Knock down provincial trade barriers

While Canada fares very well when it comes to agreements with other countries, there is no free-trade paradise within our own borders.

I wonder if someday a politician will dare to take on the issue of monopolies and protectionist legislation preventing Canadian provinces from freely doing business with each other.

This spring, the Conservative government announced its plan to modernize and rewrite the antiquated Agreement on Internal Trade to bring it in line with the current global economic reality. Enacted in 1995, the agreement included many barriers allowing provinces to exclude sectors deemed "sensitive." According to the government, these barriers are costing the Canadian economy $50 billion a year.

In fact, there are three types of barriers that impede free trade within Canada. First, there are what I would call regulatory and bureaucratic "irritants." For example, requirements for the type and size of tires on trucks transporting merchandise interprovincially differ from one province to the next.

A larger and more harmful type of barrier relates to government monopolies, including those that regulate liquor sales, supply management in the farming sector and trade union monopolies.

Contractors from Ontario have a tough time landing construction contracts in Quebec. In fact, construction in the new housing, commercial, institutional and industrial sectors in Quebec must be carried out by unionized workers only. Under Quebec regulations, employers are also required to hire workers who have a competency certificate in each of the 30 or so construction trades. For example, ceramic tiles can only be installed by a tile setter and not a resilient flooring layer who puts down carpets. Yet, a resilient floor layer is perfectly capable of laying tiles. If regulations were more flexible, contractors and their clients could save a lot of money.

Would you like to drink wine from BC’s Okanagan Valley or Ontario’s Niagara region without your province’s liquor monopoly having you over a barrel? Good luck. And yet in 2012, Ottawa adopted Bill C-311 allowing interprovincial purchases of wine, provided it was for personal consumption. This bill also permitted online purchases of bottles from out-of-province wineries. Therefore, in theory, you could have bottles shipped to your home without going through the provincial liquor board, which applies a markup to your bill. However, Ottawa left it up to the provinces to set their own rules in implementing this bill. Not surprisingly, the government monopolies said they would ensure that nobody could circumvent the rules. To date, only two provinces — British Columbia and Manitoba — allow their residents to order wine from other provinces and have it shipped directly to them.

Lastly, there is supply management. This protectionist system discourages milk, chicken and egg imports and restricts the production of some commodities in the provinces, which keeps prices high. This system fails Canadian consumers while benefiting producers, the majority of which are in Quebec and Ontario. It’s no wonder that over the past 15 years, milk prices in Canada have risen twice as quickly as inflation, and in some provinces supermarket chicken is twice as expensive as what is charged in the US.

Canada fares very well when it comes to agreements with other countries — it has 43 such signed trade agreements. However, there is no free-trade paradise within our own borders. As far as some companies are concerned, doing business with a neighbouring province is more difficult than doing business with the US or internationally. If the Conservative government intends to address the issue, that’s good news. But the question remains — how far will it dare to go?

About the Author

David Descôteaux


David Descôteaux is a Montreal-based business columnist.

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