INTRODUCTION:
Canada is a friendly country that supports trading activities at its best, which is the reason Canada is recognized as a trading nation. Government of Canada has devoted abundant resources to foster trade within the country, as well as external trade. Moreover, government has carried successful negotiations of diverse trade contracts with different nations. In the intervening time, when government was just focusing on making external trade easy and possible, Canada has lost its strength over trade within the country (Pierce and Branch, 2013). Country continues to get engrossed in many internal trade barriers that created firm obstacles to carry trade across the provinces of Canada. By creating the barriers for internal trade, the movement of products, goods, services, and citizens between provinces of Canada was obstructed. There are numbers of internal trade barriers that have caused a great deal of damage to the economy of Canada. In this paper, critical analysis has been done with regards to interprovincial trade barriers. The report has discussed some of the worst interprovincial trade barriers and their consequences. Further, it has presented differences in interprovincial trade barriers among different provinces, and the sectors, agencies or departments those who have accepted or rejected the trade barriers. The discussion is further followed by indicating and defining the market failures that are created or resolved by interprovincial trade barriers. In the end, paper has presented the best possible recommendations for the government of Canada which includes procedures to eliminate or reduce the internal trade barriers, the favorable policies that are needed to be continued and policies that should be abolished.
INTERPROVINCIAL TRADE BARRIERS:
Internal trade is an essential and large part of most of the national economies, and this statement also settles for the economy of Canada. The interprovincial trade has accounted for $326.6 billion according to the statistics of 2008 (Palda, 1994). This figure reflects over half of total import and exports across the border of Canada. As of the national survey, around one third of jobs in private sectors of Canada depend on provincial exports. First, the term internal or interprovincial trade barriers should be made clarified in order to understand the barriers, their consequences and ways to overcome those barriers. The interprovincial or internal trade is a trading of goods and services within the country. The restrictions that cause to hinder the trading activities across the provinces are known as interprovincial trade barriers. Barriers can be in the form of government regulations or imposed taxes and tariffs (Coulombe, 2003). In Canada, some barriers such as tariffs are strictly prohibited as according to The Constitution Act of 1867, under section 121 (Palda, 1994). Most often the countries impose excessive rules and regulations that hinder trade between different provinces and conduct regional programs that misrepresent the markets to unfamiliar people. Moreover, the internal trade barrier also supports provincial legislation that was affected by removing out of province competition in order to protect the interests of local vested people. Dr. Parsons in his recent paper the Distant Realities of Free Trade in Canada pointed out some major feature in addition to this sort of protectionist legislation. He included that there are some few large costs that are linked to the bureaucratic network of provincial and federal regulatory and administrative agreement. Dr. Parsons verifies that the costs of the replication of government official procedures were huge and summarized that there is an obvious overlap in 55% of the federal spending distributable to Alberta.
Undoubtedly, there are numerous policies and regulations that are imposed for some good reason; but, lack of communication between various levels of government has severely led the condition to the unneeded replication and compliance costs. These costs have created barriers in the flow of products or services through provincial authority across the provinces of Canada.
Companies from various industries are functioning in a strongly competitive worldwide economy. In order to build the global competitiveness, it is essential for the countries to create a suitable market at home where they can build their competency scale. Comparatively, Canada is a small economy to start over, and at this stage if interprovincial barriers would be created and balkanize the economy of the country and develop into thirteen different regional economies, in that case it would become challengeable to adapt a scale. As the economy of Canada has divided into numerous regional economies that have created more hurdles to develop a scale that is needed in order to be competitive worldwide. Moreover, interprovincial barriers have reduced the trade of goods, people, and services between the provinces of Canada. Due to this reason, companies cannot sell their products to other provinces except the one where they manufacture the product. This scenario has caused the companies to bear huge losses and limit their customers. Also, with respect to Canadian customers and consumers of different companies, these barriers have limited the choice to purchase and boost up the costs of the products (Blackwell, 2013).
WORST BARRIERS:
The companies, who aim to expand and drive their businesses across Canada, come to know about layers of policies and regulations imposed by provincial government as they move from one jurisdiction to another. All such regulations create strong barriers to expand business even across their provincial borders. During the phase of high unemployment, these hindrances have emerged as even more challenging for the people who want to move from one province to another in search for a job. People may have better opportunities in other areas, or their skills may have greater demand outside the province, but these barriers have made difficult for the people to search job and for the companies to hire an employee with the most desirable skills. People, who wish to move across the province, would have to relicense to propose their skills in some other jurisdiction. Also, there are barriers to bid on government projects for the people who belong to outside the province. In such cases, preferences are given to local bidders of government contracts. This preference has increased the discrimination against bidders who belong to any other region or province at the national level.
