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September 16 2020

Policy 101: Internal Trade in Canada

If you live in Calgary, you can’t order a bottle of wine made in Nova Scotia or Quebec. Even if you could, either bottle might cost nearly seven per cent more. This is due to inter-provincial trade barriers that severely limit the flow of these products between provinces.

This is just one example of trade barriers that make it more difficult to do businesses with our neighbours, than with other countries. Nine in ten Canadians agree that there should be free trade between provinces.

As a member of the Canadian Global Cities Council, a network of chambers of commerce and boards of trade in Canada’s largest urban centres, we agree with Canadians. While we must remain steadfast in our commitment to open international trade, now is the time to fix our internal trade problem. This is especially important given the urgent need to recover from the COVID-19 pandemic.

Reducing interprovincial trade costs by ten percent may lead to an overall increase for Canada’s real GDP of approximately $17 billion CAD per year. That’s a considerable amount of missed economic activity, business opportunities, sustainable jobs, and investment.

To better understand how we got here, we can start by revisiting the current rules for free trade in Canada and how they can be fixed for the benefit of all.

An incomplete solution: the Canada Free Trade Agreement

The Canada Free Trade Agreement (CFTA) was the result of negotiations between the federal, provincial, and territorial governments from 2014 to 2017. The purpose of these negotiations was to update the prior Agreement on Internal Trade (AIT). Together, the parties agreed that the objective of the CFTA is to reduce and/or eliminate barriers to the free movement of persons, goods, services, and investments within Canada in order to promote an “open, efficient and stable” market across the country.

The CFTA automatically applies to many sectors in the economy and simplifies access to government contractors for businesses. However, it falls short of fully achieving its aims. Exceptions remain in place for trade related to water, tobacco, collective marketing arrangements for agricultural goods, among many others.

To further reduce barriers, the CFTA introduced the Regulatory Reconciliation and Cooperation Table (RCT), comprised of federal, provincial, and territorial representatives. Established in 2017, the job of the Table is to identify and eliminate diverging or duplicative regulations that create trade barriers. The RCT has ambitious work plans for 2019-2020 and casts a wide policy net. At the end of 2019, the RCT had completed five agreements designed to reduce regulations that create trade barriers in areas such as construction codes, energy efficiency standards for household appliances, and corporate registries. In 2020 and 2021, the RCT has its sights set on regulatory reconciliation in many areas such as workplace first aid training, transport size and weight restrictions, food inspection (with a specific focus on meat), drug scheduling, and hiring processes for construction labour.

Closing the gap: Alberta and other provinces are breaking down trade barriers

Governments have also taken major strides to unilaterally eliminate trade barriers. In June 2019, the Government of Alberta announced it would voluntarily remove 13 of the 27 exceptions under the CFTA, and in September 2019 announced it will remove another 8 of the final 14 exceptions, in an effort to boost free trade within Canada. Manitoba, Nova Scotia, and Ontario have also taken steps to eliminate certain exceptions.

Also in 2019, the federal government introduced legislation that removed requirements for alcohol moving from one province to another to go through a provincial liquor authority. This was the first step in allowing direct-to-consumer shipping across Canada for liquor. However, provincial limitations for liquor – including some craft beer and wine – are still in place.

Moving forward: What we can do

The provinces

While we ultimately need a Team Canada approach, Premiers can take bilateral steps to remove barriers to Canadian goods in their own jurisdictions. Premiers should start with mutual recognition of any remaining inconsistent standards, and reconciliation and removal of duplication between several provinces – as we’ve mentioned in our recent work as a member of the Canadian Global Cities Council, it only takes two to begin this important work.

The federal government

As we have called for in the past, to help secure access to markets across all Canadian coasts regardless of industry and size of business, the federal government should work to establish dedicated rights-of-way for major infrastructure projects across the country, like pipelines and power lines. By connecting existing transportation and utility corridors, we remove a significant barrier for many major infrastructure projects which will allow trade within Canada to improve and flourish.

Towards a better Canada

Establishing these corridors and tearing down internal trade barriers will lower costs for Canadian businesses, boost competitiveness and economic growth, and encourage both domestic and foreign investment. Beyond economics, it would also help stitch together the social fabric of our country.

A Canada that has truly free internal trade is a Canada that works for all of us.