How interprovincial trade struggles with complexity, special interests, and protectionism
The recent trade war with the United States has highlighted several pain points with our provincial and national economies. We have seen how our over-reliance on one trading partner can leave us vulnerable to external shocks, exposing the fragility of our economic systems.
However, this issue extends beyond international trade relations and points to deeper internal challenges. Provinces, each with their own economic interests and regulatory frameworks, often engage in protectionist practices that hinder smoother interprovincial trade otherwise known as interprovincial trade barriers.
As a result, businesses face not only external trade barriers but also a fragmented domestic market, where cross-provincial transactions are bogged down by red tape and inconsistent regulations. Some businesses report that they have an easier time exporting goods to other countries rather than neighbouring provinces.
A recent report published in 2019 by the International Monetary Fund (IMF) estimated that if Canada eliminated its internal trade barriers it could be the equivalent of a 21% tariff reduction. In January, the federal Committee on Internal Trade (CIT) wrote that eliminating interprovincial barriers could add as much as $200 billion to the Canadian economy, lowering prices and expanding productivity.
This is exactly what Nova Scotia’s newly proposed legislation, Bill 26 – the Free Trade and Mobility within Canada Act intends to address. This Bill, a first of its kind in the country, aims to foster an environment of mutual recognition of goods, services and labour mobility across all sectors.
The act specifically addresses Goods manufactured and produced in a reciprocating province or territory will be treated the same as those produced locally in Nova Scotia. This will eliminate any additional fees or testing requirements for goods from these provinces and territories
Similarly, service providers and licensees that are properly certified or licensed in a reciprocating province will be recognized as if they are licensed in Nova Scotia. This ensures that businesses providing services can operate across provincial borders without the burden of additional licensing or certification.
Shortly following Nova Scotia’s lead, newly elected New Brunswick Premier, Susan Holt, sent letters to the 3 other Atlantic Premiers calling on them to join her in making Atlantic Canada a “free trade area” with a single market operating with one set of rules governing trade and labour mobility. There is also talk from Ontario’s Premier Doug Ford to follow up with similar legislation to Nova Scotia as well.
This momentum to eliminate internal trade barriers is extremely exciting as this has been one of the most difficult and complex policy issues plaguing our economy for decades. Many organizations and government departments have attempted to unravel this Gordian Knot and have failed for several reasons.
One of the hardest aspects of dismantling the barriers between provinces was the requirement for them to work together on a solution. Typically, this is like trying to nail jelly to a wall, however the existential threats towards our economy and our sovereignty have united Canadians in a way that only the threat of a “war” can.
The next challenge is cataloging and tracking the regulations across various sectors. The complexity and volume of regulations make it even more challenging to create an effective system for tracking them. This is one of the reasons why Nova Scotia’s legislation is broad in nature so it can cut through this difficult process of cataloguing specific items.
However, this approach creates another challenge in the from of resistance by local special interest groups. Shortly following the tabling of Bill 36, several special interest groups from across Nova Scotia raised concerns about the impact the Bill would have on their ability to regulate their respected fields.
Despite the initial boldness of Nova Scotia’s free trade legislation, the Premier announced that he is considering amendments based on their feedback. This is potentially where the momentum to eliminate these barriers could hit a wall or be bogged down.
To successfully unlock our domestic economic potential at the national or regional level, we will need to stomach the fact that there could be some disruptions to local industries from the free flow of goods, services, and labour across provincial borders. However, this initiative also comes with new opportunities through increased competition and access to new markets. This could drive competition, boost productivity, and stimulate prosperity in our region, which urgently needs to improve these areas. Embracing these changes will require adaptability and a forward-thinking approach to ensure that the benefits outweigh the challenges.
