An economic think tank is calling for provinces to adopt Nova Scotia’s mutual recognition act, a model which opts to “trade first and harmonize later,” to reduce interprovincial trade barriers.
Amid Canada’s trade war with the U.S., provincial governments have identified that differing regulations, certifications and testing requirements between jurisdictions only overburdens domestic trade.
Nova Scotia Premier Tim Houston responded to U.S. tariffs by calling for his province to create a model of “mutual recognition” of standards to accelerate interprovincial licensing.
In other words, it renders the vast majority of interprovincial trade barriers moot with any province that adopts similar legislation.
Nova Scotia’s Free Trade and Mobility Within Canada Act received royal assent in March, becoming law in the province.
A new study by the Montreal Economic Institute found that removing the interprovincial trade barriers between Nova Scotia and Ontario alone would boost the Canadian economy by nearly $4.1 billion.
If Quebec and Ontario were to adopt a similar agreement, Canada’s GDP would grow by an estimated $32.2 billion.
“A major hurdle is that each province has really been pushing for their regulations to be the ones that are accepted and approved and that’s why harmonization has been a slow process,” MEI director of research Krystle Wittevrongel and study author told True North.
“The Nova Scotia model is quite interesting and unique because it’s saying, ‘we’re going to trade first and harmonize later’ by the mutual recognition aspect.”
Following Nova Scotia’s lead, Ontario Premier Doug Ford and Prince Edward Island Premier Rob Lantz tabled similar bills in their provinces.
“Ontario has been moving quite quickly, they have their own bill for mutual recognition. They’ve also put forward memorandums of understanding with a number of provinces even just within the last week,” said Wittevrongel.
The study noted that Nova Scotia stands to benefit the most from this model, with annual growth estimated at $2,800 per person.
Estimates for Ontario show gains of about $100 per person but there are also positive economic spillovers for Canadians in other provinces as well.
For example, the Nova Scotia-Ontario agreement would gain Albertans $15 per person just from their mutual recognition.
“It’s not a huge amount of money to each Albertan but the fact is that there are gains to everybody from these bilateral free trade zones,” said Wittevrongel.
The “potential economic gain” between Ontario and Nova Scotia is most prominent when it comes to services such as trade costs, which are “especially high” and goods as well.
“This speaks to the issues of regulatory and licensing frictions,” said Wittevrongel. “Even though we’re looking at the benefits of those two provinces, there are benefits that come to residents of other provinces as well through the supply chain and efficiency gains.”
However, there are entrenched interests that still stand in the way and some hesitation from certain provinces remain regarding their perception that their regulations are superior to others.
“There is some carving-out that provinces are doing in their own memorandums of understanding, unfortunately where they still want to protect certain industries or other measures that stand in the way of liberalizing free trade,” said Wittevrongel.
“So it’s not a full blanket push but at least things are moving in the right direction.”
Wittevrongel noted that more provinces attempt to protect certain industries because they will be left out of these mutual recognition agreements which offer wider market access to “free trade zones” across Canada.
Prime Minister Mark Carney pledged to get rid of federal barriers to interprovincial trade by July 1. However, while the federal government can dismantle certain barriers and encourage the provinces to cooperate, it can’t force them to come to the table.