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The Progressive Economics Forum

April Fool’s Day Message from Corporate Canada

On the anniversary of TILMA coming into force, nine national business associations and the professional association representing non-chartered accountants have demanded “bold action” on inter-provincial trade.

The press release alleges that “the emergence of new trade barriers threatens to further balkanize the Canadian economy” without naming a single “new trade barrier”. It repeats the unfounded claim that “it is often more difficult to move goods and services across provincial boundaries than over our international borders.”

In fact, relative to distance and market size, Canadian provinces trade far more intensely with other provinces than with American states. Statistics Canada figures indicate that, from 2000 to 2006, interprovincial exports increased by 34% while Canada’s international exports increased by only 7%.

The press release cites Premier Stelmach as a source indicating that “internal trade issues cost the Canadian economy as much as $14 billion a year.” However, it was and is completely unclear what Stelmach based this figure on. His number is nearly five times the $3 billion on which the federal government and The Globe and Mail seem to have settled. It is twenty times the $700 million implied by academic studies concluding that internal barriers cost no more than 0.05% of Gross Domestic Product.

The accompanying three-page “position paper” repeats the inflated $14-billion figure, but at least tries to outline some concrete issues:

. . . differing government procurement practices, limitations on the flow of investment and the movement of persons from province to province, different securities rules arising from the fragmented regulation of Canada’s capital market, differing regulations and standards under the guise of consumer protection to protect local interests from competition, differing product and grade standards and differing commercial transportation codes.

The concern about procurement is odd given that the Canadian Manufacturers & Exporters, who signed onto the release and position paper, recently called on Canadian governments to use preferential procurement for economic development. The “movement of persons” is a reference to occupational certification, which already has been or is being integrated among provinces. National business organizations favour a national securities regulator, which probably would make sense. The language about different product standards is code for Quebec’s margarine-colour regulations, which Sean McPhee (one of the contacts on the release) acknowledged cost only 0.2% of the vegetable-oil industry’s revenues. Different transport rules reflect differing provincial terrain and differing provincial fiscal capacities to maintain highways.

Why has corporate Canada made such wildly exaggerated claims about such minor issues? Rather than suggesting specific solutions to these small problems, the business groups call for the federal government to establish a set of rules “designed to ensure a free and open market.” Alleged violations of these rules would be adjudicated by a new tribunal whose rulings “would be subject to enforcement by the courts”. Like TILMA, this proposed system would entitle business to directly challenge the wide range of important public policies that could influence economic activity that crosses provincial borders.

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