Canadian Internal Trade Deal Expected To Add US$ 25 Billion A Year To Economy; Give 'Home-Field Advantage'

Trade & Policy

Canadian Internal Trade Deal Expected To Add US$ 25 Billion A Year To Economy; Give 'Home-Field Advantage'

After 150 years of squabbling over internal trade, Canadians finally have a comprehensive internal trade agreement - and they might have Europe to thank for it.

The federal government, 10 provinces and three territories in Toronto unveiled the Canadian Free Trade Agreement, a deal that commits them to remove all internal barriers on trade - except for 144 specific exemptions claimed by one of the 14 member governments. The deal replaces the 1995 Agreement on Internal Trade, which opened up business only in the 11 sectors covered in that pact.

Government procurement is a big part of the new deal. Suppliers and service providers can now bid on government business outside their home provinces.

This isn't a coincidence. The new trade deal with the European Union, the Canada-EU Comprehensive Economic and Trade Agreement, opens government procurement to trans-Atlantic competition. Had Canada's internal trade deal failed to open up government procurement, European bidders would have had better access to bid for Canadian government contracts. "Without the new Canadian Free Trade Agreement, we could have seen a circumstance where EU companies were getting greater access to the Canadian market than homegrown companies," said Brad Duguid, Ontario's minister of economic development and growth, who was chair of the negotiations. "That just didn't make sense to any of us."

"This is really about Canada strengthening its home-field advantage," said Navdeep Bains, federal minister of innovation, science and economic development. "At the federal level, we're making significant investments in infrastructure, US$ 180 billion over the next 10 years. That procurement will be open to all businesses across the country."

Labour mobility is another big part of the agreement. Licensed professionals and trades people accredited in one province, such as engineers or carpenters, will be allowed to work in another province without having to re-qualify with the local regulator. The agreement also opens the power generation sector and permits energy utilities to compete for business across provincial lines.

The deal sets up a "negative list" regime in which all trade moves free unless one of the 14 governments declares an exemption - and the list is already long. The exemptions - 144 of them - take up 135 pages or 60% of the 335-page agreement.

Bains said even if there are a lot of exemptions, they're outweighed by the general market access. "Everything is under the spotlight," he said. "That puts a great deal of pressure on different jurisdictions to explain why they are looking for certain exemptions."

If a recent study by the Bank of Canada is correct, removal of interprovincial trade barriers within Canada could add between 0.1 and 0.2 percentage points or between $2 billion and $4 billion to the country's annual gross domestic product.

The central bank also suggests that if the removal of internal trade barriers is combined with three other big projects, the Trans-Pacific Partnership, the CETA deal, and the federal government's infrastructure spending plan, the total effect could raise real Canadian GDP by 3-5% or up to US$ 100 billion by 2025.