On a recent bright sunny morning in Ottawa, Ontario truckers and construction workers briefly occupied one of the busy bridges linking the capital to Gatineau, Que., to protest the “mountains of red tape” that keep them from operating in Quebec.
Just a few kilometres away, federal Industry Minister Christian Paradis complained in a speech that internal trade barriers are an “invisible monster” sucking billions of dollars a year out of the economy. “Canada is a champion of freer trade around the world. The same needs to be true here at home,” Mr. Paradis bluntly told business leaders, academics and government officials.
From Germany to Hong Kong, Mr. Paradis said foreigners grumble to him about the insidious web of provincial and local rules that make operating across the country difficult.
Wait a minute. Is this really 2013? Nearly two decades ago, Ottawa and the province signed the much-hyped Agreement on Internal Trade (AIT) that was supposed to stop all this nonsense. Too often, Canada behaves more like a loose confederacy of 13 inward-looking provincial and territorial fiefs than a unified country. It’s not just Quebec.
Imagine, then, how Canada looks to foreign investors. It’s an already-small market that can seem splintered, costly and uninviting.
Persistent internal divisions make ambitious foreign free-trade deals more difficult to conclude. The European free-trade deal, which was to have been wrapped up months ago, remains hung up, in part, because of rival interests at home.
Ottawa is realizing, much to its distress, that foreign countries want such things as harmonization of regulations and access to provincial purchasing that don’t even exist within Canada, pointed out Martin Lavoie, director of policy at the Canadian Manufacturers & Exporters association.
“You can’t very well give European companies access to a province’s procurement market when it isn’t even available to other provinces,” he pointed out.
Mr. Paradis’ sudden interest in internal free trade is part of an effort to align provincial regulations with a new generation of much more expansive international trade agreements, Mr. Lavoie suggested.
Canada has signed nine international free-trade agreements since 1995. And it’s pursuing a series of massive and complex deals with the European Union, Japan, India, South Korea and the 12-member Trans-Pacific Partnership.
Opening up provincial and local purchasing markets remains an unresolved issue in the European talks. Also still incomplete is the thorny agricultural section of the deal, which pits Western Canadian cattle ranchers, who want greater access to Europe, against Ontario and Quebec dairy farmers, who want to keep Europe from getting a larger slice of the domestic cheese market.
The history of the internal trade deal is marked by unfulfilled potential and disappointment.
Ottawa and the provinces wisely created a dispute settlement regime, and later added financial penalties to enforce rulings.
But the process remains clunky, costly and increasingly irrelevant. Consider this: In 2010, Alberta won a case striking down Ontario’s ban on mixing a bit of butter or milk into vegetable oil or soy-based drinks and spreads, such as Land O’ Lakes Fresh Buttery Taste Spread. The Ontario regulations were designed to protect dairy farmers.
Ontario complied and removed the ban, but Quebec ignored the ruling. Even after a series of mandated consultations, the province still won’t budge. So two years after the Ontario win, British Columbia and Saskatchewan are poised to demand a dispute settlement panel. A decision could take a year or more, even though the legal outcome is a foregone conclusion.
“We have a panel report on Ontario that creates jurisprudence everyone in Canada should observe,” lamented Sean McPhee, president of the Vegetable Oil Industry of Canada. “Why do we have to go through this again?”
Alberta, in another of just three active AIT cases, challenged Ontario’s controversial feed-in tariff program for renewable power in 2011 because of requirements that equipment be made in the province.
The dispute is now a moot point because Japan went to the World Trade Organization and won, forcing Ontario to overhaul the program.
The butter and feed-in tariff programs are just two of a long list of barriers that continue to gum up trade within Canada, even with the AIT.
Two decades on, internal free trade should not be something Canadians fret about, or blockade bridges to get.