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Inter-provincial barriers flagged | The Western Producer

Canada’s industries often ignore their own markets, focused instead on foreign destinations.

That needs to change, two domestic trade experts urge. With foreign markets increasingly subject to protectionism and ravaged by pandemic disruptions, the domestic market could become more important than ever.

That could reveal flaws and constraints that limit the Canadian market’s depth today and could stop it developing to the potential producers need.

“We’ve been reminded of the value of internal trade relative to international trade,” said Trevor Tombe, a University of Calgary economist, in a C.D. Howe Institute panel discussion.

“I think we need to talk more about internal trade than (just) international trade, which tends to get much more of the attention.”

Current impediments to province-to-province trade add costs the equivalent of five to 15 percent, a “hidden GST” that could be as much as the impact of three GSTs.

If the various laws, regulations, measures and other bureaucratic complications that cause these costs were eliminated, interprovincial trade could rise dramatically, the experts said. Trade within Canada could become as important as export trade.

“It would allow the highly productive, competitive firms to expand,” said Ryan Manucha, a Harvard professor.

Canada’s internal trade barriers can be profound, covering everything from product specifications to building and construction codes and professional and trade qualifications. They all add up to a less flexible national economy that prevents the most efficient companies from thriving and props up many weak players who are a drag on economic efficiency.

Federal and provincial politicians and officials have been deliberately working since the mid-1990s to reduce the obstacles, but many remain.

Interprovincial co-operation has improved, with an Alberta-British Columbia agreement growing to become a Western Canada-wide internal trade agreement, but much could yet be improved.

The great possibilities of overseas markets often distract attention from internal wrangles, but experts said exporters must see the vulnerabilities revealed by the COVID-19 situation.

“We saw issues with supply chain readiness and durability, especially through the period of April and May,” said Manucha.

“I think it’s really brought to the fore the importance of interprovincial trade and ensuring that while we may not be able to rely on our partners abroad, especially in periods like the pandemic, we should be able to rely upon one another to keep the flood of goods coming.”

Agriculture is particularly vulnerable to disruptions to international trade and supply chains, with most of Canada’s production exported.

Agri-Food Economic Systems of Guelph, Ont., last week released a commentary calling for preserving and improving domestic market access for Canadian farmers and agriculture, especially in this time of pandemic.

Indeed, the agricultural think-tank fears that problems accessing foreign markets could back up production on farms and lead various provincial governments to attempt to control access to provincial markets.

“Provincialism and beggar-thy-neighbour provincial policy to grow (or) retain provincial industries as economic development could result,” warn Douglas Hedley, Al Mussell and Ted Bilyea. (See previous story at www.producer.com/2020/08/farmers-need-more-support-in-new-world-order-report/.)

The C.D. Howe Institute experts said that the pandemic has revealed flaws in “long and complex” international supply chains and could shine a light on existing domestic obstacles, but “this is an opportunity to really recalibrate and rethink what we have in place that governs internal trade… and where are the roadblocks.”

One of the achievements since 1995 has been the creation of a dispute settlement mechanism, which not only allows for disputes to be discussed, but also provides a forum in which various snags and challenges can be first noticed.

Manucha said many interprovincial trade problems arise in the nitty gritty details of codes and regulations, the “unassuming regulatory codes” that govern many businesses, industries, trades and professions.

But Tombe said there can be simple resolutions to many vexing technical barriers to trade, such as simply accepting the regulations and codes operating in other provinces.

“That would be one way to dramatically wipe away a lot of (what) inhibits internal (trade),” said Tombe.

“Just recognize (that) if it’s good enough in another province it’s good enough in yours.”

Manucha said another challenge is that the dispute mechanism tends to work well for complaints brought directly by a provincial government, but not as well for individual businesses.

“It’s a little weak,” he said.

Recently, Alberta raised hopes among domestic free-traders by suggesting it might unilaterally begin reducing restrictions on out-of-province workers and professionals.

“The province has the power to do that,” said Tombe.

Manucha said governments and industry could ease Canada toward more integrated national trade by liberalizing restrictions on areas where improvements would be broadly popular, and where there seems to be a national imperative to have a strong industry, as in finance.

With the current focus on the importance of within-Canada trade due to the precariousness of international markets during the pandemic, Manucha said now is a good time to take the initiative on a longstanding problem.

“It’s an important wave of momentum to follow through on,” said Manucha.

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