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.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 the 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 been more about reducing regulation rather than reducing cross-border tariffs, which were vanishing by the 1960s. Trump's enthusiasm for tariffs is truly weird, and the American people need to give him a firm whack upside the head for inflicting them.
But the people who promise 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.
Update, March 5: CBC News recently offered an inept and cheerleaderish analysis of the interprovincial trade issue. One would think the CBC News might ponder why a unanimous ruling of the Supreme Court of Canada not long ago dismissed the outlandish claims that populate this piece. But no. (Sometimes I see the point of Pierre Poilievre's animus against the CBC. What a bushleague news operation it has become!)
Update, March 6: Linda McQuaig takes up the interprovincial trade issue.
Today, our business leaders seem, above all, determined to use the Trump crisis to win concessions they’ve long sought from Ottawa, like more tax breaks and deregulation.Indeed, deregulation appears to be the main impetus for removing interprovincial trade barriers.
And here's economist Marjorie Griffin Cohen interjecting a little common sense:
The main reason businesses do not have more interprovincial trade is primarily because of the structure of the Canadian economy and its geography. ... Mostly those businesses that find significant barriers to trade cite issues related to geography – mainly the cost of transportation.
In many cases, they [interprovincial "free trade" lobbyists] will focus on removal of crucial regulations that either protect people or allow provincial governments to promote their own economic and social policy objectives. Removing the policy tools of government undermines democratic control and makes it much harder to counteract the negative impacts of what Trump is now doing.