Governments get marks for prioritizing provincial trade barriers, but must ‘step up’ on results: CFIB

A leading business group is giving some provinces and the federal government good grades for trying to break down Canada’s costly internal trade obstacles, even as those barriers continue to cost Canadians billions of dollars a year.

In its annual report on internal trade due to be released Wednesday, the Canadian Federation of Independent Business (CFIB) credited Ottawa and the provinces for their efforts in trying to tackle internal trade barriers, while acknowledging that most of the “significant progress” stems from the increased attention they’re paying to the problem, without much by way of results.

The federal government, which removed all federal barriers to internal trade a year ago, was given an A+ grade after receiving a mark of C a year earlier. Eight of the 10 provinces received As this year, with British Columbia receiving an A-. Newfoundland and Labrador didn’t receive a grade because of a recent government change.

The grades were much higher than in most years, the report said, because of a new multiplier that kicked in a year ago for those provinces that changed their rules to recognize some of the regulations and standards of other jurisdictions.

But Keyli Loeppky, one of the authors of the report, The State of Internal Trade, said governments should expect harsher grading next year because CFIB will be looking for tangible results. Loeppky, CFIB’s senior director for Alberta and interprovincial affairs, also said that the group wants to see the federal government start to use its ability to penalize and reward provinces for working to tear down trade walls.

Loeppky said Ottawa may have to get tougher because it’s unlikely the provinces will get very far on their own.

“They do need to step up,” said Loeppky. “We’ve seen enough announcements — now we want to see results.”

The federal government has authority over interprovincial trade but has never been willing to use its leverage — perhaps including adjusting big-ticket transfer payments or corporate subsidies — to bring down interprovincial trade barriers.

Despite the good grades, many economists, businesses and even governments say that more needs to be done to remove barriers, and faster.

Intergovernmental Affairs Minister Dominic LeBlanc met a couple of weeks ago with his provincial and territorial counterparts and later released a statement that emphasized the need to uphold previous commitments that have largely not been met.

Most businesses, meanwhile, aren’t yet seeing clearer trade paths across the country, nor are workers in a range of professions finding it easier to move from one province to the next because of unharmonized accreditation standards. According to the report, a clear majority of Canadian small businesses (70 per cent) have not noticed a change in the ease of doing business across provincial borders.

The issue of internal trade barriers has come under greater scrutiny over the last year or so, following U.S. President Donald Trump’s implementation of punishing tariffs against Canada and many other countries. The Trump tariffs created economic anxiety but also raised fresh questions about why Canada still hasn’t created its own internal free-trade zone.

Federal barriers have largely been removed but were mostly related to government procurement and were never the biggest problem. But the broader goal of free trade within Canada has again slowed in recent months despite widespread agreement that provincial impediments are costing the economy billions of dollars and countless jobs a year.

Economic estimates on the cost of internal trade barriers to the Canadian economy have shown quite a range. The federal government has been quoting a figure of between four and eight per cent of gross domestic product (GDP), or about an average of $5,100 per Canadian per year.

The International Monetary Fund (IMF) says that removing these barriers could boost the Canadian economy over the long term by almost seven per cent a year.

No matter the most accurate figures, the elimination or lowering of trade barriers would mean greater competition, and therefore lower prices and better service for consumers. Some domestic companies would also benefit from expanded markets, allowing them to expand, take advantage of economies of scale, and then perhaps sell more overseas.

The political case also seems strong. Beyond the national anxiety over the costs of compromised international free trade agreements, governments already agreed to interprovincial free-trade agreements in 1995 and 2017, while the Constitution states that products from one province shall “be admitted free into each of the other provinces.”

Some provincial politicians, however, are wary of exposing local businesses to out-of-province competitors, despite the benefits to consumers.  And some provincial regulators, Loeppky said, will defend their own rules despite the economic costs.

“It’s really a result of protectionism,” Loeppky said.

Tim Sargent, director of economic growth and prosperity at University of Calgary’s School of Public Policy, said interprovincial trade barriers are no accident. They exist, Sargent said, because many provinces and their regulatory bodies want to protect their local businesses and other parochial interests.

“They suit people’s economic interests. If they didn’t, they wouldn’t be there.”

Provincial barriers to trade and worker mobility in Canada are widespread, including:

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