Why is it much easier for a Canadian business to trade with an American state than domestically, with a Canadian province?
Small- to medium-sized businesses are trying to find new avenues of growth and development during a pandemic to expand their revenues.
But they can’t easily trade with other provinces – not without jumping through regulatory hoops and increased costs.
Almost seven per cent of internal trade costs are added to the cost of traded goods between provinces.
“Easing trade barriers will be very beneficial for SMEs,” says Bridgitte Anderson, President & CEO of Greater Vancouver Board of Trade. “These businesses typically have fewer resources, which puts them at a disadvantage when it comes to navigating interprovincial trade barriers.”
“By reducing these barriers, we will not only lower the cost of doing business but open up new domestic markets that provide SMEs with opportunities for growth and expansion,” she says.
“It will create untold opportunities for businesses to diversify their customer base,” says Janet M. Riopel, President & CEO of Edmonton Chamber of Commerce. “If a small business only has customers in one province, and the economy is suffering there, they have nowhere to turn.”
“If we can get more businesses trading across provincial and territorial boundaries, businesses will have customers in multiple markets to rely upon, ensuring more consistent revenue and better overall viability in the long run.”
In the Canadian Constitution Act of 1867, trade barriers and tariffs are prohibited. But they do exist today to protect provincial interests.
The province-specific rules and regulations were designed to eliminate domestic competitiveness and promote local industries.
These rules and regulations are enforced by the constitutional rights of the provinces (Section 92), which override policies originating from the federal government.
“This has created a situation where it’s often easier for some provinces to trade goods with other countries than it is among themselves,” says Anderson. “I think a lot of it stems from the little decisions governments make over time, without regard for the bigger picture and best practices across our great country.”
This provincial authority is exercised to protect local industry, resulting in trade barriers. But at what cost? Distorting the domestic markets.
“We shouldn’t misinterpret “buy local” to mean protectionism and blocking Canadian businesses from accessing local markets,” says Riopel.
“By entering into a bilateral or multilateral internal trade deal, a province is allowing freer access to their customers, but they’re also getting freer access to another province’s customers,” she says. “It’s a win-win, and only serves to make our nation a stronger competitor in the global marketplace.”
Provinces are protecting the interests of producers in their own region under the umbrella of supporting local, but they’re ignoring consumer and market demand and spurring costs of efficiency, free trade and distribution.
“We had hoped that the creation of the Canadian Free Trade Agreement (CFTA) in 2017 would mean the end of these barriers, but sadly that isn’t the case,” says Riopel.
By relying on consensus between all 14 governments, the CFTA regulatory harmonization process is moving remarkably slowly in removing barriers.
The slow process is leaving the country with a free trade agreement that does not guarantee free interprovincial trade.
“Indeed, many of the trade barriers we see today were unintended, the result of a lack of coordination across provinces, while others are simply outdated,” says Anderson.
“Simply put, it shouldn’t be easier to do business in the US or Japan than it is in Ontario or Nova Scotia,” she says. “Greater harmonization is required in order to address these issues and remove the unintended barriers that are impeding internal trade and economic growth.”
Over $80 billion can potentially revive the Canadian economy annually if outdated internal trade barriers were eradicated. That’s nearly $5,700 for every family.
The Canadian Global Cities Council (CGCC) is making a stand to push for less restrictions and barriers. The Council has recently started running an internal trade advocacy campaign called #WeCANtrade.
The campaign’s aim is to maintain political pressure and keep public attention on the need for easing of barriers on interprovincial trade.
“We’ve been advocating for free trade within Canada for a long time,” says Anderson. “But through the #WeCANtrade campaign, we really want to signal to the government that there is no better time than the present to seriously look at what can be done to address interprovincial trade barriers.”
Many SMEs across the country are promoting the campaign through their communication channels. They are fighting for a reduction in red tape and pushing for Canada-wide growth.
“Breaking down barriers to trade within Canada will lift all boats and provide more opportunities for our entrepreneurs,” says Anderson. “Some companies will end up finding opportunities in Quebec and Halifax when they had previously focused on one local market.”
Founded in 2015, the CGCC is a coalition of Presidents and CEOs of the nine largest urban regional Chambers of Commerce and Boards of Trade in Canada: Brampton, Calgary, Edmonton, Halifax, Montréal, Ottawa, Toronto, Vancouver and Winnipeg.
