TILMA: Edmonton Journal and Saskatchewan Party admit few genuine trade barriers exist between three westernmost provinces

In Western trade pact builds better future (EJ April 3, 2007) the Edmonton Journal editorial board state there is “little in the way of genuine trade barriers remaining between the two westernmost provinces.”

Meanwhile, in an April 3, 2007, news release Saskatchewan Party Leader Brad Wall said Saskatchewan has “fewer trade barriers and restrictions—than either B.C. or Alberta.”

So it’s now been firmly established that there are few if any genuine trade barriers left between the three westernmost provinces.

This is despite the fact that trade barriers are often cited by proponents of the Trade, Investment and Labour Mobility Agreement (TILMA) in these provinces as being one of the main reasons why the agreement is so desperately needed. Now that that argument has been stripped away, what’s left?

According to the Edmonton Journal it’s “the myriad of red-tape hurdles” and “layers of bureaucracy that have built up over the years.”

In The Myth of Interprovincial Trade Barriers and TILMA’s Alleged Economic Benefits (2007), the Canadian Centre for Policy Alternatives (CCPA) offers a legitimate solution:

“A more sensible approach to internal trade would begin with business organizations compiling publicly-available lists of interprovincial barriers. Citizens could respond by assessing the social, economic and environmental purposes of the alleged barriers. Provincial governments could then co-operate to remove barriers that entail economic costs, but do not serve important policy objectives. Whatever minor barriers to internal trade that do exist should be addressed through a democratic process rather than by the dictates of TILMA tribunals. Through the Council of the Federation, governments are already working to harmonize licensing by professional bodies to enhance labour mobility. Canada needs a transparent, incremental approach focused on particular problems rather than TILMA’s sweeping provisions.”

Since TILMA’s primary purpose is massive de-regulation this likely won’t be considered.

Saskatchewan Party Leader Brad Wall noted in his party’s news release that the “Conference Board of Canada study for B.C. predicted the agreement would create 78,000 new jobs in B.C. alone, along with a potential increase of $5 billion in real GDP.”

This would be the same Conference Board whose study the CCPA showed to be deeply flawed.

The CCPA report, which was authored by Marc Lee and Erin Weir, notes that the Conference Board made “no attempt to list, or estimate the cost of, trade barriers between provinces.”

On page three Lee-Weir states:

“Most serious studies conclude that there are few significant obstacles to trade and investment within Canada. There are no customs inspection stations along provincial borders, nor any kind of tariffs on interprovincial trade. Canadians use the same currency and share common legal, financial and economic institutions. Canadians are free to live and work anywhere in the country. The federal government has constitutional power over interprovincial trade and the courts have consistently struck down attempts by provincial governments to obstruct it.

In Death by a Thousand Paper Cuts (2006), the Conference Board identifies only two examples of interprovincial trade barriers: Quebec’s prohibition of margarine coloured like butter and Ontario’s restriction on vegetable-oil-based substitutes for dairy products. It is not clear that these barriers have significant economic impacts, much less that they constitute the “balkanization of our national economic space.” In Mission Possible: Stellar Canadian Performance in the Global Economy (2007), the Conference Board refers to “a thicket of provincial barriers” but provides no further examples.”

Furthermore, Lee-Weir found that “Rather than using standard economic techniques, the Conference Board infers huge benefits from a tiny survey of business organizations and government ministries.”

Apparently, only 4 of 13 business lobby groups answered the Conference Board survey.

“The fact that two-thirds of recipients could not be bothered to respond suggests that alleged interprovincial trade barriers are not a particularly important issue for BC business. More generally, the low response rate and small sample size cast doubt on the survey’s validity,” Lee-Weir point out.

The authors also discovered that the “Conference Board doubles its estimate of TILMA’s benefits through a simple arithmetic error. Even after correcting this error, most of the projected gains are from industries exempt from the final agreement or from industries that barely engage in interprovincial trade.”

According to their report “even if we accept the study’s bizarre methodology, TILMA’s projected benefits are less than $1 billion, or significantly below 1% of provincial GDP.”

“The true purpose of TILMA,” say Lee-Weir “is not to facilitate interprovincial trade, but to reduce different provincial regulations to the lowest common denominator. A review of the empirical literature on interprovincial trade barriers prepared for the BC government by UBC economist Brian Copeland notes:

Because trade barriers between the provinces are low, efforts to liberalize those barriers that do exist are likely to have only a small effect on trade flows. Much of the debate is not really about interprovincial trade, but rather about how decentralized the policy regime should be in Canada and how much flexibility governments should have to intervene in markets… These are issues which deserve to be debated on their own merits, without the distraction of misleading claims about a crisis in internal trade."

Lee-Weir concludes saying “despite the rhetoric, there are few examples of interprovincial trade barriers and no evidence that they entail significant economic costs. Certainly, such barriers are not sufficient to justify a far-reaching agreement like TILMA, which would substantially curtail the capacity of provincial governments to act in the public interest.”

And still the Saskatchewan Party, the British Columbia and Alberta governments, the media and conservative think tanks insist on quoting the Conference Board of Canada, an organization with a long history of pro-business bias, and expect the public to dutifully accept their findings.