening of interprovincial trade. Unfortunately, embedded in that agreement were roughly 300 “exceptions” – filling about 130 pages – that individual provinces and territories negotiated to continue to shield certain key industries and interests from out-of-province competitors. The pact was far from perfect, but the hope was that the CFTA would form the basis for a gradual removal of those remaining protectionist barriers.
But in the past six years, the progress has been glacial. Individual provinces have voluntarily dropped a handful of exceptions in the name of more open and efficient trade among provinces (most notably Alberta and Manitoba, which unilaterally scrapped most of theirs), but most of these administrative and regulatory barriers remain in place.
In a report published on the same day the premiers’ meeting began, the Canadian Federation of Independent Business noted that over the past two years, provinces have removed just 12 CFTA exceptions; 96 per cent of the barriers from two years ago remain in place. The federation, which represents the country’s small-business owners, gave every province a letter grade of “D” or “F” on its “interjurisdictional barriers to internal trade.” On these measures – ranging from costly provincial registration requirements and fees for companies, to certification barriers for workers, to cross-border transportation restrictions on alcohol – our provinces are all failing.
These restrictions impede the flow of goods, labour and investment, and the country’s economy is less efficient, less productive and less prosperous as a result. A 2019 paper from the International Monetary Fund estimated that eliminating government-imposed barriers on goods movement could boost per-capita gross domestic product by roughly four per cent.
A couple of years ago, I wrote a column highlighting these self-inflicted wounds to Canada’s economy. At the time, it seemed, the damage from the COVID-19 pandemic had generated new interest in once and for all removing these obstacles to growth and productivity.
Two years later, as the world continues to wrestle with questions of supply chain security and elevated geopolitical uncertainties that are reshaping the global trading map, the case has grown even stronger.
And yet, the premiers’ meeting came and went without any indication that this is a serious priority among our provincial leadership.
In its spring budget, the federal government vowed to work with the provinces to identify and remove internal trade barriers. It said pretty much the same thing in the 2022 budget. And the 2021 budget. And yet in terms of addressing the mountain of remaining CFTA exceptions, distressingly little actual progress has been made. At this point, Ottawa’s position looks more like lip service than policy priority.
Yes, there have been other more pressing issues in federal-provincial relations over the past couple of years. Health care funding and reforms have dominated discussions. Climate measures have been a key issue. Housing is a major concern.
Still, in an economy wrestling with low productivity and stubborn inflation, removing barriers to internal trade of goods, services and labour seems like a very desirable and achievable step that would help ease those pressures – not just in the short term but on a continuing basis.
It’s ultimately up to the provinces to make this happen. Collectively, they must recognize that these trade obstructions are doing more harm than good to their own economies and those of their provincial partners. If they’re serious about achieving “Canada’s full economic potential,” removing these interprovincial roadblocks is an essential and entirely achievable step.
But now, the provinces have handed Ottawa a bargaining chip with which it can seize leadership to get this process going. The federal government could agree with the premiers’ request for a first ministers’ meeting on trade infrastructure strategy and funding, provided that interprovincial trade be included on the agenda. If provincial and federal leadership are to co-operate on a new vision for fostering trade competitiveness, then surely removing these internal trade barriers must be an essential part of the discussion.