Next steps for Premier Houston's innovative commitment to reduce interprovincial barriers

Government of Nova Scotia Premier Tim Houston has taken a bold innovative move to reduce interprovincial trade barriers by tabling legislation to promote free trade and mobility within Canada. Under the act, any service provider, licensed individual or manufacturer in another province with reciprocal legislation or equivalent policies, will be treated as meeting Nova Scotia requirements, without any further fees, certification, licensing or testing.

Does it matter which other provinces respond? Yes. Trade flows depend on geography (i.e. proximity) and market size – what economists technically refer to as a gravity-based trade model:

• Nova Scotia trades more with larger provinces, like Ontario and Quebec. These two provinces account for over 60% of Nova Scotia’s interprovincial trade flows.
• Nova Scotia also trades more with other Atlantic provinces (over 20% of its interprovincial trade flows) than Western provinces (about 15% of Nova Scotia’s interprovincial trade flows). Although the West has a bigger population and market than other Atlantic provinces, the latter are much closer, reducing travel and transport costs to serve those markets.

So, which province should Nova Scotia most want to join this initiative? Using current trade flows as a guide, Ontario of Ontario and Quebec would be top of the list, followed by New Brunswick:

• Newly re-elected Premier Doug Ford has committed to tear down internal trade barriers. Although he has not formally committed to go as far as Premier Houston with reciprocal legislation, he has committed to streamlining credential recognition and recognizing standards and certifications across Canada for key sectors.
• Premier Houston should schedule a call with Quebec Premier Francois Legault or encourage Premier Ford to use his leverage. Legault and Ford have committed to discussing increasing trade between their provinces. Getting both provinces on board would be a huge step to advancing internal trade.
• Premier Susan Holt in New Brunswick has committed to “lead the way in reducing barriers.” Nova Scotia and New Brunswick have a history of working together on this file. If these two provinces can agree, it will be easier to bring the other two Atlantic provinces along.

Labour mobility is also on the table. Which provinces most matter here? Using recent (pre- and post-covid) interprovincial movement of people as a guide, Ontario is again the most important province to secure recognition of professional recognition. New Brunswick is also important, but Alberta and British Columbia matter more than Quebec in terms of labour flows to and from Nova Scotia.

Should Premier Houston go further and remove clause 4(1) and just unilaterally accept all goods, services and individuals licensed or approved in other provinces? There would be some benefit to such a policy. While the current policy shows innovative and thoughtful leadership on the internal trade file, it has no benefit or economic value unless another province reciprocates.

However, making the policy conditional on reciprocal action helps the Premier in two ways:

1) it helps manage the political economy of trade liberalization where opening up trade opportunities in other provinces can offset any competitive pressures in opening up your own market, as I discussed in a previous post and

2) it provides some bargaining power for the Premier in bilateral discussions with other provinces, and some incentive for other provinces to reciprocate.

Two final thoughts on mutual recognition, as discussed in my earlier post:

1)????? mutual recognition can run some risk of “hopping and shopping” to get licensed, registered or approved in the province with the least restrictive regulations. I encourage the Premier to work with reciprocating provinces to minimize this risk by moving towards greater harmonization where needed.

2)????? Mutual recognition does not address every type of interprovincial trade barrier (e.g., differences in labour, health and safety regulations that affect multi-jurisdiction firms). I encourage the Premier to show the same leadership to reduce barriers in these other areas that the current legislation will not address.

Premier Houston has proposed an innovative approach to quickly seeing progress in reducing interprovincial trade barriers. Now its up to other Premiers (in the Council of the Federation Secretariat | Secrétariat du Conseil de la fédération ) to see if they are willing to walk the talk and respond to Nova Scotia’s lead.