The following is AEG’s monthly column by AEG President Josh Bilyk appearing in the August edition of Business in Edmonton Magazine. If you have tips or suggestions for future columns, please feel free to write or call.
Each year the Canadian economy leaves billions on the table due to a litany of internal trade barriers, and the time for that to change is long overdue.
A recent study by University of Calgary researchers Trevor Tombe and Lukas Albrecht estimates that unfree trade costs Canadian families $7,500 per year. Tombe and Albrecht figure $165 billion worth of goods and nearly $200 billion of services are traded within Canada.
Every rule, stipulation, mandate and regulation imposes an expensive cost on that trade. Different regulatory standards, certifications, inspections and the thousands of other little rules governments like to impose (and seemingly never get around to eliminating) makes trade within Canada more expensive than it needs to be.
The obvious example are shipping rules. If you want to ship a container from Edmonton to Halifax, you will have to comply with a variety of different standards along the way. Requirements for businesses to register separately in each province make it more difficult for companies to operate nation-wide. Provincial licensing standards make it difficult for professionals to work in different provinces.
A recent report by the Organization for Economic Cooperation and Development (OECD) blew the whistle on the high cost of trade in Canada. “High barriers to competition in network sectors … impede innovation and productivity growth,” the report outlines. “Improving regulatory conditions, efficiency and/or cost competitiveness could yield more productive outcomes in these sectors, as well as in downstream industries.”
The OECD report also said Canada should remove barriers to interprovincial trade and labour mobility, “which act to fragment Canada’s already small domestic market.”
We’re talking about significant dollars here. Tombe and Albrecht estimate that if trade costs within Canada were reduced by 10 per cent, Alberta’s GDP would grow nearly 1 per cent faster than it otherwise would. That calculates to nearly 3.8 billion new dollars in the Alberta economy each year.
For years Alberta has been a leader in reducing interprovincial trade barriers. Our province was a driving force behind the New West Partnership that reduced trade friction between the provinces of British Columbia, Alberta, Saskatchewan, and with the election of a new government Manitoba, that province has announced their interest in joining the partnership.
Now Alberta’s leadership in this area is in question. Provinces are currently working to revamp the Agreement on Internal Trade (AIT). Recent media reports suggest the Alberta government is holding up a new deal due to a proposed Alberta exemption that would ensure at least 20 per cent of public procurement contracts go to local companies.
This kind of protectionism is unnecessary and unwanted. Alberta companies can match competition from anywhere in the world. What they really need, especially in this economy, is access to other markets. The Alberta government should drop any demands for special treatment under the new deal, and instead seek greater access to markets across Canada for local companies.
And one final thought…what kind of message does it send for Alberta – a province desperately in need of pipelines in every direction – to be selectively blocking freer trade within Canada? Not very neighbourly of us.
Alberta Enterprise Group is a member-based, non-profit business advocacy organization. AEG members employ more than 150,000 Canadians in all sectors of the economy.