Tear down these walls! Canada could finally become the free-trading dynamo envisioned in 1867
The Canada we know today, with thickets of trade barriers between provinces, is not the one our founders intended. One of the clearest statements of the founders’ intent came from John A. Macdonald, who in February 1865 said that Canada wanted “unrestricted free trade, between people of the five provinces.”
Such a sentiment was in fact why Macdonald and other early politicians enacted section 121 of the Constitution Act 1867, which states that “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”
Fast forward 149 years after the founding of Canada, to 2016, and the Canadian Senate could still identify both major and minor barriers to internal trade in Canada. These included: regulations stipulating that some trucks must be driven only at night in British Columbia and only during the day in neighbouring Alberta; weight limits on certain truck tires that differ across jurisdictions, forcing truckers to change tires when crossing certain provincial/territorial borders; and dairy creamer and milk container sizes that differ across provinces, forcing some companies to duplicate production streams.
Provincial trade barriers not only contradict the vision of Canada’s founders, they also harm the economy, and thus employment and incomes, resulting in significant losses to Canadians. Statistics Canada estimates that such barriers equate to a 6.9 per cent tariff on goods and services sold between provinces. One team of economists at the University of Calgary calculated that internal trade liberalization could add from $50 billion to $130 billion to Canada’s overall GDP.
Internal trade barriers are unpopular, too: In a 2017 Ipsos poll, Canadians overwhelmingly agreed (88 per cent) that “there should be free trade between Canadian provinces because we are one country.”
Can anything be done? We think so. In a new joint study by the Montreal Economic Institute and the Canadian Constitution Foundation, released Thursday, we started by measuring provincial and territorial exceptions to the 2017 Canadian Free Trade Agreement (CFTA), as well as subsequent announcements as recently as this fall, to come up with a ranking of provincial trade barriers.
The CFTA was trumpeted as a ground-breaking agreement but far too many exceptions contribute to continued barriers. When totalling existing, future and procurement exceptions to the CFTA, Quebec has the most exceptions and thus was dead-last in interprovincial free trade. Western provinces were generally freer in trade, with Saskatchewan in fourth place, British Columbia and Manitoba tied for second, and Alberta first.
After recent announcements by Alberta to unilaterally abolish some trade barriers, that province has just six CFTA exceptions remaining. In comparison, Ontario has 24 exceptions, and Quebec 35, which explains why those provinces are ranked 10th and 13th respectively.
There are ways each province can lessen its internal trade barriers. For example, New Brunswick could, among other measures, open up to cross-border beer, wine and liquor. Quebec could reverse its opposition to the transportation of oil from Alberta. Even Alberta could improve by allowing direct-to-consumer wine shipments.
The best way for liberalization to happen is for a province or territory to act unilaterally to end its own barriers. The Alberta government has already moved ahead in just this fashion. In July, Premier Jason Kenney announced that all the exceptions to open public procurement that the province had listed in the 2017 CFTA were unilaterally withdrawn and abolished. In September, Alberta announced further eliminations of exceptions, and in October, the Manitoba government followed suit.
The Alberta and Manitoba examples of unilaterally abolishing barriers could be a model for the other provinces and territories. Many of the premiers have expressed their support for free internal trade and when they met this summer they each committed to reviewing their own CFTA exceptions by the end of the year.
Given the historical aims of Canada’s founders, the clear economic rationale for free interprovincial trade, the decisive support in public opinion, and the political desire, the time may finally have come to transform Canada into the free-trading dynamo envisioned in 1867.
Mark Milke is an independent policy analyst, Peter St. Onge is Senior Economist at the MEI. They are the authors of “Internal Trade Provincial Leadership Index” and the views reflected in this op-ed are their own.