Canada, Let’s Tear Down These Trade Walls

Ever wonder why some Canadian small businesses have a harder time selling their goods in the next province than they do in Europe? Or why a Quebecer can't order a bottle of wine from Niagara Falls without having to pay a ''kickback'' to Quebec's liquor monopoly?

That's because we Canadians put a lot of effort in crafting trade deals with countries around the world — which is a very good thing. But we fail to do the same within our borders. We are a trading nation. But on our own land, we created a multitude of balkanized markets that give unnecessary headaches to our entrepreneurs.

At least this could change. James Moore, the federal Industry Minister said the Conservative government is planning to significantly overhaul the existing Agreement on Internal Trade, signed by all provinces 20 years ago. This agreement left in place a number of cumbersome barriers that are estimated to cost the country $50-billion a year.

I say it's about high time! In fact my think tank, the Montreal Economic Institute, has worked since long ago on this issue. Mainly because economic relationships between provinces are vastly underestimated. Take Quebec and Ontario for example. Canada's two most populous provinces represent a market of 18-million people. Their joint GDP make them the fourth-largest economic area in North America, behind California, Texas and New York State.

And guess who's their largest trading partner? Each other.

Free trade, with foreign countries as well as with ourselves, is good. When trade barriers come down, competition among companies increase, prompting them to offer high quality goods and services and lower prices, and also raises productivity levels.

But while this initiative by the government is commendable, let's keep in mind that in these interprovincial trade agreements, usually far more effort goes into harmonizing existing regulations than into truly removing obstacles to trade. For example, it sure helps the trucking industry if we remove trade irritants like various tire specifications for each province, but little progress has been made throughout the years in liberalizing the market for farm products. Dairy marketing boards still inhibit farmers from exporting across provincial boundaries.

The same goes for labour markets. Licensing of trades and preferential hiring has created an artificially fragmented labour market. It is particularly the case in Quebec's construction sector. Also, the current agreement does not affect government monopolies, for example in the hydroelectricity and alcoholic beverage sectors.

What consumers need is real free trade.

To get closer to this goal, one model to look to is The New West Partnership Trade Agreement (NWPTA), a trade agreement between the Governments of British Columbia, Alberta and Saskatchewan and which builds on TILMA, a similar accord between British Columbia and Alberta.

What's particularly interesting with this agreement is that economic sectors are subject to the agreement, except for the exemptions it lists. This approach is more transparent by making industries that seek to be excluded from the agreement's rules highly visible in the public eye. This procedure exerts pressure on politicians, who must then justify these exceptions.

In Canada, interprovincial trade has increased over the years, but at a much slower pace than international trade. In an age of increasing globalization, it is critical that our governments liberalize our own market and tear down all remaining walls and irritants within our borders.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.

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