How Trump’s tariffs is forcing Canada to reassess interprovincial trade barriers

The looming threat of U.S. President Donald Trump’s tariffs, postponed until March, is forcing Canada to re-evaluate interprovincial trade barriers, and experts say part of the solution involves provinces giving up some independence.

Trevor Tombe, a professor at the University of Calgary’s department of economics, said differences in rules, regulations and standards contribute to barriers. Each province and territory has their own set of rules which don’t necessarily translate to others, therefore adding costs to companies who are trying to buy and sell across borders within Canada.

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“It’s really hard to get rid of because provinces are naturally hesitant to give up their independent authority in different areas because eliminating these barriers ultimately means that provinces need to harmonize their rules with each other, or recognize each other’s rules as a valid substitute for their own,” Tombe said.

“Either way, it kind of cuts against some independence on the part of our provincial government.” 

Trump’s threat to impose 25 per cent tariffs on Canadian goods has highlighted how decentralized Canada is and the reliance it has on its closest neighbour as a trading partner.

Canadian Free Trade Agreement has some success, but slow

To help break down interprovincial trade barriers, the Canadian Free Trade Agreement (CTFA) was passed in 2017, which Tombe said had some early success. But the challenge is that it takes a long time to rewrite rules and negotiate those rules.

He said the threat of tariffs should be a reminder of the economic consequences of these internal trade barriers.

In a statement to Postmedia, Jobs, Economy and Trade Minister Matt Jones said Alberta has been “driving” a stronger internal market and has been breaking down “unnecessary” trade barriers across the country, citing the New West Partnership Trade Agreement which came into effect in 2010 between the provinces of Alberta, British Columbia, Saskatchewan and Manitoba. 

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“At last Friday’s committee on internal trade meeting, Alberta and our federal, provincial and territorial counterparts agreed to bold steps to eliminate regulatory barriers, enhance labour mobility and standardize regulations across Canada. We committed to adopting mutual recognition for goods and services, improving the Canadian Free Trade Agreement and removing exceptions, all aimed at reducing trade barriers, boosting productivity and strengthening Canada’s domestic economy,” Jones said.

The province said it has removed more than 80 per cent of its CTFA exceptions since 2019 and plans to work with counterparts across Canada to remove trade barriers where possible.

Infrastructure and policy changes are important next steps

Tombe said one of the “faster” ways to go about alleviating interprovincial and territorial barriers would be for provinces to recognize the “rules of the game” elsewhere as valid in their own jurisdiction.

“If you have a certain product that is abiding by health and safety standards in British Columbia, for example, then you could, if Alberta wanted, have automatic access to the Alberta market, even if technically your product didn’t comply with health and safety standards in Alberta,” Tombe said.

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Alberta Premier Danielle Smith has pointed to building pipelines across Canada as one of the solutions to the issue. Tombe said while pipeline expansions would be beneficial, infrastructure in general is a very important trade perspective.

Expansions to rail capacity and more specifically trucking is something Tombe said Canada will likely see progress on in the near future.

“While it’s not a sexy topic like alcohol sales, it has a very large economic effect, because so much is shipped by truck, that if we can make that sector more efficient through mutually recognizing each other’s rules, regulations, or harmonizing them, that gets cascaded through to so much of what we buy,” Tombe said.

He suspects there may also be renewed interest in credential recognition across Canada, which could have a short-term impact.

Alberta brewery believes breaking down trade barriers will be good in the long haul

Cameron French, owner of Alley Kat Brewing Company based in Edmonton, said the direct impacts of the looming 25 per cent tariffs on Canadian goods is minimal since the company does not export any of its goods to the U.S. and mainly sources local ingredients for its products.

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He said they could see price increases for items if there’s a higher demand on the Canadian side if U.S. goods aren’t an option anymore, citing aluminum cans are predominately coming from the U.S.

“We often have a number of suppliers for a lot of our items. So we do start to try to look at, OK, what might be available just in terms of other suppliers here in Alberta, Canada, or even if it’s not available here, is there another country that we can go to as well,” French said.

Alley Kat currently supplies alcohol to Alberta, Saskatchewan and Yukon. French said because every territory and province has different rules surrounding alcohol, it creates a barrier to entry from a lot of provinces. He said it would be a “great option” for Canada to discuss breaking down interprovincial trade barriers to give consumers more choice.

He added now is the time to really encourage shopping local.

“Let the consumer speak for what they want. Kind of like the Alberta model, consumers will support the product they like. (Consumers) do support local which is great for us here in Alberta, but it’d be great because we have requests coming from other provinces. We just can’t necessarily get the beer to them all the time,” French said.

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ctran@postmedia.com

X: @kccindytran

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