Canada’s Existential U.S. Trade Challenges: Addressing Internal Trade Barriers as Part of a Solution

Once again, the need to address internal barriers to trade (a.k.a. interprovincial trade barriers) is top of mind in Canada. Eliminating these barriers is seen as being a key part of a suite of solutions to our current Canada-U.S. trade challenges that will include “Buy Canadian” policies, among other efforts.  

But we need to start with a debate grounded in history and reality, not sloganeering. And our debate needs to begin with a few hard truths.  

First, while arguably of significant impact, resolving these barriers will not undo the damage caused by potential U.S. trade action. Efforts to eliminate internal barriers will have to be part of a logical suite of policy solutions we need to consider, but in the absence of a broader set of policy and regulatory changes it will not be enough. Fixing internal barriers is not the panacea that some make it out to be. 

Second, a real public debate needs to occur around what is on the table and what is not. The debate on internal trade barriers has quietly occurred for years around meeting tables, with limited political or public attention. The time is at hand for governments to justify to the public why specific barriers exist, which are justified and which should be eliminated.  

Lastly, we need a reality check – it will be difficult to accomplish in a few months that which we have been unable to deliver collectively over the last 30 years.  On this point it is important to note the efforts to eliminate barriers that have been ongoing since 1995 when Canada’s First Ministers established the Agreement on Internal Trade (AIT), setting in place a set of rules to govern internal trade and identifying clearly areas in need of resolution. 

Fingers are so easily pointed – by the federal government, by academics and the media, by business groups – at a lack of attention paid to internal trade.  In the years since 1995, Canada’s Premiers have dedicated much time and effort to addressing internal trade barriers. At the founding meeting of the Council of the Federation in 2003, a key priority flagged was the need for “strengthening the economic union, including enhancing internal trade, improving labour mobility, and harmonizing and streamlining regulation.”  

At their follow up meeting a year later, Premiers agreed to a detailed internal trade workplan, including specific deadlines imposed on their Ministers. But by the time Alberta hosted Premiers at the 2005 meeting in Banff, NAFTA and U.S. border issues dominated discussions, with internal trade quietly slipping off the agenda. During meetings in the following years internal trade barriers would ebb and flow as an issue for governments.  

In 2006, to jump start work which was already stalling out, the provinces of BC and Alberta signed what was referred to as the “Trade, Investment and Labour Mobility Agreement”, focused on eliminating barriers, regulatory duplication and preferential procurement policies. In 2010, Saskatchewan joined the effort, and the agreement was rebranded as the “New West Partnership”, and in 2016 Manitoba joined in, making it a truly Western undertaking. And building on that momentum, governments agreed to replace the decades-old AIT with the “Canada Free Trade Agreement” in 2017. Momentum at last! 

I was fortunate in my career to be able to attend many of those meetings as part of the Government of Alberta delegation, but to look back at those meetings is to be struck by the fact that internal trade issues, despite frequently being top of mind, have also clearly not been appropriately resolved. Over the years other, bigger issues crept to the top of the agenda, forcing issues like internal trade off the agenda, or at least well down the agenda.  

It is fair for one to ask though that given all the attention paid over the years to this issue, why have we not slain the interprovincial trade barriers dragon?  

I would point to two factors which help explain our limited successes in eliminating barriers to trade. First, the frequent lack of political will. When governments have had success (like the early years of the New West Partnership) there has been not only a degree of political will but a political alignment between the Premiers of the day. BC Premier Gordon Campbell, Alberta Premier Ed Stelmach and Saskatchewan Premier Brad Wall saw eye to eye on many issues, making their commitment to internal free trade an imperative of their respective governments. This kind of alignment – politically and philosophically – only comes along so often. We appear to be at the cusp of such a moment today and governments are now seized with the need to move expeditiously to remove barriers. 