The wine case is the most recent one, in which parliament expressed its favor toward sales of wine across the provinces. However, the provincial government did not allow doing so and imposed a question mark on having an open market. This practice is senseless from every aspect. Such conditions are all self-defeating for the Canadian economy. These barriers have boosted up the costs of doing business in Canada, and developed the inefficiencies in the country-wide system. According to the estimation of government of Alberta, interprovincial trade barriers cost the huge figure of around $14 billion to the country economy (Alberta Chambers of Commerce, 2012).
DIFFERENT INTERPROVINCIAL TRADE BARRIERS:
The interprovincial trade barriers are imposed at all level of businesses, taking into account all the industries operating in Canada. The section has identified barriers in three different industries that are getting affected adversely and their consequences on the overall market condition.
Barriers to interprovincial labor mobility
In this era of global competencies where organizations hire people who have the best skill-set from across the world, Canada has restricted its policies to the specific regions only. This restriction means that people from one region or province cannot move to another province for work.
Following are some barriers in terms of government regulations that are imposed across the country:
- Certification and license of professional occupational programs
- Certification and license of trades by government
- Preferential hiring on the basis of preferences (Discrimination)
- Programs policies based on income security
- Differences in language and education system
- Varying standards of employment
In Canada, people need certification in order to work in a specific jurisdiction. In effect of these barriers, a person who has a particular skill in one region will have difficulty to move in another region for work, despite the better job opportunities he/she may have that best suit their skills. This condition is resulting in economic damages in Canada. The country is facing a severe lack of competencies at work, as there are many people available to work, but there is a great mismatch between the demand of skills and available skills. Canadians are not able to move within their own country and utilize their skills, which have increased the costs along with the increased level of unemployment in the country. According to The Canadian Chamber of Commerce, Perrin Beatty, if the regulations are made to ease the movement of people based on off welfare, off employment insurance and provide the tax rolls and job rolls, everybody in the system can be benefited by this (Blackwell, 2013).
Interprovincial Barriers to Beer Trade:
Canada has been trapped by few major barriers in the trading of beer from one province to another. These barriers are created due to the pressure approaching through the GATT (General Agreement on Tariffs and Trade) at international level and competitive pressure that emerges in a market that remained sluggish for at least a decade. Further, the trading of beer was let off from the US-Canada Free Trade Agreement (FTA), this has made the brewers become more cost effective. There are many different markups on imported or domestic goods by all provinces that served as a major factor in imposing GATT against Canada. The paradox was raised that provincial government has started to discriminate the markups, tariffs and regulations not only against international producers of beer but equally against domestic producers of beers who existed out of province. Furthermore, these inequity and unfair practices have been summed up by production policies that forced upon the fact that beer can be sold in any province but it must be brewed in that particular province (Heien and Sims, 2000). This practice enhanced the imposition of Intoxicating Liquor Act, which supported the local production of beer under the risk of legislation. This act resulted in forced production by industries while making up high cost of production and high prices to the customers (Palda, 1994).
Interprovincial Barriers to Agricultural Trade:
Some of the major impositions of regulations have been translated in such a way that provincial government has favored to enhance local investment and employment within a specific province. For instance, government has imposed regulations regarding favoritism and the provincial preference based. Government gave more importance to local suppliers in terms of purchasing preferences that also included unfair and unethical labour discrimination practices on government based construction ventures. Also, breweries were asked to locate plants in every province wherever they want to gain access to synchronized distribution system. The excess of financial assistances, tax holidays and various inducements used to magnetize production or manufacturing machineries / plants. This activity has been done in order to discourage the trade and transaction across the provinces of Canada (Cherniak, 2011).
The trade barriers in agricultural sector are based on following conceptual map:
(Palda, 1994)
The two forms of interprovincial barriers to agriculture trade are found in two types that include intentional barriers and unintentional barriers. These barriers may be caused owing to technical obstructions and non-technical obstructions. The intentional barrier that was imposed by the provincial government was cost enhancing product regulations based on technical hindrances, while monopolistic product marketing agencies have created barriers and hinders the agricultural trade across the province. This non-technical obstruction created the chaos in the market of Canada. On the other hand, unintentional barriers were created as the consequence of other regulations or by chance that led to create health and safety regulations and consumer information regulations. These are caused due to lack of technical expertise. Conversely, non-technical hindrances have caused barriers such as Farm Support and Adjustment Measures. These barriers either intentional or unintentional have not only limited the production of meat and other agri-food, but also have restricted the sales of meat and meat made products to other provinces. Particular to provinces, governments have imposed quotas that ensure the level of production that is permissible to be sold in the province. These quotas intervene in the market structure, and many companies who do not belong to the agriculture industry cannot sell their product, owing to their residency (Palda, 1994).
