Economic growth depends on eliminating internal trade barriers

Last month I had the privilege of participating in the inaugural Atlantic Economic Forum hosted by the Mulroney Institute at St. Francis Xavier University. The key takeaway for me was an answer given by Canada’s Immigration Minister Sean Fraser in response to a question about the folly of barriers to interprovincial trade, investment and labour mobility.

Fraser revealed that back when he was Parliamentary Secretary to the Minister of Finance, he’d asked department officials what specifically the federal government could do that would have the greatest positive impact on our economic growth, competitiveness and productivity. The answer was to offer child care and eliminate interprovincial trade barriers.

While a national child-care plan has since been created, internal trade barriers remain. As CEO of the Business Council of Canada (BCC), I meet regularly with foreign diplomats and visiting dignitaries, and those meetings rarely end without their expressing disbelief that it’s easier for Canadians to do business internationally than intranationally.

Canada today has 15 free trade agreements which encompass 51 different countries, with many more currently being negotiated. We are the only country in the world that has free trade agreements with every other G7 country and most of the G20. It’s therefore completely absurd that we cannot have free trade among our 13 provinces and territories.

While Canada has two internal trade agreements — the Canadian Free Trade Agreement and the New West Partnership Trade Agreement — they are, at best, partial solutions. The CFTA is limited in scope, leaving too many interprovincial barriers in place. The NWPTA is limited in scale, covering only British Columbia, Alberta, Saskatchewan and Manitoba.

To be clear, this issue is almost as old as Confederation itself. The number of reports and studies devoted to the subject could easily fill a large library, with all of them reaching the same inescapable conclusion: the lives and livelihoods of Canadians and their families would benefit significantly from our getting rid of all the barriers between all the provinces.

A November 2021 report by Deloitte — whose CEO, Anthony Viel, is a BCC member — found existing interprovincial barriers have the same impact as a 6.9 per cent tariff on goods. Removing them could result in a 3.8 per cent ($80 billion) boost to Canada’s gross domestic product and a 5.5 per cent increase in wages, resulting in a 5 per cent increase in household income.

Again, none of this is new. The cost to Canadians of interprovincial trade barriers is among the most openly and widely acknowledged facts — one generally accepted among political leaders of every party stripe. The reason they still exist is just as commonly known: removing them will require an almost unprecedented unanimity between provinces.

I say “almost unprecedented” because the federal government has a successful example it can replicate. It’s the one Minister Fraser noted in his answer at the Atlantic Economic Forum: the national child-care plan. The federal government should lead with the same approach to eliminating intranational trade barriers as it did establishing national child care.

More specifically, the federal government should leverage federal transfers as well as work collaboratively with business, labour unions and other civil society groups — as it did to make child care a reality — to persuade all provinces and territories to sign on to a national framework to facilitate interprovincial free trade, investment and labour mobility.

While it’s true the government has recognized the issue of interprovincial trade barriers in successive federal budgets, its efforts to tackle them have often been ad hoc, piecemeal and little more than token half measures. It’s time for a bold new strategy: a directed Team Canada approach on the same scale we apply to international trade negotiations.

Every day I speak with business leaders — both foreign and domestic — who are thinking about making investments in Canada. Although we offer enormous advantages, including proximity and preferential access to the United States market, highly skilled labour and abundant natural resources, our internal trade barriers remain a massive deterrent.

We live in an age of tremendous geopolitical shifts, where events around the world can result in a sudden, severe impact on our domestic economy. Very few things are exclusively within our control. Eliminating barriers to interprovincial trade, investment and labour mobility is one of them, and it is the best thing Canadians can do to boost national economic growth.

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