The federal government’s interprovincial trade push is a political distraction, not a solution
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Political and business leaders constantly warn of supposed barriers strangling Canada’s east-west trade, claiming it’s easier to do business with foreign countries than within our own borders.
Transportation Minister Anita Anand argues that removing internal obstacles to trade—whatever they may be—would lower the cost of everything in Canada by 15 per cent while adding $200 billion to Canada’s gross domestic product (GDP).
If that sounds too good to be true, it is.
More trade takes place between provinces than between U.S. states or European Union countries. While provincial trade was pulled southward following the Canada-U.S. Free Trade Agreement of the late 1980s, this shift had nothing to do with internal barriers in Canada. It was driven by profits.
 Transportation costs, not regulations, are the real obstacle to interprovincial trade. |
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While discussions often focus on provinces trading with one another, it is crucial to remember that trade actually occurs between companies that buy and sell goods and services to each other and to consumers. There are simply far more companies and consumers in the more populated and, for most parts of Canada, geographically closer United States.
Time and again, Canadian companies say the main barrier to interprovincial trade is transportation costs and the sheer size of the country.
This raises an important question: what is driving the current interprovincial trade mania?provincial trade mania?
In a scramble to appear in control of the Trump tariff emergency, the federal government is searching for what it calls “no-cost approaches” to diversifying trade away from the United States, including within Canada.
One such approach—a proposal that all provinces should mutually recognize the regulations, standards and worker training requirements in all other provinces as equivalent to their own—could save businesses in Canada some money. But the cost of mutual recognition could easily be borne by workers.
An overly broad mutual recognition agreement between provinces would be a classic recipe for a race to the bottom on standards. Low standards or weaker health and safety protections in any province, however inadequate, would have to be recognized across the country.
For example, following the tragic Humboldt Broncos bus crash, all provinces agreed to adopt minimum entry-level training requirements for heavy truck drivers. While it took far too long for them to harmonize training requirements at an acceptable level, this targeted and more thoughtful approach to dealing with internal trade irritants is far preferable to the politically expedient mutual recognition approach.
The provinces and federal government are addressing the small list of other trade irritants through a regulatory reconciliation process under the Canadian Free Trade Agreement. There are issues with the process, but they stem from a lack of transparency and public involvement.
Provincial liquor boards, which restrict trade in alcohol for public health reasons, are the only obvious barrier to interprovincial trade in Canada. Even here, provinces are finally, albeit slowly, making it easier to buy wine from other provinces.
What Minister Anand and a few provinces are proposing with respect to mutual recognition of regulations and standards would weaken democracy and allow businesses to cut corners to boost profits. We are rushing headlong toward this bad outcome under the illusion of standing up for Canada and fighting Trump.
It would be far more beneficial for east-west trade to improve Canada’s trade infrastructure, including rail, roads and electrical transmission lines. Companies will ship more within Canada if it is faster and cheaper to do so.
Overheated rhetoric about internal trade barriers will not defend us from an autocratic U.S. administration intent on sucking jobs and investment out of Canada. It will not get resource projects up and running faster or ensure there are new markets for Canadian goods.
Seeking new ways to hamstring governments trying to bolster local jobs and industry or strengthen public protections points us in precisely the wrong direction.
Stuart Trew is Director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives.
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