An Easy, Attainable Reform for Canadian Interprovincial Trade

In April 2021, the Canadian federal government announced $21M to help fight interprovincial trade. This post identifies one early, easy win well within reach.

Canada’s federal budget, released on April 19, 2021, included a pledge of $21M over three years to fight interprovincial trade barriers. Copied below essentially verbatim, the budget proposed to allocate this money to:

• Work with provincial and territorial partners to enhance the capacity of the Internal Trade Secretariat that supports the Canadian Free Trade Agreement (CFTA) in order to accelerate the reduction of trade barriers within Canada.
• Advance work with willing partners towards creating a repository of open and accessible pan-Canadian internal trade data to identify barriers, including licensing and professional certification requirements, so that we can work together to reduce them.
• Pursue internal trade objectives through new or renewed discretionary federal transfers to provinces and territories.

These three initiatives will be important for remedying the trade barriers that cause distortions to Canada’s domestic interchange (and which thus hamper Canada’s economic prospects). In a previous post, I commented on the vagueness of the third bullet point (above) found inside of the 2021 budget. Reading between the lines, I take that bullet to mean that the federal government will use the power of its purse to incentivize provinces and territories to drop protectionist regulations. However, those changes will take time to negotiate.

An easy, early win for the federal government is subsumed under the first bullet point above. The federal government should use some of these monies earmarked for internal trade to enhance the public communications capacity of the Winnipeg-based Internal Trade Secretariat (ITS). The ITS should be charged with, at minimum, producing an annual publication for meant for broad public dissemination that details the progress achieved on the internal trade front. I advocated for this in a research memorandum published by the C.D. Howe Institute. The full report is available here.

In that report, I argue in favour of an enlarged role for the Internal Trade Secretariat. When the predecessor to the CFTA (the Agreement on Internal Trade, or AIT for short) was negotiated in the early 1990s, the federal government had been an advocate for an ITS that could undertake research and policy-formation functions. However, Ontario and Quebec, amongst other jurisdictions, preferred a minimalist role for the ITS. There are indeed legitimacy concerns about a large and proactive Secretariat. The C.D. Howe research report explores these worries in detail. I will refrain from going into them in detail here. However, there is still room for the role of the ITS to expand without triggering those articulated concerns (which are largely premised on notions of democratic accountability).

Taking the lead from the WTO, which publishes its annual World Trade Report (an annual publication that “aims to deepen understanding about trends in trade, trade policy issues and the multilateral trading system”), the Canadian equivalent (i.e. the ITS) should be endowed with the responsibility to release an analogous publication.

As it stands now, the ITS does release an annual report. However, the bulk of that report consists of the ITS Financial Statements. There are some sections that speak to advancements on the internal trade file, but the document as a whole reads like a memo meant for interprovincial policy experts. It is not easily decipherable what the document is saying in respect of progress on interprovincial trade barriers. Canada’s internal trade policy specialists have accomplished a great deal on the internal trade front every year over the past quarter-century, and these achievements ought to be highlighted and better communicated to the Canadian polity.

A annual publication would allow Canada’s governments to point to the progress made on internal trade, and provide for a more robust discussion on interprovincial barriers. It would also help Canada’s governments to dispel the omnipresent Canadian myth that the state of interprovincial trade never improves (which is simply not the case).

Currently, the ITS fulfills its current mandate on a budget of approximately $600,000, with a staff of approximately five individuals. Given the current breadth of the ITS mandate, as found in the text of the Canadian Free Trade Agreement, the current capacity of the ITS is quite limited. Additional funds could grant it the dry powder required to produce a public-facing annual report.

In sum: a quick win for the federal government is to allocate a certain portion of the $21M earmarked for internal trade to helping the ITS produce an annual public-facing publication.