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Former cabinet minister and head of The Canadian Chamber of Commerce Perrin Beatty: ‘We are putting Canadian businesses at a serious disadvantage.’ (FRED CHARTRAND/The Canadian Press)
Former cabinet minister and head of The Canadian Chamber of Commerce Perrin Beatty: ‘We are putting Canadian businesses at a serious disadvantage.’ (FRED CHARTRAND/The Canadian Press)

Canada Competes

Why are we blocking free trade between provinces? Add to ...

This piece is one of a series of high-profile Canadians commenting on the Canadian Chamber of Commerce's Top 10 reasons Canadian competitiveness is dropping.

In an era focused on international free trade, it seems incongruous that Canada has so many internal barriers that impede movement of goods, services and people between provinces. That’s a situation that has to change if the country is going to stay competitive in a global marketplace, says Perrin Beatty, a former Conservative cabinet minister who is now president of The Canadian Chamber of Commerce.

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Why are interprovincial trade barriers a problem?

Businesses are operating today in an intensely competitive global economy. It is important for them to have a market at home in which they can build their scale. We are a comparatively small economy to begin with, and if we Balkanize our economy and turn it into 13 regional ones, then it is much more difficult for Canadian companies to get the scale that they need to be able to be globally competitive.

Also, from the perspective of Canadian consumers and customers of businesses, it limits choice and drives up costs.

What are some of the worst barriers?

Try driving a big truck across Canada and you will discover very quickly the layers of regulation you have to deal with as you move from jurisdiction to jurisdiction. All of these layers create barriers to doing business across the country.

We [also] have impediments that may make it difficult, at a time of high unemployment, for workers to move from one area to another where their skills may be in demand. They have to be relicensed to offer their skills in another jurisdiction.

You can see [barriers] in local preferences given in bidding on contracts for governments. There may be discrimination against bidders from out of a region or out of a province.

The most celebrated case recently was that of wine, where Parliament finally intervened to say, ‘Yes, we should allow interprovincial wine sales.’ [But] provincial wine monopolies are dragging their feet on this, and we still don’t have an open market. This clearly makes no sense.

This is all self-defeating. It drives up costs and it enshrines inefficiencies in the system. It builds costs into the economy. The government of Alberta estimated a few years ago that the costs [of interprovincial trade barriers] could be as much as $14-billion a year to the Canadian economy.

How damaging are the barriers that diminish labour mobility?

In instances where you have to be certified to offer a service in a particular jurisdiction, a Canadian who has a skill in one region of the country has difficulty in moving to another region, and taking up a job that may be open – particularly jobs that may be open for the short term. [That is damaging because] what we are seeing is not a shortage of bodies available to work, but a mismatch between the skills that are available and the demands of the work force. We need to make it easier for people to move within Canada and put their skills to work. That will bring down costs and also help reduce unemployment. If we can move people off employment insurance or off welfare and on to the job rolls and tax rolls, everybody benefits.

What role do agricultural marketing boards play in this issue?

[The main issue is the] quotas, which assign what production is allowed to be sold. Obviously, anything like that interferes in the market system. It says that some people will not be allowed to sell, based on residency.

How have provincial trade barriers changed over time?

One of the reasons for the creation of Canada was the abrogation of reciprocity with the United States. When we no longer had access to that U.S. market, the Canadian colonies came together and they struck an agreement that was designed in large part to ensure free trade within Canada. Section 121 of the constitution is quite clear in saying there should be no duties or impediments put in the way of trade within Canada. So the clear intention of the founders of the country was to have a single market in Canada.

We just have allowed an accretion of barriers over [time] – everything from marketing boards for agriculture, to restrictions on mobility of labour, to competing regulatory standards, to redundant regulatory standards. All of those discourage the free movement of goods, services and people in the country.

I was part of the government that brought in free trade back in 1988. If anybody had told me we would have free trade with the United States but wouldn’t have it within Canada, I never would have believed them. And now we are negotiating free trade with Europe. One of the issues [in those negotiations] is provincial and local procurement. Well, we had better address this within Canada as well, and ensure that we stop discriminating against ourselves.

