True North Strong & (Trade Barrier) Free: Reasons and recommendations to eliminate non-tariff barriers to internal trade within Canada
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2020-09-15
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Abstract
The Constitution of Canada delegates decision-making authority over all matters of international and interprovincial trade and commerce to the federal government. Yet interprovincial trade impediments abound, as a result of provincial authority that expressly allows for the regulation of all matters related to property and civil rights. In a federation of equal, self-governing provinces and territories, it is inevitable that discrepancies between regulations will arise out of such independent decision-making. In Canada, wherever regulatory misalignment adversely affects interprovincial trade in goods and services—which is responsible for about one-fifth of Canada’s annual gross domestic product—an internal barrier to trade is said to exist. From the perspective of Canadian firms, internal barriers to trade create duplication and variation in processes and procedures, deter foreign direct and private sector investments in uncompetitive jurisdictions, and fragment the domestic market, which all serve to discourage competition and innovation. From the perspective of Canadian consumers, this duplication, deterrence, and fragmentation increases the price of preferred goods and services, while simultaneously limiting their very availability. Internal barriers to trade impact productivity and business formation, the ease of doing business, and the success of small and medium-sized enterprises, as well as aggregate welfare, labour mobility, and Canada’s ability to realize its future economic growth potential. Historical attempts at dismantling internal barriers to trade have resulted in a patchwork of solutions across the country; certain efforts have fallen short, certain efforts have made real progress, but none have resulted in a truly single market for Canadian goods, services, capital, and labour. The agriculture and mining, finance, food and textiles, and wholesale and retail sectors of the Canadian economy are some of the most interconnected and are ripe for liberalization. Policy solutions to this seemingly intractable issue do exist, having been adopted by federations around the world that have been faced with similar internal trade hang-ups. Mutual recognition agreements, regulatory harmonization initiatives, the greater empowerment of existing regulatory authorities and internal trading arrangements, and the modernization of key domestic public institutions would all help Canada to achieve the economic union that was first envisioned by the Fathers of Confederation. As with any direct interference in the free market, any government support that is directed to facilitate enhanced interprovincial trade would inevitably come with unintended consequences. However, the long-run socio-economic benefits to Canadians from all walks of life and Canada as a whole would outweigh any near-term economic disruptions. In the wake of the current COVID-19 pandemic, Canada will need to use every policy tool in its arsenal to service its massive levels of debt, support its aging population, and preserve its way of life for future generations.
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Godwin, N. M. E. (2020). True North Strong & (Trade Barrier) Free: Reasons and recommendations to eliminate non-tariff barriers to internal trade within Canada (Unpublished master's project). University of Calgary, Calgary, AB.