Representing more than half of Canada’s GDP and population, the CGCC collaborates on international and domestic issues impacting the country’s competitiveness. The campaign is leveraging support from chambers across Canada to show solidarity within the business community.
President and CEO of the Halifax Chamber of Commerce, Patrick Sullivan was one of the first leaders to spearhead the campaign. As Chair of the CGCC, Sullivan kickstarted the campaign with a video posted on Twitter with the hashtag #weCANtrade.
The video promotes wishful thinking to have prominent CGCC members living in other provinces enjoy the bounty of less strict interprovincial trade.
The campaign is planned to run its course from coast to coast, with Halifax as the first city to lead the charge. It was then followed by videos from Ottawa Board of Trade, Winnipeg Chamber of Commerce and Toronto Region Board of Trade for the first blast on July 28.
“For decades, Canada has been a champion for global free trade and international partnerships – but it’s time we make ourselves a priority too,” says Jan De Silva, President and CEO of the Toronto Region Board of Trade.
“For instance, Canada’s interprovincial trade barriers prevent many businesses from building relationships with domestic partners,” she says. “The fact that it’s easier to do business with Texas than Alberta just doesn’t make sense – not to our business members and not for our economy.”
“Each Chamber of Commerce and Board of Trade in our coalition has been highlighting the absurd barriers that persist, from road weight limits, to different requirements for toilet seats on construction sites, and incredibly high restrictions that prevent selling meat in multiple provinces,” says Riopel.
Moreover, it’s illegal for Canadians to ship alcohol directly to a friend in another province. They can face fines and even in some instances jail time.
“Most provinces allow you to drive to a neighbouring province to buy liquor and bring it home, but they won’t allow you to place an online order and have those products shipped across the same invisible borders,” says Riopel.
Tidal Bay, Nova Scotia’s signature wine, is not easily purchased off the shelves of liquor stores in other provinces. Specific agencies need to acquire it for sale locally.
Compass Distillers’ signature Gin and much-needed hand sanitizers are also not made readily available outside of Nova Scotia.
“This leads to absurd barriers that are difficult to comprehend,” says Riopel. “For example, certain loads can only be transported by day in Alberta, and only by night in British Columbia, forcing drivers to wait for sundown at the border.”
Based on a 2019 survey, nine out of 10 Canadians support free interprovincial trade.
The CGCC’s research indicates the country’s GDP can increase by four per cent as a result of free trade in Canada.
“New opportunities and ideas are going to be crucial to our economic recovery and opening up the Canadian market is just that,” says Anderson. “By reducing the barriers to trade between provinces and territories there is the potential to bring substantial economic gain at a time when businesses need it most.”
When the pandemic spending is prohibiting economic growth and bleeding the government dry with the numerous supports given to businesses, the CGCC wants red-tape reduction and regulatory changes as a response to alleviate the loss and to recover.
“While waiting for all 14 governments to agree on something may be the most ‘Canadian’ thing to do, we simply can’t wait any longer,” says Riopel.
The CGCC claims businesses that create jobs and generate growth within the economy need free trade and need it now.
“There is nothing stopping ambitious Premiers from showing leadership and taking actions on their own to dismantle their own trade barriers,” says Sullivan.
“Removing these restrictions will strengthen Canada’s economy during and after COVID-19 recovery by lowering costs for Canadian businesses, boosting competitiveness and encouraging domestic investment,” he says.
“Premier Kenney has taken bold action on this issue, and we’re proud that Alberta leads the way on dismantling trade barriers,” says Riopel.
“We now have the fewest CFTA exceptions of any province,” she says. “We need to build on that strength and develop bilateral or multilateral trade deals between provinces, who are keen to take bold and decisive action to resolve these barriers permanently.”
It’s alarming for a country like Canada, that prides itself for being a trade nation – by advancing open trade with international partners – to maintain such obsolete barriers to domestic trade, especially during this desperate time for economic recovery.
“The global pandemic has presented countless challenges to businesses, but it has put in place new and effective communication measures that enable us to ensure that recovery measures like this one are heard,” says Anderson.
“In a time of volatility heightened by a global pandemic, it’s inexplicable to maintain antiquated domestic trade barriers that hurt economic activity and growth,” says Riopel.
“We need to strengthen east-west corridors and eliminate interprovincial trade barriers as part of our economic recovery plans, otherwise we miss a once-in-a-lifetime opportunity to bring increasingly divided Canadians closer together through trade, reaping the economic benefits that are right in front of us.” ■
< Back to Articles | Topics: Cover story