Home August 2019 Billions of Reasons to Tear Down Interprovincial Trade Barriers

Billions of Reasons to Tear Down Interprovincial Trade Barriers

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David MacLean.

International market access for Alberta products has dominated headlines and board rooms for years, and that won’t change any time soon. Getting Alberta energy to market at fair prices is the top priority for the Alberta economy, but while policy makers and energy producers chip away at that problem, Canada needs to continue to work on tearing down internal barriers to trade. A recent report from the International Monetary Fund (IMF) took a close look at the true cost of internal trade barriers, and the impacts are significant.

The IMF report estimates that if all trade barriers (such as vehicle weight and dimension standards, provincial permitting rules, varying technical and safety standards) were eliminated, Canada’s GDP would be 4 per cent higher. That amounts to around $86 billion in additional economic activity across the country every year.

Removing all internal trade irritants is impossible but if we can get even halfway there, we’d generate $40 billion in new trade activity – and that’s nothing to sneeze at.

Politicians understand this. Over the years, governments have tried in various ways to boost the flow of goods and services within Canada. Provinces have worked together to make trade agreements like the New West Partnership Trade Agreement among the western provinces and the 2009 Quebec-New Brunswick deal. The IMF report says these efforts have paid off in increased economic activity in those provinces.

The 2017 the Canadian Free Trade Agreement made government procurement rules more transparent, and there’s a legislated process for reducing red tape and duplication. However, too many exemptions remain, adding an estimated 7 per cent cost to petroleum products and 27 per cent to manufactured goods.

A recent Financial Post story shone a light on Edmonton-based manufacturer Levven Electronics – a manufacturer of internet-enabled light switches and receivers. It’s a local success story, but here’s the rub: varying building codes across Canada prevent Levven from selling switches to 90 per cent of the Canadian home building market.

It’s frustrating that the kind of company everybody wants to see here in Alberta – innovative, advanced, export-oriented – is being stifled by policy makers’ failure to adapt to new technology.

The challenge here is the absence of a single decision-making entity that can make these trade barriers disappear. The feds, provinces and municipalities all have reasons for their rules. Some of these rules are legitimate and address problems specific to that jurisdiction. Others are just remnants of a failure to update and revise rules in a timely way. Some rules are political; powerful stakeholders have a vested interest in maintaining the status quo.

Another problem is that removing trade barriers often doesn’t have an immediate payoff for politicians. Any regulatory change inevitably annoys someone, and the economic benefits are difficult to measure. The massive benefit of broad-based regulatory reform is only visible from a distance.

This all boils down to competitiveness. Canada can and should be a global manufacturing powerhouse, but we need to get our own house in order first.

Canadian Manufacturers & Exporters (CME) is the voice of Canadian manufacturing. CME represents more than 2,500 companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.

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