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The City of Halton Hills, Ont., west of Toronto, passed a resolution last week, calling on Canadian municipalities to stand up for "free, fair and reciprocal trade" between Canada and the U.S.

Wait. Wasn't that battle fought – and won – in the 1980s?

Apparently not.

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Halton Hills, home to a cluster of manufacturers that export to the U.S., is upset about the resurgence of protectionist Buy American rules contained in recent Congressional spending bills.

Meanwhile, Saskatchewan Premier Brad Wall is threatening to retaliate against Ontario over rules that discriminate against out-of-province bidders on construction projects.

It is distressing that in 2014 – 25 years after the Canada-U.S. free trade agreement and two decades after the Agreement on Internal Trade – Canadians are still fighting for free trade on the home front.

Canada has aggressively pursued new free trade deals in Europe and Asia in recent years. That's all good.

But costly and insidious protectionism persists in Canada's own backyard, where the overwhelming majority of commerce actually occurs.

A true North American free trade zone does not exist. The seamless border is an illusion for many exporters – the result of recurring and unpredictable spasms of protectionism, border fees and shifting rules.

Worse, free trade doesn't even exist within Canada. Provinces often refuse to recognize the health, safety and professional standards of other provinces for no legitimate reason, other than favouring their own. Ontario and other provinces discriminate in awarding government construction contracts. Energy markets are balkanized and inefficient. Interprovincial trade in many products, including alcohol and dairy, remains highly restricted.

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The costs are tallied in lost opportunities and chronic economic inefficiency – sapping as much as 1.5 per cent of GDP, according to some estimates.

Absurdly, Europeans may soon enjoy better access to some markets here than Canadians.

That's a problem that deserves a lot more attention from policy makers than it's been getting.

To their credit, provincial premiers meeting in Charlottetown at their annual summit last week discussed internal trade at some length. B.C. and Saskatchewan also announced a modest deal at the meeting to end restrictions on shipments of wine and spirits between the provinces for personal use.

And for six months now, federal Industry Minister James Moore has been quietly trying to drum up support for overhauling and strengthening the weak and ineffective Agreement on Internal Trade.

It is a worthy effort, to be sure. But the time for talking was a decade ago – not now, on the eve of a historic free trade agreement with European Union.

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Canada and the U.S. risk sliding further away from the elusive goal of true free trade.

The Halton Hills resolution against Buy American purchasing restrictions is a prelude to what could become a much more assertive campaign by municipalities across Canada in the coming months. How long will cities here tolerate open tendering here if domestic companies are barred from bidding on everything from transit systems to highways and sewer projects in the U.S.?

Canadian Manufacturers & Exporters has been urging Ottawa and other governments to get tough in pursuit of a level playing field. For example, it wants the federal government to favour the use of Canadian steel in the $5-billion project to replace Montreal's Champlain Bridge.

"No trade agreements can be mutually beneficial if there is no reciprocity," CME president Jayson Myers pointed out. "We're supportive of Halton Hills' resolution and we are going to work with all municipalities across the country that want to stand up for Canadian manufacturers."

Saskatchewan's Mr. Wall similarly complains about the elusive "level playing field" inside the country. He told The Globe and Mail last week that his province is tired of being the "Boy Scouts" while Ontario discriminates against Saskatchewan companies. He vowed that his province would "react" unless Ontario opens its market.

There are a lot of sensible reasons to fix these problems.

The best might be that it's un-Canadian to live in a country of walls.

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About the Author
National Business Correspondent

Barrie McKenna is correspondent and columnist in The Globe and Mail's Ottawa bureau. From 1997 until 2010, he covered Washington from The Globe's bureau in the U.S. capital. During his U.S. posting, he traveled widely, filing stories from more than 30 states. Mr. McKenna has also been a frequent visitor to Japan and South Korea on reporting assignments. More

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