Interprovincial trade barriers are falling. But rewriting old rules will take time

Interprovincial trade barriers are falling. But rewriting old rules will take time

IMF estimates that removing internal trade barriers could boost Canada's GDP by $210B

The collapse of talks with the United States has added urgency to reducing trade barriers within Canada. But experts say it's not a simple fix.

Efforts to boost interprovincial trade have ramped up recently. Nine provinces agreed last month to allow direct-to-consumer alcohol sales across provincial lines, for example.

But even this kind of progress, dealing with a niche side of the booze industry, shows the challenges of opening up sales. Some provinces have added on extra charges and rules, on top of what producers face in their home province.

"Having to pay two wholesale markups — that's just lunacy," said Jeff Guignard, chief executive officer of Wine Growers British Columbia.

Forcing B.C. wineries to also register in other provinces, just to mail wine there, goes against the push to open up trade within Canada, he said.

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"It's just noise, right? And bureaucratic nonsense that doesn't need to happen," said Guignard.

"For too long we've treated every province as though it's a completely different economy, which it is not. We're talking about one Canadian economy."

The potential benefits of simplifying domestic trade are substantial.

The International Monetary Fund estimates that removing internal trade barriers could boost Canada's real gross domestic product upwards of seven per cent, or about $210 billion, over the long term.

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CIBC put out a less optimistic figure in March: a potential one per cent boost to the GDP. But the bank noted that it would still be helpful and is very much worth pursuing.

Federal and provincial ministers have been meeting in Iqaluit this week to try and push forward that "one Canadian economy" and work on removing barriers.

Ahead of the meeting, Internal Trade Minister Dominic LeBlanc said in a statement that while progress has already been made, there's much more to do as the United States fundamentally changes its approach to trade.

Priorities at the meeting included working toward an agreement on a freer flow of services across the country by the end of the year, harmonizing the approval process for prefabricated homes and new building materials, and making it easier to trade food in Canada.

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The renewed push on removing provincial barriers is welcome, said Corinne Pohlmann, executive vice-president of advocacy at the Canadian Federation of Independent Businesses.

"It had felt in the last six months that they took their foot off the pedal a little bit," she said.

Pohlmann said important progress has been made, such as the agreement by provinces to recognize the standards of other provinces when it comes to goods.

The deal came into force in June, but making sure it's actually working is another matter, she said.

"Unfortunately, it now gets into more of the nitty-gritty-detail side of things, and actually looking at how each province is actually operating on the ground."

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The layers of rules mean that someone can buy a ladder or chainsaw from another province but not necessarily be able to use it on a job site, she said.

"If we're really going to take it seriously to become one economy across the country, we really have to start looking at some of these things more closely."

Looking closely is what University of Ottawa professor Wolfgang Alschner is trying to do.

Alschner, who is the Hyman Soloway chair in business and trade law at the university, is using artificial intelligence to catalogue regulations across Canada and find where there's unnecessary divergence.

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Part of the problem is many of these rules have been in place for ages and, even if antiquated, no one's been forced to deal with them, he said.

Public toilet seats are an example, he said. Ontario is the only province that requires a U-shaped seat. It's a rule that aligns with U.S. industry standards, limiting trade options with other suppliers.

"Even though it's sort of a ridiculous example, it just shows you how through vested interest, and through sort of locked-in trade relationships, we're actually not trading enough with the rest of the world."

To find other hidden barriers to trade, Alschner is working to assemble the 17,000-or-so regulatory texts in Canada, each of which has multiple thousands of sections, to substitute a very anecdote-based approach with something more systematic.

"We are talking about really an immense maze of regulatory material," said Alschner.

While provinces have made progress on recognizing each other's regulations, it would be better to just have one set of rules, he said.

"It matters, because ultimately we care not only about cutting red tape on paper, but actually facilitating more trade in real life, right?"