Back-of-Envelope Math on TILMA

It seems to me that, compared to an international free-trade agreement, TILMA provides none of the potential benefits (i.e. tariff reductions) and all of the costs (i.e. regulations harmonized to the lowest common denominator and businesses suing governments).

As Marc noted below, the Government of BC claims that TILMA could add $4.8 billion to provincial GDP.  A Government of Quebec report, updated last month, indicates that BC’s gross exports to Alberta (goods and services) were $8.8 billion in 2002. Since BC’s total inter-provincial exports grew by 22% between then and 2005, its gross exports to Alberta might have increased to somewhere around $10.7 billion. It seems wildly optimistic to imagine an Alberta-BC free-trade agreement raising BC’s GDP by an amount equal to about 45% of its current exports to Alberta, especially since gross figures significantly overstate the contribution of exports to GDP.

In his critique of the Agreement on Internal Trade, Marc notes that trade is far more intense across provincial borders than across national borders. The same is true of investment and migration, implying that whatever inter-provincial barriers exist are extremely low.

3 comments

  • Another point to note is that BC has a fairly large trade deficit, largely on interprovincial trade, on the order of 5-6% of GDP last I checked. The BC government could potentially argue that they have signed TILMA as a means of reducing that deficit.

    In the absence of any evidence (no good anecdotes, even) of massive impediments to trade with Alberta from a BC perspective, it would be reasonable to assume that the TILMA, if it increases commerce between the two provinces at all, will reinforce existing trade patterns — and could thus make BC’s trade deficit worse.

  • Although BC consistently runs an overall inter-provincial trade deficit, the report that I mentioned above shows it running a small trade surplus with Alberta. In 2002, BC exported $8.8 billion of goods and services to Alberta and imported $8.5 billion from it.

    Most of BC’s inter-provincial deficit results from trade with Ontario. In the preceding post, you suggested that Ontario is considering joining TILMA.

  • Marc, you also quite correctly mentioned that Saskatchewan is considering involvement in TILMA. While I am not certain that trade balances are the best measure for evaluating this agreement, they certainly tell an interesting story with respect to my home province. In 2002, Saskatchewan had a large trade deficit with Alberta ($2.2 billion) and a small deficit with BC ($0.3 billion). If TILMA increases inter-provincial trade flows, joining it could increase Saskatchewan’s inter-provincial trade deficit. An important caveat is that much of this deficit presumably reflects the eastward shipment of Alberta oil and gas, which TILMA probably would not affect.

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