Canada Faces Economic Strain as Inter-Provincial Trade Barriers Persist

The Canadian economy is grappling with significant challenges as it faces a loss of 66,000 jobs and an unemployment rate that has climbed to 7.1 percent as of July 2023. Analysts attribute this downturn largely to persistent inter-provincial trade barriers, which hinder economic growth and contribute to rising unemployment.

Despite previous attempts to address these challenges, including the 1995 Agreement on Internal Trade and the Canadian Free Trade Agreement established eight years ago, trade among provinces remains fraught with obstacles. The population has grown, but so has the number of unskilled and unemployed individuals, indicating a growing underclass within the country.

Addressing Trade Barriers for Economic Recovery

Former Bank of Canada Governor Mark Carney, who has been a vocal critic of U.S. trade policies, has also highlighted the detrimental impact of inter-provincial trade barriers on Canada’s economy. In a recent statement, Prime Minister Justin Trudeau echoed the need for collaboration, stating, “By working together, we can expand and build one more interconnected and resilient Canadian economy.”

Trade barriers—often due to conflicting safety regulations, professional licensing, and bureaucratic red tape—are estimated to cost Canada up to 4 percent of its real GDP per capita. This situation is particularly alarming given that 1.6 million Canadians were jobless as of July, according to Statistics Canada. While the federal government has made efforts to provide support, the burden primarily falls on individual provinces to take action.

Ontario has emerged as a leader in reducing these trade barriers, becoming the first province to eliminate all exceptions under the Canadian Free Trade Agreement. Vic Fedeli, Ontario’s Minister of Economic Development, Job Creation, and Trade, revealed that memorandums of understanding have been signed with all provinces except Newfoundland and Quebec.

Fedeli stated, “If you make a product in one province and it meets all [their] regulations, we in Ontario… will accept it as equivalent.” He further emphasized the absurdity of the current trade situation by noting that importing goods from Texas can be simpler than shipping between Canadian provinces.

Opportunities and Challenges Ahead

One significant change has been the easing of restrictions on direct-to-consumer alcohol sales. Previously, individuals from provinces like Saskatchewan would have to travel back to a winery to purchase more bottles. Now, they can order online, showcasing a tangible improvement in cross-border trade.

The push to eliminate inter-provincial trade barriers isn’t new. Former Ontario Progressive Conservative leader Tim Hudak advocated for Ontario to join the New West Partnership Trade Agreement over a decade ago. “This would have created jobs and opened up more markets,” Hudak remarked, underscoring the potential economic benefits of such initiatives.

Alberta is also positioning itself to remove trade barriers, leveraging its competitive edge in oil production. The Calgary Chamber of Commerce asserts that Alberta’s energy sector can play a crucial role in bolstering the economy by providing resources efficiently within Canada. Deborah Yedlin, the chamber’s president and CEO, highlighted Alberta’s operational advantages, stating that the province has a solid foundation for continued production without needing external capital markets.

Despite these positive developments, Alberta faces a significant challenge: a shortage of skilled labor. The impending demand for skilled trades, particularly with the potential expansion of liquefied natural gas (LNG) projects in British Columbia, adds urgency to addressing labor market gaps.

As Canada navigates its economic struggles, the importance of dismantling inter-provincial trade barriers becomes increasingly clear. With a growing population and rising costs of everyday goods, the need for a cohesive national market is pressing. The government must prioritize this issue to foster job creation and stimulate economic growth across the country.

The future of Canada’s economy hinges on the ability to effectively address these barriers and improve the flow of goods and services between provinces. With millions of Canadians currently out of work, there is no reason for the status quo to persist.