Martha Hall Findlay is the president and CEO and Sarah Pittman is a policy analyst at the Canada West Foundation. They are co-authors of a new report: Toilet Seats, Trucking and Other Trade Tie-ups: A new solution to the old problem of Canadian internal trade
Many components of the Canadian economy – such as competition, infrastructure and international trade – receive significant funding, attention and serious engagement from the federal government.
Internal trade? Not so much.
In the words of Bank of Canada Governor Stephen Poloz, the state of internal trade in Canada is, frankly, “absurd.”
There is widespread consensus that internal trade barriers are impediments to expanding the Canadian economy. And in the current global trade environment, any impediment to growth at home – the one market fully under our control – is as unaffordable as it is unacceptable.
Barriers remain that create inefficiencies, that in turn cost businesses, consumers and taxpayers; limit overall economic activity and growth; and impede businesses’ achievement of economies of scale through access to a whole-of-Canada market. They limit our global competitiveness, which reduces export and investment opportunities and makes Canada less attractive for both domestic and foreign investment.
That the problem has not yet been solved and that it is costing far too much, has drawn notice: Alberta and Manitoba have announced unilateral reductions in their exceptions under the Canadian Free Trade Agreement (CFTA). The Liberal Party’s 2019 election platform promised that a Liberal government would “actively assert federal jurisdiction where needed, to help move forward with free trade within Canada.” The Conservative Party planned to, within the first 100 days of being elected, negotiate a new interprovincial/territorial trade agreement. Such efforts are to be commended.
But for the federal government, it would be a mistake to force anything, particularly when federal-provincial relations are so tense. There are, however, some creative, bold steps that the federal government can – and must – take, as outlined in a new Canada West Foundation report.
Profound distrust of the federal government by provinces and territories is a key impediment to liberalization. Unless the federal government can address the lack of trust, and take bold action without requiring more provincial and territorial money, there is very little it can do to help.
We’ve identified five major problems holding back internal trade in Canada – and focused on what the federal government could do to fix them. Key is establishing a robust, properly funded, independent Canadian internal trade bureau (CITB) – in amounts similar to spending for the Competition Bureau, the Canada Infrastructure Bank and other organizations important to the Canadian economy. Also key is that the funding must come from the federal government, without requiring matching or any other contributions from the provinces/territories, and with no strings attached. This may feel “unfair” to some, but our analysis of the status quo suggests that this is critical.
- There is a major lack of data and comparative analysis by province and territory. One reason for the lack of data is the high cost in finding and collecting it when it involves 14 jurisdictions. The federal government must fund by way of the new CITB, the research, collection and updating of data and comparative analyses needed at the province-by-province-by-territory level.
- Despite a few exceptions, there remains a broad lack of political will among most of the provinces/territories to really tackle internal trade barriers. The federal government can help by using the data obtained and analyzed by the new CITB to show the specific costs of the status quo and potential benefits of liberalization, at the detailed provincial/territorial level.
- The Internal Trade Secretariat we have (as part of CFTA) is underfunded, understaffed, under-resourced and correspondingly under-functioning compared with organizations elsewhere that manage trade blocs. The new CITB, modelled on the World Trade Organization Secretariat, would provide robust and functional data collection, analysis and information dissemination.
- There is a significant lack of knowledge among Canadian businesses (and their provincial and territorial governments) about opportunities in our own domestic markets. The federal government can create, fund and help organize domestic trade missions. We fund trade missions for Canadian business to explore opportunities abroad – while there are many at home to take advantage of.
- Finally, the current CFTA still has far too many exceptions. As noted, some provinces are unilaterally moving to eliminate theirs – the federal government should do the same.
As several provinces make efforts to finally open up internal trade in Canada, the federal government has the opportunity to make a real difference in increasing pan-Canadian prosperity.