Progressive approach to interprovincial trade needed

Opinion

Very few people in Canada had “eliminate interprovincial trade barriers” on their bingo cards at the beginning of 2025.

Yet, in a few weeks, this issue has been vaulted from the obscure reaches of free-market economic theory to a central item on Canada’s political agenda.

On Feb. 28, trade ministers from across the country met to hammer out a new deal on mutual recognition and updates to the Canadian Free Trade Agreement (CFTA), the document that currently manages trade between all provinces and territories. This meeting in Toronto occurred behind closed doors and with minimal input from the public.

The rush to rewrite Canada’s internal trade rules is being spurred on by the White House’s chaotic and brutish economic agenda. There is no question that governments need to take action to protect workers and build Canada’s economic independence. However, the speed at which trade agreements and legislation are being rewritten and the lack of clarity over what interprovincial trade barriers really are should raise alarm bells for Canadians.

Without proper consultation or democratic oversight, the rush to eliminate protections in the CFTA, or sign new trade deals between provinces risks doing more harm than good.

Nova Scotia’s effort to appear tough on internal trade barriers, the Free Trade and Mobility Act (Bill 36), provides a case in point.

As written, Nova Scotia’s Bill 36 trumps any other provincial legislation when a trade conflict arises. What this means is that Nova Scotia is agreeing to accept goods, services, or credentials that do not meet its own standards as long as another province agrees to do the same. This sort of trade deal takes a “teardown” approach by allowing the weakest regulation in any province to rule the land, making it difficult for Nova Scotians to raise standards for labour, environmental protection, or public safety in future. It is also unclear how this legislation would apply to international trade agreements.

This approach to trade is misguided for several reasons, but primarily because it is unclear whether eliminating provincial regulations will increase interprovincial trade.

As CCPA senior economist Marc Lee has outlined, governments across Canada have been removing trade barriers between provinces for over 30 years. In 2021, total interprovincial trade was $530 billion, a 69 per cent increase since 2007. This was on par with international exports, providing little evidence that trading across international borders is easier than between provinces.

Currently, Manitoba has among the fewest exclusions (areas of the economy shielded from free trade) under the CFTA. These exclusions protect characteristics of the Manitoba economy that are in the public interest: Manitoba Hydro, liquor retail, and parts of agriculture, forestry, fishing, and hunting. Removing these protections risks eliminating Manitoba’s affordable Hydro rates, a major comparative advantage, as well as well-paying, unionized jobs.

The claims that hundreds of billions of dollars can be uncovered by removing trade barriers do not stand up to scrutiny. These figures are based on dubious theoretical assumptions about the way economies work rather than any real-world analysis of trade barriers.

Rather than rushing to apply sweeping new rules that limit the capacity of governments to protect the public interest, governments should work with each other and with stakeholders to identify trade barriers that do exist and find solutions that protect the public interest.

The Red Seal trades program provides a model for how labour mobility could be smoothed across provinces while maintaining high standards. This program allows provinces to set standards for training in the trades that are recognized across the country.

Investing in cross-country transportation infrastructure to lower shipping costs provides another approach to increasing trade within Canada. A February survey from Statistics Canada found the cost of transportation was the most common obstacle for businesses buying or selling goods across provincial boundaries. Establishing a public bank to provide low-cost financing and financial services could kickstart economic diversification across the country.

To deal with U.S. President Donald Trump’s unilateral rewriting of North American trade relations, Canada needs to launch a robust industrial strategy that creates the next generation of jobs, infrastructure, and investment in this country. Projects like building one million non-market homes or an east-west electricity grid will deliver the long-term benefits Canada needs right now. Government must be empowered to actively orchestrate these ambitious investments in a way that supports workers and communities affected by tariffs, not have their hands tied further in a rush to show political action in the face of U.S. threats.

Niall Harney is a senior researcher with the Canadian Centre for Policy Alternatives – Manitoba.