In the middle of a federal election, the best example of bold political leadership has come from a province – Alberta. Premier Jason Kenney just announced the unilateral removal of a swath of internal trade barriers for Alberta. This is a big deal.
Section 121 of the Canadian Constitution says: “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.”
Sounds pretty straightforward, and it’s likely the drafters thought so, too. Except that over the years, provinces have erected more and more barriers to trade between them – usually for political, not economic reasons, and the Supreme Court of Canada, first in 1921 and then more recently in the Comeau case, interpreted s.121 far, far more narrowly than one suspects the drafters ever intended.
Now, thanks to the Comprehensive Economic and Trade Agreement (CETA) with the European Union, it is considerably easier for a business in, say, Ontario, to trade goods or services with any European country, than with, say, Manitoba or New Brunswick. With the newly signed Comprehensive and Progressive Agreement for Trans-Pacific Partnership between Canada and 10 Asia-Pacific countries, the same is true with respect to, for example, Japan or Vietnam. And, of course, the free-trade agreement between Canada and the United States in 1988, followed by NAFTA in 1994, have meant that it is far, far easier for businesses in any Canadian province to trade more easily with neighbours to the south.
Internal trade barriers cost the Canadian economy between $50-billion and $130-billion. They keep Canadian businesses from expanding effectively to other Canadian customers beyond their own provincial borders. They create inefficiencies that cost businesses, consumers and taxpayers, and limit overall economic activity and growth. They prevent Canadian businesses from gaining economies of scale through access to a whole-of-Canada market, which are critical to developing global competitiveness. This, in turn, means fewer international export opportunities. And all of these factors make Canada less attractive for foreign investment. These trade barriers between provinces and regions also impede greater pan-Canadian social and political cohesion.
None of that makes sense.
Yet for far too many years, there has been insufficient political will in Canada, either at the provincial level or the federal level, to move forward.
It is true that in 1994, prompted by all of the discussions leading up to NAFTA (and the reminder to the provinces that this meant much freer trade with the U.S. and Mexico than between them), the provinces and federal government entered into the Agreement on Internal Trade (AIT). It had good intentions, but was vague, toothless and, ultimately, had no effect.
The AIT was replaced in 2017 by the Canadian free-trade agreement (CFTA). This was an improvement, including for example using a “negative list” (where instead of specifying what can be traded freely, it provides that all can be traded freely except for whatever the parties decide to exclude).
All good in theory, but consider that the CFTA has about 130 pages’ worth of exclusions. It amounts to almost the same as before: little progress. In the interim, in 2010, B.C., Alberta and Saskatchewan entered into a more ambitious deal, the New West Partnership trade agreement (NWPTA), which Manitoba joined in 2017. Most agree that the NWPTA is more ambitious, but it still falls short of fully free trade – and only includes four provinces.
Moving forward requires political will – and leadership.
The Alberta government had already announced in July the removal of 13 of its exemptions under the CFTA. This recent announcement unilaterally removes eight of the remaining 14 Albertan exemptions, relating to issues such as energy, alcohol, sales of public lands, procurement by the legislative assembly and some procurement exemptions for regional economic development.
Alberta will now have the fewest exemptions in Canada and is calling on others to follow suit. Will they? There is much that the federal government can do to help move this issue forward, but those steps – as distinct from just talking about it – would also require political will and courage. Will any of the federal politicians running for office step up to this truly national challenge?
https://www.theglobeandmail.com/business/article-internal-trade-barriers-make-canada-less-attractive-for-foreign/?utm_medium=Newsletter&utm_source=Politics%20Briefing&utm_type=text&utm_content=PoliticsBriefing&utm_campaign=2019-10-3_12&cu_id=JJBpd5fH7zvj6%2Bf8AP7wP6aSQXDOVzkf
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