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Canada’s Problem With Interprovincial Trade Barriers

Appeared in the Financial Post
Authors:
Release Date: May 22, 2009

Even though the free-trade negotiations between Canada and the European Union began earlier this month, the negotiations hit its first roadblock when the issue of interprovincial barriers came up. As one of the European diplomats pointed out, the European Union is not interested in trade agreements with individual provinces but rather with Canada as a whole.

The problem of interprovincial barriers is nothing new to the Canadian negotiation team. Canada has been struggling with this issue for quite some time. The Agreement on Internal Trade (AIT), between all Canadian jurisdictions, that came into effect in 1995 was specifically aimed at reducing and eliminating barriers to free movement of persons, goods, services, and investment within Canada. Unfortunately, AIT failed on many fronts leaving many interprovincial barriers still in place.

Frustrated with the AIT, the provinces of Alberta and British Columbia signed the Trade, Investment, and Labour Mobility Agreement (TILMA) in 2006 with a goal of creating a seamless economic region between the two provinces by eliminating many of the existing interprovincial barriers. The TILMA inspired the adoption of the TILMA-like labour mobility provision and enforcement mechanism in the AIT by the Canadian ministers. Despite these positive steps, there are numerous laws and regulations, regardless of how minor they might seem, that are reducing Canada’s productivity and making its businesses less competitive internationally.

Interprovincial barriers are and will remain a major roadblock in the current negotiations as well. To be fair, however eager the Canadian team is in negotiating with the European Union, the issue of interprovincial barriers will not be easy to overcome. Creating a freer single market within Canada has not been easy thus far mainly because it requires an agreement of all Canadian provinces and territories. It will require a lot of hard work and genuine efforts from all sides to deal with interprovincial barriers. But the free-trade agreement with the European Union is an opportunity for the Canadian governments to finally resolve the remaining interprovincial barriers.

One of the ways to eliminate many of the interprovincial barriers is for the provinces to join TILMA. This has been considered by some provinces initially, such as Saskatchewan, but has been rejected in the end. Even if the TILMA is adopted by all provinces, the agreement would not eliminate all of the interprovincial barriers, due to a number of exceptions including the regulated marketing and supply management of poultry, dairy and eggs.

Another option might be to adopt something similar to mutual recognition of regulation introduced in Australia in 1993. The aim of this regulatory reform was to remove regulatory barriers to free flow of goods and labour between Australian states and territories. The way it woks is that each jurisdiction recognizes regulations created and administered by other jurisdiction, even if they vary from their own regulations. This is effect means that goods allowed to be sold in one jurisdiction, can be sold throughout the nation.

Adopting something similar in Canada would solve the problem raised by the European Union since it would allow them to sell its goods throughout Canada if they meet the laws and regulations of one province. If Australia is any indication, this type of mutual recognition would not result in unacceptable reduction in standards as some might fear but rather, it would increase trade within Canada.

Needless to say, Canada should consider what other countries and jurisdiction have done to eliminate interprovincial/interregional barriers and adopt what best fits its provinces and territories. What Canada should not do is to miss yet another chance to settle the issue of interprovincial barriers once and for all.

The benefits of free trade are well known. The European Union is Canada’s second major trade partner with more than seven per cent of our exports going to the 27 nations in the European Union. Let’s hope that the Canadian government takes this trade negotiation as an opportunity to tackle the interprovincial barriers that have prevented it from achieving a single economic market within Canada.



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