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Interprovincial trade barriers continue to frustrate business and depress GDP

Canadian businesses often find it easier and more cost effective to sell internationally than into other provinces
Distance and red tape is hindering cross-Canada commerce, according to some stakeholders.

San Francisco is 220 kilometres closer to Vancouver than Regina, and Austin, Texas is 755 kilometres closer than Toronto.

It’s not surprising, then, that some B.C. commodity producers tend to sell more goods to the United States than they do to the rest of Canada.

B.C. seafood producers, for example, exported $828 million worth of fish and seafood to the U.S. in 2020, compared to $226 million to all provinces in Canada combined, according to BC Stats and Statistics Canada data.

The U.S. is not only a much bigger market, but many major population centres south of the border are geographically closer than major Canadian population centres, so north-south trade can have lower transportation costs than trade from west to east and vice versa.

“Of businesses who reported transportation cost and availability as an obstacle when conducting interprovincial trade over the last 12 months, one-quarter (25.4 per cent) reported it as a major obstacle,” Statistics Canada said in an interprovincial analysis last year.

But apart from the barriers to trade created by distance and transportation costs, persistent regulatory barriers within Canada also continue to impede the flow of goods and labour between provinces.

The Business Council of Alberta has estimated that interprovincial trade barriers are tantamount to a 6.9-per-cent tariff on Canadian goods, and the International Monetary Fund has estimated the removal of these barriers could boost Canada’s GDP by four per cent, or $80 billion.

“We have got some significant concerns around productivity,” said Bridgitte Anderson, president and CEO of the Greater Vancouver Board of Trade. “And [trade barriers] play a big, big role in that.

“So if we were to be able to remove that, that would really raise everybody’s standard of living and help with economic growth across the country.”

“From occupational health and safety to workers’ compensation to truck weights and dimensions, a lack of either consistency or mutual recognition across Canada introduces inefficiencies, inflates business costs and reduces overall productivity. Regulatory misalignment is therefore bad for affordability, competitiveness and prosperity,” Ryan Manucha, a research fellow at the C.D. Howe Institute, recently wrote in the Financial Post.

Some progress has been made on breaking down interprovincial trade barriers since the implementation of the Canada Free Trade Agreement (CFTA) in 2017, said Keyli Loeppky, director of interprovincial affairs at the Canadian Federation of Independent Business (CFIB).

But many barriers remain to a freer flow of goods and labour throughout Canada, and most of those barriers are provincial.

“At the time, CFIB was super excited about the agreement,” Loeppky said of the CFTA. “But what we’re seeing is there are still barriers, particularly around food, labour and alcohol.”

One obstacle that farmers, ranchers and food producers face is that their products must pass federal inspections before their products can be sold in another province.

“Food isn’t able to move between provinces unless a producer is federally inspected,” Loeppky said. “And that has to be the same federal inspection quality whether you’re sending your food between provinces or whether you’re sending your food internationally.

“So it’s a really big barrier for some of the smaller businesses to be able to meet that federal standard. We’re seeing food producers not want to expand beyond their home province or territory because it’s not feasible for many of them.

“What we’re hearing from many of our members is that it’s actually easier to sell their products—not just food but any products or services—internationally than it is within Canada.”

The CFIB recommends reciprocity between provinces. If B.C. inspection standards are good enough for B.C., they should be good enough for Alberta or Ontario, and vice versa.

The CFIB is carefully watching a pilot project in Lloydminster, which straddles the Alberta-Saskatchewan border, that could become a template for all provinces.

The Canadian Food Inspection Agency (CFIA) is working with the Alberta and Saskatchewan governments on a pilot program that will treat the movement of food into and within Lloydminster as though it were located within one province.

Another major headache for business is differing regulations in provinces with respect to workers’ compensation and certifications, with a lot of duplication of fees and paperwork when workers temporarily move from one province to another.

“Businesses spend a lot of time filling out the paperwork,” Loeppky said. “The fees are another aspect. But because workers compensation is different in each province, having to know how to go through the process of registering for [workers’ compensation]. It’s like a full-time job.”

The CFIB would like to see the provinces work out agreements that would allow registration with a workers’ compensation board in one province to count in other provinces when workers move to another province temporarily.

Loeppky said B.C., Alberta, Saskatchewan and Manitoba could set a precedent by coming to a mutual recognition agreement on workers’ compensation through the existing New West Partnership Trade Agreement between the four provinces.

Provincial licensing can also be a barrier to the free interprovincial movement of labour.

“A lot of times we’re hearing from our small business owners who are trying to move workers into the province, or they’re trying to have their workers go work in another province, the delays in getting professional certification from the professional colleges still seems to be an issue,” Loeppky said.

The CFIB would like to see professional licences and certifications obtained in one jurisdiction to be automatically recognized in all other jurisdictions.

As for beer, wine and spirits, there has been some progress federally to break down barriers that once prohibited alcohol to be sold between provinces.

But there are still protectionist provincial barriers to selling directly to customers, said John Skinner, owner at Painted Rock Estate Winery.

“It’s more difficult for me to get my wines into Ontario than it is into London, England,” Skinner said.

Anderson noted that Alberta Gaming, Liquor and Cannabis recently put restrictions on B.C. wines and told wineries in B.C. that, if they want to be able to continue selling their products in Alberta liquor stores and restaurants, they had to stop selling directly to customers.

“This is a perfect example of interprovincial trade barriers that not only hurt the wine producers, but they end up hurting the region itself,” Anderson said.

“If you go on a vacation and visit a small craft gin place and you want to bring stuff back with you, you certainly can bring a bottle back with you,” Loeppky said. “But maybe you don’t see that on the shelves in your home province. You are not allowed to order it from that producer, unless you are in Manitoba. Manitoba allows it. The rest of the provinces do not.

“When we talk about being an economic union, if you cannot order a bottle of booze from one side of the country to the other, I think that’s a really good indication that we still have some work to do.”

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