An employee moves products in an LCBO store at Toronto's Union Station. Eleven provinces and territories missed a May deadline to allow direct alcohol purchases from out-of-province producers.Laura Proctor/The Canadian Press
Giles Gherson is president and chief executive of Toronto Region Board of Trade.
To grow Canada’s economy, successive federal governments have doubled down on free trade with as many countries as possible – now 51 and more to come. But at home, it’s an entirely different story: persistent protectionism.
It’s costing us, big time. And we can no longer afford it.
As it was last year, fixing interprovincial trade should again be top of the agenda at the Council of the Federation, when the premiers of the 13 provinces and territories meet in Charlottetown this week. This time let’s get it right.
Nearly 160 years ago, when the Fathers of Confederation cobbled this country together, they created a political and economic union. Economic infrastructure was nation-building – the transcontinental railway was British Columbia’s price of admission. It should have been the start of a single, prosperous market for the new country.
Instead, Confederation laid the groundwork for one of the world’s most decentralized, fragmented federations. Ottawa and each province create their own regulations, often overlapping, often out of date. It’s a tyranny of small differences; a complex patchwork of similar, but just-different-enough, regulatory, administrative and policy variations across Canada.
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Variable licensing rules and tiny product standards differences stunt business growth by making it prohibitively expensive and time-consuming for goods and labour to move within Canada.
The 1990s push to establish the Agreement on Internal Trade made some good, but limited, progress. The Canadian Free Trade Agreement in 2017 made considerably more progress but left us with 160 pages of exemptions.
One hundred and sixty years of Confederation, 160 pages of exemptions.
Different rules at every provincial boundary discourage innovation, expansion and investment in productivity-boosting technologies. This isn’t a single market.
Today’s barriers – many designed to protect local industries from competition – prevent our industries from growing.
Regulating for growth means designing rules that protect the public and the environment without prohibitively raising the cost of doing business; enabling business success, not curtailing it.
Nearly 20 per cent of Canada’s GDP comes from trade within Canada. We’re leaving as much as $200-billion annually on the table, nearly half of Toronto’s GDP – growth that could translate into jobs, investment and the competitiveness we desperately need.
Also consider the wave of businesses leaving Canada to take advantage of lower costs and a much larger, single market – the United States.
Those that do try to grow here struggle to attract financing. Without a single federal regulatory body for securities, Canada’s fragmented capital market is a major barrier to growth.
Investors don’t want the aggravation of engaging with multiple sub-national jurisdictions, so they avoid investing in Canadian businesses.
Increased regulation and market fragmentation; the barriers to growth compound. Two decades ago, the Canadian Securities Administrators (CSA) created a passport system to allow easier access to capital markets, reduce the costs and regulatory burden of public listings, and help Canadian companies grow at home. On July 15, Ontario, the lone holdout on the CSA passport, announced it would join.
We are making progress and momentum is growing. At the federal level, Prime Minister Mark Carney’s Bill C-5, the One Canadian Economy Act, removed a number of barriers.
In November, all provinces signed the Canadian Mutual Recognition Agreement on the Sale of Goods, and Ontario Premier Doug Ford has struck a series of agreements with other provinces. But none of this is comprehensive and future governments could roll back any, or all, of this progress. The certainty that harmonized rules across the country would bring to businesses is, so far, not on the table – a significant shortcoming of the current approach.
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Case in point: Eleven provinces and territories signed an MOU last year to allow direct alcohol purchases from out-of-province producers. Target implementation: May, 2026.
We’re well past that deadline. Meanwhile, Ottawa residents can drive seven minutes and buy a case of beer from a Gatineau brewery in-person but cannot legally make that same transaction online.
Canadians are proud of our beer, wine and spirits, yet current rules prevent us from sharing it with each other.
Financial services received something of a fix with Ontario agreeing to join the CSA’s passport system. To be sure, this is a big move, but 13 better aligned markets isn’t the same as a unified one when it comes to cost, speed and efficiency. The gold standard is a single, national securities regulator giving businesses and investors seamless access to operate across one Canadian economy.
The immediate path forward remains clear – harmonized, cross-country rules that apply in core sectors.
This summer’s Council of the Federation would be a good time to achieve a historic victory: in the face of aggressive America First policies restricting access to the south, finally create a more self-reliant single Canadian market of $3-trillion and 41 million people.