Opinion: The opportunity for Canada to grow faster is now — by unlocking our internal trade market

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Using trade data and models, the IMF’s calculations and conclusions are interesting indeed.

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The report estimates that trade barriers within Canada represent the equivalent of a nine per cent tariff applied to internal trade in goods and services. These costs are mainly concentrated in services — which account for the majority of interprovincial trade — with barriers in some sectors, including educational and health-care services, exceeding the equivalent of a 40 per cent tariff.

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The report delicately and diplomatically notes that “such a level (of tariffs) would be prohibitive in most international trade agreements.” To be blunter, the IMF’s estimated nine per cent “internal” tariff is almost double the average tariff rate currently facing Canadian exports in the volatile U.S. market. That rate, as cited in last week’s federal economic statement, is 5.2 per cent — “the lowest rate among all major U.S. partners.” To be blunter still, one could conclude that we’re charging ourselves more than the Americans are.

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The IMF report goes on to estimate that fully eliminating internal trade barriers could raise Canada’s real GDP by nearly seven per cent over the long run — roughly $210 billion in today’s terms.

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“Even modest reductions in internal trade costs could help offset sizable adverse shifts in external trade conditions, underscoring the role of domestic integration as a resilience buffer. The evidence is clear: Internal barriers remain large, economically costly, and increasingly out of step with the needs of a modern, vibrant, service-intensive economy. Removing them offers one of the most powerful — and least fiscally costly — levers to raise productivity, strengthen resilience, and support inclusive growth. The opportunity is now.”

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But how? Notwithstanding a new majority government status, the need to sustain a high level of good old cooperative federalism these days prevents the federal government from wielding the heavy constitutional hammer available to it to smash barriers to trade within Canada.

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However, the IMF’s report and references to “levers” did not go unnoticed by the Canadian Chamber of Commerce, which represents 200,000 businesses nationally. In its presentation before the standing committee on trade last month, the chamber said, “We cannot politely accept that we’ve come this far only to settle for ‘good enough.’ If momentum slows, the federal government should consider applying conditions on major federal transfers to provinces and territories requiring the elimination of specific barriers to interprovincial trade and labour mobility.”

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Intriguing. With a raft of new Canada Strong expenditures about to be rolled out across Canada, maybe Ottawa should venture beyond the traditional approach of seeking matching financial commitments from provincial/territorial partners for these projects. It could require, as a condition of funding, a full and complete elimination of trade barriers maintained by these partners. If provinces and territories resist, they should be obligated to defend their claimed exceptions before a CFTA tribunal and prove that their domestic businesses would be injured if protection was removed. A combination of approaches like these could accelerate the erasure of CFTA exceptions and build a fast-track to free trade to replace an off-ramp-ridden slow trail.

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As the IMF report concludes, “the prize is large. Turning 13 economies into one is no longer just an aspiration — it is an economic imperative.”

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Surely this could this be something to celebrate this Canada Day.

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In the meantime, good luck finding an Ontario wine at the B.C. LDB for such a celebration. Over the past year, the number of Ontario table wines listed at the LDB has fallen from three to one. B.C.’s wines have been rewarded with the same treatment in the Liquor Control Board of Ontario. Sour grapes indeed.

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Stuart Culbertson is a former deputy minister in the B.C. government. He served as B.C. trade representative during the Canada-U.S. Free Trade Agreement talks.

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