Skip to main content
opinion

Some time in the next few weeks a federal panel will rule on a trade case with sweeping implications for a key Canadian industry, and hundreds of millions of dollars are at stake.

And yet if history is any guide, the decision will be snubbed and ignored.

It is the sad reality of Canada's once-celebrated Agreement on Internal Trade. Cases drag on for years and final decisions are meaningless because they're virtually unenforceable.

As a result, the 16-year-old system has fallen into disuse by the provinces, and open contempt among the businesses it's intended to help.

At issue in this latest case is a margarine-like spread, made by blending canola oil with a little butter. As innocuous as this concoction sounds, it's illegal in Ontario and Quebec. (It's actually cheaper, free of trans fats and low in saturated fat.) Both provinces prohibit oil-based spreads that contain anything less than 50-per-cent butter.

Why? The only plausible explanation is to protect the province's dairy producers at the expense of canola producers in Western Canada. Make the stuff mostly with butter, and it's more expensive and doesn't hold any attraction for health-conscious consumers.

The absurdity doesn't end there. B.C. and Alberta won this case once already in 2004. But Ontario repealed the offending law and quickly inserted the prohibition into another piece of provincial legislation, forcing a second protracted round of litigation. The case has now consumed the better part of a decade, with no outcome.

The problem, of course, isn't butter, or even Ontario. The larger issue is the willingness of a country to accept a broken system that tolerates barriers to legitimate trade within its own borders.

All levels of government are guilty, and all of us pay the price. A recent back-of-the-envelope calculation by the Macdonald-Laurier Institute puts the tally of internal trade barriers at 0.5 per cent of GDP, or $8-billion a year. Getting rid of them would put nearly $1,000 into the pockets of a family of four.

The list of these costly barriers is frustratingly long. Alberta insists that only provincially certified welders assemble components used in the oil sands and other projects. Federal law bars people from ordering wine directly from another province. Quebec requires all butter sold in the province to be wrapped in foil. B.C. won't let Ontario buses on its roads because of differing brake standards. The no-brainer of creating a national securities regulator has become a decades-long saga.

Governments, particularly at the provincial and municipal level, continue to steer big purchases to local suppliers. Ontario and Quebec, for example, are currently doling out generous subsidies to wind and solar power producers, but only if they source most of their goods and services at home.

In some cases, it's now easier to do business internationally than inside the country. Carole Presseault, vice-president of government and regulatory affairs for the Certified General Accountants Association of Canada, argues that U.S. accountants face fewer restrictions working in Ontario than accountants from elsewhere in Canada.

That's because Ontario, like virtually every other province, can indefinitely keep out professionals certified in another province as long is it lists the restrictions and makes a case why they're needed. Ontario deems that Certified Public Accountants and Certified Management Accountants from the rest of Canada aren't fit to work in the province.

The good news is that the current system may be buckling under the weight of its own inefficiency. International trade deals, such as the proposed Canada-EU trade treaty, are forcing negotiators to confront many remaining barriers.

Last year's Buy America flap with the United States exposed the consequences of clinging to local purchasing restrictions. Canada could have signed on to a World Trade Organization government purchasing agreement years ago that would have shielded many Canadian suppliers from new U.S. restrictions. Ottawa opted not to back then, at the urging of the provinces, which wanted to continue steering contracts to local suppliers.

And after years of waiting on the sidelines, the business community appears to be getting agitated again about internal trade. A broad coalition of groups that includes CGAs, the Canadian Council of Chief Executives and Canadian Manufacturers & Exporters is pushing for federal "open trade" legislation, a permanent trade tribunal with teeth, and implementation of all those past rulings that provinces have ignored.

That's a good start.

A federal government that stands up and demands one country free of petty and costly internal walls would be even better.

Interact with The Globe