Free Trade among the Prairie Provinces: A Boost for Their Economies

Commentary, Economy, Alexandre Massaux

Trade barriers among provinces in Canada are a problem. Canada has signed trade agreements with foreign countries like the U.S. and regions like the European Union. Yet, trade barriers still exist in Canada even though countries like Germany or Belgium don’t have trade barriers among their states. This unique Canadian situation is damaging the country’s economy. Fortunately, the Prairie Provinces have taken some action to develop free trade among them—these initiatives must continue and be developed. 

The New West Partnership Trade Agreement (NWPTA) among British Columbia, Alberta, Saskatchewan and Manitoba has created Canada’s largest, barrier-free, interprovincial market. The NWPTA came into effect July 1, 2010, and has been fully implemented since July 1, 2013. This agreement aims to “remove barriers to the free movement of goods, services, investment, and people within and between the three provinces.” Eliminating trade barriers has created many benefits by creating a single market for British Columbia, Alberta, Saskatchewan and Manitoba of over 11 million people and a gross domestic product of more than $720 billion. This figure is greater than Quebec’s GDP in 2019 ($377 billion) and population (8.5 million in 2020) and it is close to Ontario’s (GDP of $747 billion in 2020 and a population of 14 million in 2020). This western single market also includes labour mobility by allowing “certified workers to practice their occupation in these provinces without being subject to additional exams or training requirements.” Moreover, when registering in one of these provinces, a business can also register in the others at the same time without paying the other provinces’ fees. By removing their trade and economic barriers, the Prairie Provinces and the West are gaining influence in the Canadian economy and credibility in foreign markets.

However, barriers remain among Eastern Canadian provinces like Ontario and Quebec, the two central provinces. In 2014, 45.9 per cent of Alberta’s imports came from Ontario and 12.9 per cent from Quebec. Moreover, in 2014, exports to Ontario represented $27 billion for Alberta, $6 billion for Saskatchewan and $7.6 billion for Manitoba. This made Ontario the leading interprovincial destination for exports from Alberta and Manitoba and the second destination for Saskatchewan. Removing trade barriers in Western Canada was a good beginning. However, if the other provinces continue to apply some restrictions, the economies of the Prairie Provinces will still be affected. Based on the 2021 Internal Trade Provincial Leadership Index of the Montreal Economic Institute, Alberta, followed by British Columbia, Manitoba and Saskatchewan currently have fewer trade barriers. Quebec is the most protectionist province (including the territories). Fortunately, Ontario is lowering its number of exemptions on free trade.

Alberta went further by unilaterally reducing some trade barriers with all Canadian provinces in 2019. Eight of 14 remaining exceptions (which were trade barriers) to the Canadian Free Trade Agreement were removed. Alberta’s premier said it moves Alberta from being the province with the third-highest number of exemptions to being the province with the fewest exemptions in Canada. If other provinces take this step, all the provinces’ economies will profit from economic growth.

 A study by the International Monetary Fund shows that removing all internal trade barriers would increase the real GDP per capita by 3.8 per cent nationally. For Alberta, this increase would be 3.2 per cent, 2.8 per cent for British Columbia, 7.1 per cent for Manitoba and 5.1 per cent for Saskatchewan. Considering the impact of the COVID-19 crisis on the Canadian economy, it is becoming urgent to remove the last interprovincial trade barriers. But the political will must come from the provinces themselves. 

 

Alexandre Massaux is a research associate with the Frontier Centre for Public Policy. 

Photo by Frantzou Fleurine on Unsplash.