Free-Trade Farce

Thanks to a new agreement between Ottawa and the European Union, Canada and the EU appear to be opening up freer trade terms than what’s currently in place between provinces.

Why is this a problem you say?  Because businesses are operating today in an intensely competitive global economy and it is important for business to have a domestic market in which they can build scale.  Canada is a relatively small economy to begin with, but by Balkanizing the economy into 13 regional ones then it becomes that much more difficult for Canadian companies to build the scale they need to be able to be globally competitive.

Furthermore, when products and/or services hit a wall at each provincial border (thanks to the hindrances caused by the limits of the AIT – Agreement on Internal Trade) they add to the annual cost in productivity losses which reach into the billions annually.  Following are five examples of why we are all paying more to buy Canadian;

Gasoline – blend requirements are different for each province meaning refiners can’t produce single batches that can be shipped across the country.  Why would Saskatchewan and Manitoba have different regulations on the blending of ethanol in gasoline?

Professional Services – whether it be dentists, accountants, home renovators, or bill collectors they would all be subject to more competitive pressures if it were easier to operate between provinces.  Transparent boarders would drive the opportunity to build scale which along with increased competition would lead to improved pricing for customers.  Currently individual provinces are responsible for jurisdictional accreditation, meaning a dentist in Ottawa must jump through several hurdles to open a clinic across the bridge in Gatineau QC.  They may as well try to expand their operation to France.

Preference for government contracts – is still routinely given to local or provincially based companies when a request for proposal is released for a project by a municipal or provincial agency.  The CETA trade deal with Europe as well as a new trade agreement with Korea appears poised to open up government procurement to foreign firms, but there is nothing enshrined that says Canadian firms from other provinces are equally deserving of the same.

Flow of goods – are continually interrupted and hindered by a slew of different transportation rules in each province.  Differing truck weights and dimensions, not to mention tire sizes currently create unnecessary headaches for logistics firms.  Smoothing the flow of goods across the country itself would quickly add to overall productivity increases.

Chicken and dairy – provincial marketing boards and not the free market forces of supply and demand determine the prices we all pay for everyday staples like chicken, milk and eggs leading to overall higher prices.

In an era so highly focused on international free trade, it seems rather bizarre that Canada has so many internal barriers that impede the movement of goods, services and people between provinces.  It’s apparent that freer trade with the Eurozone leads to better headlines than a blockbuster deal in the milk trade would between Ontario and Alberta.