Flahertyâ€™s Made-Up Numbers
The following Canadian Press story is an hilariously accurate report of what happened on Wednesday when the Finance Minister appeared before a Senate committee to pontificateÂ about supposed interprovincial barriers:
Flahertyâ€™s remarks came shortly before a senior Finance Department official told a Senate committee that interprovincial trade rules cost the country about one quarter of one per cent of its gross domestic product.
But Denis Gauthier, the assistant deputy minister of economic development and corporate finance, conceded the department has not recently done any economic modelling to determine the precise cost of the internal trade barriers.
“Thereâ€™s been so many studies done, and the numbers youâ€™ve heard, you know, between a quarter to three quarters of one per cent of GDP is in the ballpark,” Gauthier said.
“All of the studies point in the same direction,” Flaherty added.
When pressed by Liberal Senator Wilfred Moore, however, Gauthier said the loss stemming from the provincial trade barriers costs the Canadian economy about $3 billion each year.
One is left wondering whether the Department of Finance has any evidence on this matter. Gauthier also said, “Recent estimates from Industry Canada and elsewhere in the government indicate the cost of barriers around a quarter of one percent of GDP,” which would equal about $3 billion.
If anyone can find these “recent estimates,” please post a link as a comment below.Â The only thing that I can think of are papers prepared by Grady and Macmillan for Industry Canadaâ€™s internal trade conference. These papers outlined previous estimates, but did not endeavour to provide new ones.
Quebecâ€™s ban on margarine coloured like butter is one of a very few bonafide inter-provincial barriers. As Marc notes, vegetable-oil lobbyists claim that this rule costs about 0.2% of their industryâ€™s revenues. Of course, the dairy industryâ€™s gains would offset at least part of this loss. Since there are no comparable barriers in most sectors, it is highly doubtful that such barriers cost 0.25% of GDP. As noted previously, the Macdonald Commissionâ€™s estimate was no more than 0.05% of GDP.
Alberta Premier Ed Stelmach has estimated interprovincial trade issues cost the Canadian economy about $14 billion a year.