Second, political or economic self-interest tends to override necessary collective action. The desire to prop up or support local businesses, local products or local regulations is strong in any political system. Pressure is so easily brought to bear on any government to support local products or local service providers. Ironically, this pressure is often brought to bear by the very same business groups that also support the elimination of barriers.  

In recent days, Canada’s First Ministers and their Ministers for Internal Trade, have agreed to an aggressive schedule to remove barriers in the weeks and months ahead. A critical piece will be what are referred to in trade agreements as “exceptions”.  Every government has delineated areas that are deemed to be exempt from the agreement.  In fact, when the Canada Free Trade Agreement was signed in 2017 there were well over 100 pages of exceptions, only some of which have been undone in the years since.  

In their March 5 statement, governments have committed to conducting a review of exceptions by June 1. Let’s be clear though that this is not a commitment to remove exceptions but to simply review them.  And let’s also be clear that this lengthy list of exceptions must be addressed to achieve success.  

Over the last few years, individual provinces like Alberta and Manitoba have taken steps to unilaterally delete many of their exceptions, and more recently the federal Minister pledged to reduce almost half of federal exceptions.  

Pressure needs to be brought to bear on this massive list of exceptions and governments need to be compelled to make public their arguments for retention of these limitations on free trade. Some exceptions might be deemed acceptable, but through an open debate, we might also be stunned at the extent of impediments to internal trade that persist. 

Other areas of focus will need to be around mutual recognition of regulations (a favourite one is differing truck weights allowed). Again, let’s have a transparent discussion as to why differences occur and lean towards far more harmonization (while compelling governments to defend differences).  

Regulatory burden is a significant drag on efficient movement of goods even within provinces, let alone between provinces. A “red tape reduction” exercise would have to be a necessary part of an internal trade push. 

To make quick headway perhaps we need to be bold and adopt an operating ethos built on the “reverse onus” principle – be prepared to prove why something should exist, expend political capital defending why it should exist and bear the political consequences of retaining existing limitations. And delete any exceptions that governments are unwilling to defend publicly. 

Lastly, a lack of labour mobility between provinces has been a long-standing irritant, particularly as it pertains to professional certification. In their March 5 statement, Ministers have agreed to go as far as “to develop a service standard of 30 days or better to get people working faster” and to “provide a plan for Canada-wide credential recognition, while taking into account jurisdictional specificities such as language provisions, by June 1”.  

These commitments sound good until one pauses to consider the off ramps built in.  It is not a commitment to eliminate credential recognition – it is a commitment to act expeditiously (30 days or less) in approving the credentials of those moving between provinces. It is also not a commitment to solve this by June 1 but to “provide a plan” by June 1. Oh, and “jurisdictional specificities” will be “taken into account”. This could simply mean language carve-outs for Quebec, but the wording is “such as”, meaning other “specificities” could be protected. All the more reason to have a public discussion built on the principle that governments must actively defend those barriers they wish to see remain. 

The plan to address internal trade barriers in the months ahead becomes clear:  

• stop talking in generalities and start talking specifics; 
• attempt to set aside political and economic self-interest;  
• focus on undoing decades of protectionist policies;  
• demonstrate the political will necessary to resolve long unresolvable divisions;  
• and do it amid an existential crisis brought on by President Trump…which is on top of a federal election cycle. 

There has never been more pressure to achieve success as we see today. The developing consensus – between governments, business groups and the public – is clear. This is a priority, bordering on a mantra. But we have seen this be a priority many times in the last 30 years, only to see other issues come to the fore and push barriers off the agenda. It could not happen again could it? 

Canada’s Internal Trade Ministers met on February 28 and reached agreement on the future directions as noted above. Canadian Press reported on the outcomes of the meeting and closed with one sentence: 

“A press conference with members of the Committee on Internal Trade planned for Friday afternoon was cancelled due to a ‘lack of media interest.’ ”

*The writer was with the Government of Alberta’s Ministry of International and Intergovernmental Relations for over two decades, including serving as its Deputy Minister from 2008 to 2011. He also served as CEO of Alberta Forest Products Association.