Removing domestic trade barriers could boost Canada’s economy by $200 billion a year: study

A recent study by the McDonald Laurier Institute (MLI), a think tank, found that Canada could see economic growth of $200 billion a year if it considered removing domestic trade barriers and adopting a mutual recognition policy. .

“Domestic Trade Liberalization Through Mutual Recognition: A Legal and Economic Analysisclaims that Canada’s economy loses billions of dollars in productivity each year due to a “web of interprovincial rules, regulations and restrictions.”

“The web of regulations makes it more difficult for companies to operate across state lines, increasing delays and administrative costs, and significantly impacting productivity,” the MLI said. increase. news release.

On the contrary, should Canada decide to adopt a mutual recognition policy, this would mean that “the regulatory requirements of one provincial and territory government automatically meet the profit is “large”.

“We found that if domestic trade barriers were removed through a mutual recognition policy, the Canadian economy could grow by 4.4% to 7.9%, a substantial increase of $110-200 billion annually,” the authors say. increase.

Using data from Statistics Canada, the report examines a broad range of industries based on their impact on the economy as a whole and trade flows between provinces and territories. If cut, Canada’s real GDP would be 0.027 percent.

“This may sound small, but it equates to an annual increase of more than $713 million, considering Canada’s economy will exceed $2.6 trillion in 2022,” the report said. increase. Similarly, the authors estimate that the mining, quarrying, and oil and gas extraction sectors will add $1 billion annually, with trade costs falling by a similar amount.

‘Stubborn problem’

Despite the potential benefits of removing barriers, resolving Canada’s domestic trade problems “remains a stubborn problem,” the MLI stressed.

Co-author and interstate trade expert Ryan Manucha said the need for an “absolute agreement” between states “because it involves so many ministries at once, it’s hard to know what they want, what their ideals are.” It’s difficult because it doesn’t always match in terms of whether or not.” Result is. “

“It comes down to political willpower. [which] It has a little bit to do with protecting stakeholders inside and outside the government,” he told MLI host Aaron Udrick. webinar He was asked why previous efforts to liberalize domestic trade in Canada had failed.

In 1995 Canada Intra-regional trade agreement (AIT) is an intergovernmental agreement under which the federal government, states and territories agree to reduce and remove barriers to the free movement of persons, goods, services and investment within their countries.

The report argued that the AIT did not provide a clear framework for reaching mutual recognition, so it was eventually terminated and replaced by the Canadian Free Trade Agreement (CFTA) in 2017. According to the authors, CFTA introduces institutionalized methods to solve trade barriers.

But when the federal government and states began applying for hundreds of exceptions under the CFTA, the improved agreement was quickly “neutralized,” Manucha noted.

‘Political interests are not concentrated’

Outgoing Alberta Prime Minister Jason Kenney, who also attended the webinar, said the problem for many politicians was that they did not see “focused political interests” in advocating for mutual recognition policies, resulting in “congestion”. said to do.

Kenny gave a contrasting example where his state and Saskatchewan secured regulatory exemptions from Ottawa last month. This will allow oil service rigs to move freely between states. But the effort to reduce bureaucracy took him more than two years.

“When you’re in a job like mine, you’re dealing with millions of problems at the same time. Most of your attention is siphoned off by the most urgent matters and the short-term benefits that come your way.” said Kenny.

“Thus, tedious, technical work that sees far-flung long-term gains doesn’t really work in the political calculations and isn’t a real priority.”

Co-author Trevor Tombe, an economics professor at the University of Calgary, said the gains from domestic trade liberalization are “less visible and easier to dissipate” than from protectionist measures.

“The benefits of protectionist measures are often very focused and visible, and as such create very strong incentives for beneficiaries of protectionist measures to push politically,” he said at the webinar. .

trade off

The report needs to consider important trade-offs such as shifts between sectors and even regions in resources, production and employment, even if the removal of domestic trade barriers could bring huge economic gains. emphasized that there is

“Sectors in states that may not be able to withstand competition from low-cost imports may shrink, while those seeing increased export volumes may expand. ,” the report said.

Manucha said that if Canada pursues a mutual recognition agreement, what is needed is the infrastructure and mechanisms in place to clarify the labor migration process.

“What are the expectations for newcomers to the new state? What is the process they are supposed to go through?” I don’t like the way you assess my qualifications. I think it’s a good place to practice.”

Manucha said Canada could look to Australia as a model because Canada’s version of the mutual recognition policy works “very well” and that the two countries have a lot in common.

“What are the ingredients for success in Australia? Many of them exist in Canada,” he said. “You have the same language, and roughly speaking [the] Same kind of culture, same regulatory framework, same legal framework. “