What do you see as solutions? What’s the way to fix this?

The best progress in recent years was an agreement in western Canada [involving] Alberta, British Columbia and Saskatchewan. It has been an exceptionally complex and lengthy process for them, dealing with hundreds of different barriers they had to try to bring down. But that is just limited to three western provinces. We need to extend that sort of initiative across the country.

The first place to look is the AIT [Agreement on Internal Trade, established in 1995 by Ottawa and the provinces to reduce barriers]. But if we can’t make greater progress with the AIT, then we need to see the provinces themselves coming up with bilateral agreements that will take down the barriers. It is not the preferred route, because you would like to see a single market all through the country. But anything that can knock down barriers is desirable.

What are the problems with the AIT as it currently stands?

The real issue is, is there a mechanism that is enforceable, or does it rely on the goodwill of government? Citizens themselves should be able to challenge improper barriers, and to have a mechanism that will strike them down. We don’t have that.

Should the federal government take unilateral action to eliminate barriers?

I don’t think that is practical. The way governments have tried to deal with this is through collaboration.

Is the wine trade legislation an example of unilateral action by the federal government?

Parliament passed legislation but provincial liquor monopolies are still dragging their feet, so its application is still uneven across the country. In this instance it is less about protectionism – [the provincial monopolies] want to make sure they can squeeze every last bit of tax out of consumers. [While the federal government took the initiative], the provinces then have continued to fight a rear-guard action on it.

Thank heaven [the federal government] did it, but it hasn’t solved the problem. It has ameliorated it somewhat. And it has shamed some of the provinces, but not so much that they have changed their practices.

Is there enough political will among the provinces and Ottawa to get some of these barriers reduced?

The most significant leadership shown was in the agreement between Alberta and British Columbia initially, and then with Saskatchewan coming in. They recognized that all three of the provinces were losing out as a result of these barriers. We haven’t seen anything on that scale since then. There is progress [but] it is glacial.

What is the role of the business community on this issue?

The business community really has to lead on it. It can’t speak out of both sides of its mouth. The pressure for maintaining barriers to trade often comes from local businesses. People will talk about the virtues of competition in the abstract, but they may not like it in their particular case. It is important to be consistent on this, and recognize that an efficient economy requires competition. While there are winners and losers whenever there is competition, overall, the country benefits.

We need to ensure that the message is very clear: that we are opposed to interprovincial barriers to trade. We can’t argue one thing in the abstract and another thing here at home. We can’t say, I want to see the barriers brought down except in my case.

I think many businesses have simply given up or have learned to try to accommodate what they see as the inevitability of barriers. We need to redouble our efforts and make it clear, at all levels of government, that these barriers within Canada are a growing threat. The global economy is internationalizing, and if we Balkanize our market at home, we are putting Canadian businesses at a serious disadvantage.

This interview has been edited and condensed.

BARRIERS REMAIN

In Canada, there are no tariffs or duties when goods travel between provinces, but there are still many non-tariff barriers that can make it difficult for companies to ship products or services across the country. Others get in the way of workers moving into a new jurisdiction.

Industrial regulations

Provinces have different rules on truck weights and dimensions, making it more difficult for transport firms to operate in multiple jurisdictions. There are also a variety of regulations for industrial equipment.

Licencing and accreditation rules

Many professionals and tradespeople still have to be licensed, certified or registered in the provinces where they move to, despite some attempts to remove barriers to labour mobility.

Government procurement preferences

Many local and provincial governments and agencies still give preferential treatment to regional suppliers on some government contracts.

Securities licensing

Canada has 13 securities regulators, and the continuing debate over the creation of a national regulator has gone on for decades.

Liquor monopolies

Provincial liquor boards restrict the listings from out-of-province products. And federal legislation to allow cross-border wine transport has not yet been fully implemented.

Food restrictions

Supply management rules and marketing boards limit interprovincial movement of poultry, dairy products and eggs. And many provinces have different rules for packaging and labelling of food products.

Join the conversation on Canada's competitiveness by following Canada Competes on Twitter:@CanadaCompetes

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