What are interprovincial trade barriers? And can they finally be killed?

Interprovincial trade barriers have long been a frustration and drag on the economy. Donald Trump's trade war could change that.

Interprovincial trade barriers are a long-standing problem in the Canadian economy. They have been a focus of frustration and a drag on productivity — costing the country as much as four percent of real GDP per capita. In the turmoil sparked by Donald Trump’s trade war, these barriers are suddenly being looked at with some urgency. Could lifting these unnecessary barriers ease at least some of the pain inflicted by tariffs?

Last year, PPF examined the impact of interprovincial barriers, also called non-tariff barriers (NTBs), in the Atlantic region, which due to the smaller size of provinces and their reliance on internal trade, could see an outsized benefit from lifting barriers.

What exactly are interprovincial trade barriers?

From our Open Atlantic report: Interprovincial trade barriers come in a number of forms: different trade and professional licensing standards from province to province (dental hygienists, for example, must re-certify?if they move to Newfoundland and Labrador);?“buy local” procurement restrictions; varying product standards and business fees; even, famously, a ban on direct-to-consumer shipments of alcohol from other provinces. Live in P.E.I. and want to order a case of Chardonnay from the delightful little vineyard you visited in the Annapolis Valley? Too bad.

Why do they exist in the first place??

They exist largely as an archaic attempt by provinces to protect jobs, yet they’re a significant drag on economic growth and productivity. They hinder the free movement of labour, exacerbating worker shortages and preventing companies from expanding and achieving economies of scale. They discourage investment, stifle competition and, as a result, innovation. All of which means a less vibrant economy, higher costs for business and higher prices for consumers.

It shows up in the numbers. Economists put the cost to the Canadian economy of NTBs at roughly?four percent of real GDP per capita;?the International Monetary Fund estimates that eliminating internal trade barriers on goods alone would boost Canada’s productivity by?3.8 percent. For consumers, interprovincial trade barriers add between 7.8 and 14.5 percent to the price of goods and services they buy.?(Statistics Canada put it at?seven percent?for goods alone.)

What’s happening now to get rid of these trade barriers?

(Continue reading here.)

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