History of the trade war

So the Trump tariffs are on. And so is the Canadian resistance. Here are three things not to be too reliant on in the struggle: Ending interprovincial "trade barriers." The King. Europe,

1.  Interprovincial trade barriers.

I was heartened the other day to read the economist Mark Lee casting doubt on interprovincial trade-barrier reductions as a easy source of Canadian economic strength. 

In response to the threat of Trump tariffs, an old narrative about interprovincial trade barriers has risen from the dead. The idea that eliminating supposedly massive internal trade barriers would lead to thousands of dollars per year in gains for ordinary Canadians makes for great soundbites, but should we really believe that there is a free lunch to be had?

While politicians have claimed that Canada’s GDP could grow by up to $240 billion, those numbers simply don’t make sense based on what we know about interprovincial trade.

If anything, Mark Lee is too polite. A decade or so ago, for a research project I was associated with, I found myself reading background papers for "Tear Down These Walls," a Canadian Senate report on interprovincial trade barriers and the need to reduce them.  Some reliable economists, to be sure, argued there were gains to be made. But there were also claims that eliminating internal trade barriers could be worth "from $1 billion to $35 billion"  -- which suggested the numbers were simply being pulled out of thin air -- much like today's $240 billion. 

Things that were being claimed as "trade barriers" back then included: provincial retirement funding programs, provincial pension regimes, provincial securities regulation, provincial minimum wage standards, provincial environmental and health regulations, and many more (virtually all?) aspects of provincial policy, even provincial subsidies to First Nations communities.

Province A required trucking companies to spend more on truck safety compliance than Province B did? Trade barrier! Province C required businesses to pay a larger minimum wage than Province D? Trade barrier! Province X's climate change actions might cost a business more than Province Y's? Trade barrier.  

No doubt there are some provincial regulatory regimes that could be harmonized for greater mutual convenience. But it was pretty clear that the intention of many of those appearing before those Senate hearings was not to create national prosperity out of thin air so much to launch a full-frontal assault on the rights of provinces to use their legitimate authority to regulate business activities in the best interests of their citizens.  

There never have been tariffs on interprovincial trade in Canada, none since 1867. Indeed even our international free trade agreements in recent decades have more about reducing regulation rather than reducing tariffs, which were vanishing by the 1960s. Trump's enthusiam for tariffs is truly weird, and the American people need to give him a firm whack upside the head for inflicting them.

The people who promise you that granting your right to have your local beer supplier stock some obscure craft beer from the other side of the country will lead to national economic salvation? They have another agenda entirely.  As a way of responding to the Trump tariffs, I suspect this interprovincial trade furor is a meaningless distraction. 

I'll get to 2) The King and 3) Europe in the next couple of days.