WINNERS AND LOSERS OF THE BARRIERS:
There are numerous agencies and forces who want to hold up interprovincial barriers in their business interest, but, however, majority wants to reduce their barriers so that they can be benefited and offer benefits as well (Star Editorials, 2013). Here are some potential winners and losers listed below:
Winners:
- Skilled workforces that are looking for suitable jobs across the province
- Companies with competencies looking to grow and expand its market
- Consumers who are looking for the best product in the best available prices
Losers:
- Local businesses in the province that are threatened by competencies of other companies operating in different provinces
- Provincial governments to maintain their standards and authority within the province
RECOMMENDATIONS:
- In order to remove the interprovincial trade barriers, agencies and regulatory bodies, who are working on federal and provincial or territorial platform, need to work collaboratively. This collaboration allows to gain positive outcomes from all the industrial sectors, while facilitating manufacturers or processors to increase their competitiveness in international, as well as domestic markets (Alberta Chambers of Commerce, 2012).
- Analyze and foster individual industry effects which can be put into practice with cost-effectiveness and reliability across the country by provinces or regions with regards to particular provincial or territorial regulator. For example, food industry will subject to Canadian Food Inspection Agency, agriculture industry will subject to Agriculture and Agri-Food Regulations.
- Assess all industry based regulations for amendments and modifications in policies in order to remove insensitive and unwanted restrictions and enhance the business interests.
- Make certain the implementation is cost-effective and constant from the production process to distribution and consumption process, without compromising on quality standards set by Canadian government.
- Considering all the industrial sectors, it is now essential for the country to shift their focus from policies-based regulatory regime to result oriented or outcome-based regulations.
- Re-examine the processes, costs and allocation of these costs to make the system transparent and reliable and enable trade across provinces without leveraging competitive disadvantage.
- Follow the desirable processes unilaterally that are allowed by provinces or territories regulations.
PROCESS TO ELIMINATE THE TRADE BARRIERS:
In recent years, the most effective development has been made in the form of agreement among Saskatchewan, British Columbia and Western Canada including Alberta. This initiative proved to be a very complex and lengthy process as it was accounted to deal with hundreds of various barriers in order to eliminate them. However, this initiative was restricted to just three provinces of Canada. If this process is extended on the national level, taking into account all the barriers across the country, this can result in improved efficiencies and increased competitiveness (Blackwell, 2013).
The first thing to consider is the Agreement in Internal Trade (AIT), which was founded by Ottawa and other provinces to eliminate barriers in 1995 (Beaulieu, 2013). The progress should be made with the AIT as it deals with overall provincial trades. Apart from this, it is also mandatory to look at each province and regulations exclusively and stress upon to turn up with bilateral agreements that will help to eliminate the unneeded barriers (Blackwell, 2013).
REFERENCES:
Alberta Chambers of Commerce. (2012). Elimination of Interprovincial Trade Barriers. Retrieved June 27, 2014, from http://www.abchamber.ca/wp-content/uploads/2012/02/Elimination_Interprovincial_Trade_Barriers.pdf
Beaulieu, E. (2013). Exploring the Economic Impact of AIT Chapters. In Report Prepared for Public Policy Forum, Department of Economics, University of Calgary.
Blackwell, R. (2013). Why are we blocking free trade between provinces? Retrieved June 27, 2014, from http://www.theglobeandmail.com/report-on-business/economy/canada-competes/why-are-we-blocking-free-trade-between-provinces/article11541453/?page=all
Cherniak, C. T. (2011). REVIEW, REFORM, RECOVERY: CLEVELAND, OHIO: APRIL 8-10, 2010: FOOD SAFETY IN CANADA AND THE UNITED STATES: CANADIAN SPEAKER. Can.-USLJ, 36, 149-310.
Coulombe, S. (2003). International trade, interprovincial trade, and Canadian provincial growth. Ottawa, ON: Industry Canada.
Heien, D., & Sims, E. N. (2000). The impact of the canada-united states free trade agreement on us wine exports. American Journal of Agricultural Economics, 82(1), 173-182.
Palda, K. F. (Ed.). (1994). Provincial trade wars: Why the blockade must end. Fraser Institute.
Pierce, A., & Branch, S. B. (2013). SME Profile: Interprovincial Trade. Retrieved June 27, 2014, from https://www.ic.gc.ca/eic/site/061.nsf/vwapj/SMEP-PPME_2013-11_eng.pdf/$file/SMEP-PPME_2013-11_eng.pdf
Star Editorials. (2013). Star editorial: Provincial trade barriers don’t make sense. Retrieved June 27, 2014, from http://blogs.windsorstar.com/2013/08/28/star-editorial-provincial-trade-barriers-dont-make-sense/
