Canada’s free trade relationship with the United States dates back more than 30 years. The CUSFTA (the precursor to NAFTA) was signed in 1987, reflecting a commitment by both countries to “promote productivity, full employment, and a steady improvement of living standards”. While not perfect, the benefits of this relationship are well documented, and for the most part it has delivered on its promise.
In the 30 years since, Canada has ratified 13 more FTAs — including agreements with Europe, Chile, Colombia, South Korea, Israel, Honduras and more.
The most recent FTA Canada ratified was in July last year — with itself.
The Canadian Free Trade Agreement is an agreement between Federal, Provincial and Territory Governments. It’s an agreement to eliminate restrictions on the “free movement of persons, goods, services, and investments within Canada”. CFTA promises to “reduce barriers to trade, investment, and worker mobility… increase choice for consumers, expand access to government contracts, and create more jobs”. The 353 page document (38 pages longer than CUSFTA) includes rules that open trade in goods and services, processes that reduce differences in regulations and standards, and provisions that increase access to billions of dollars in government procurement opportunities for Canadian businesses.
While the Agreement is certainly a step in the right direction, about a third of the document is devoted to exemptions. The more obscure exemptions provide ensure that in Ontario, the taking of bullfrogs for sale or barter is only for residents; would-be funeral directors in Quebec must have live in the province for at least 12 months before applying for a licence; and sale of shorefront property in Prince Edward Island to non-residents is subject to a FIRB type review. But there are substantial exemptions are provided for real estate, finance, agriculture, communications, alcohol, tourism, business services, transport and energy.
Barriers to intra-Canada trade are widespread, and they’re particularly well known for dairy, alcohol and finance. They range from minor inconveniences (like being able to Uber across the river into Quebec, but being forced to taxi back) to the highly significant. In a dispute about the construction of an oil pipeline, Alberta and British Colombia have for example, fired the first shots of a potential trade war: Alberta has placed an embargo on the import of BC wine and introduced legislation to restrict their supply of oil.
A recent test of the CFTA has gripped both the nation and the legal system. Retiree Gerard Comeau was fined $300 for attempting to transport 14 cases of beer across the New Brunswick-Quebec border. Comeau objected to the fine and confiscation of his alcohol, arguing that because he’s Canadian, he should have the right to shop anywhere in the country. The case made it all the way to the Supreme Court, which has just (surprisingly, but unanimously) ruled against Comeau. This ruling preserves the right for “provinces to restrict commerce if there is another over riding purpose.
We might think of the above examples as extreme cases; anomalies that are the consequence of specific institutional settings and circumstance. But they are a reminder of the economic costs that result from inefficient and disharmonised regulatory regimes. Indeed, using transaction-level transport data, Statistics Canada estimated the damage that these barriers do to the economy. They found that provincial borders had the same effect as a 6.9 per cent tariff(!) — which if you want to next have a conversation about competitiveness and the costs of doing business, its worth noting that that’s a figure which is way, way bigger than what comparable studies have found in the US.
TALES FROM THE LONG TAIL 
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