On Nov. 19, the inter-governmental Committee on Internal Trade is meeting in Yellowknife, N.W.T., to discuss trade barriers and labour mobility between provinces.
Ryan Manucha, a research fellow at the C.D. Howe Institute think tank, says he will be interested to see whether momentum for reducing internal trade barriers still exists.
“I am worried that [momentum is] flagging … I’m eagerly awaiting the press readout from that meeting to determine if there’s still a pulse on this file,” said Manucha, who specializes in interprovincial trade.
Reducing internal trade barriers has been a key priority for the Carney government — and may become even more pressing if trade talks with the U.S. continue to stall.
But the government’s success on this file is far from assured.
Some provinces have made significant strides in reducing trade barriers, says Manucha and others. But the reality is that Canada still remains more of an economic patchwork than a single market.
“[N]ot all provinces have trade agreements in place, and non-agreement barriers still exist,” says an August report by TD Economics on interprovincial trade.
Incremental progress
Seven governments — including the federal government — have now introduced or implemented mutual-recognition legislation, Manucha says. Mutual-recognition laws allow products or licenses from one jurisdiction to be accepted by another by default.
However, the scale of the provinces’ ambition varies widely. Manucha says three provinces in particular stand out as leaders.
“ Even before Trump 2.0, Alberta has been a leader on internal trade,” he said, citing the province’s 2021 Labour Mobility Act as an example of legislation that aimed to boost labour mobility.
More recently, Ontario and Nova Scotia have been at the forefront.
“Since this year, I think two strong leaders [are] Ontario and Nova Scotia,” he said.
In April, Ontario eliminated all of its exceptions to the Canadian Free Trade Agreement, a 2017 agreement that aims to reduce internal trade barriers, but which includes various carve-outs for protected sectors.
This means formerly protected Ontario sectors, such as energy and agri-food, are now subject to the same free trade obligations as other sectors.
“Obviously Ontario being the economic heavyweight within Canada, you kind of need Ontario to sustain the charge,” Manucha said.
Ontario has also introduced an “as-of-right” framework that will allow out-of-province workers in regulated, non-health occupations to begin working in the province while they await a certification decision. This change takes effect Jan. 1.
Nova Scotia has also adopted mutual-recognition laws. But this is not the only thing that impresses Manucha.
“One thing that I’ve seen is the ingenuity and the entrepreneurship amongst regulators, particularly within Nova Scotia,” he said, citing the province’s rethinking of health procurement as one example.
Quebec is often cast as a hold-out on internal trade, but has in fact made significant moves as well. In October, it adopted Law 112, which streamlines labour mobility and generally allows products sold elsewhere in Canada to be sold in Quebec without additional requirements.
Other provinces have been slower to embrace sweeping reforms.
“New Brunswick and Newfoundland and Labrador have arguably been more cautious,” says the August TD Economics report.
Both provinces have signed memorandums of understanding aiming to boost trading relationships, but these are not legally binding.
A $200B windfall?
The Prime Minister’s Office said in March that eliminating internal trade barriers could add up to $200 billion to Canada’s GDP.
The TD Economics report says this estimate may be overly optimistic. “Other research points to benefits that are significantly smaller than this,” it says.
But Manucha says internal trade reform is worthwhile, even if the best-case scenario is never realized.
“Even if it’s $50 billion in a $2-trillion economy, that’s still important, especially when you’re not standing up a $30-billion program to do it,” he said, noting it is relatively inexpensive to harmonize regulations across jurisdictions.
But regulatory changes are not the only barrier to reform, he adds. Entrenched interests and cultural barriers can be just as difficult to overcome.
“No one likes losing their monopoly, whether it’s Google or [the regulatory body] that decides who is and isn’t a dental hygienist in Ontario,” said Manucha. “And so the second you threaten that monopoly, it’s fear-inducing.”
It will ultimately fall to the provinces to address these barriers, Manucha says. But Ottawa could give them a hard nudge.
“The question is, as a federal government, what should they be doing? And are they doing enough? Are they using the carrot and stick strong enough to get provinces to work together on internal trade?”
Ottawa could require, for example, that the provinces liberalize their labour markets to access federal funding for employment programs, Manucha says.
“I think that’s something that should be on the table — tethering federal government outlays to internal market reform implementation could be a bold step forward for the federal government.”
But he is also not holding his breath that this government will be that aggressive in its approach.
“I know that [federal-provincial trade] relations are very tricky with a lot of these major projects up in the air [and] a lot of different expectations and hopes. So you could see a … fierier federal government, let’s put it that way.”
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