Ruling could force provinces to eliminate their costly trade barriers

MONTREAL, May 9, 2016 /CNW Telbec/ - The recent decision handed down by a New Brunswick judge on the interprovincial alcohol trade could prove to be a victory for consumers by challenging the control exerted by government monopolies like the SAQ in Quebec. It also places additional pressure on the provinces to bring down the barriers to trade that exist between them.

This ruling, handed down on April 29, states that no province has the right to prevent people from transporting or ordering a good purchased in another province.

Despite the proliferation of free trade agreements with other countries, the Canadian economy remains divided by artificial obstacles between provinces. These obstacles are a drag on business investment and cost consumers billions of dollars a year.

A recent study published in the Canadian Journal of Economics estimates the potential productivity gains at $100 billion, or the equivalent of $2,700 per Canadian.

In 2014, the premiers committed to renegotiating the Agreement on Internal Trade signed two decades earlier. But a new version, expected by March 31, 2016, is still pending.

"Barriers to internal trade reduce business opportunities and job creation for numerous companies, and cost the Canadian economy around 7% of its GDP each year," explains Mathieu Bédard, Economist at the MEI. "According to certain estimates, the simple fact that there isn't a uniform business registration system costs companies from $10 million to $15 million a year."

Differences between the laws and regulations of Canadian provinces persist when it comes to the transport of goods, the sale of alcohol, agricultural policies, the licenses required to practise certain professions, the registration of businesses, and access to capital markets.

For the transport of goods, for example, requirements regarding the dimensions of vehicles and their trailers, the registration of vehicles, and security measures vary from one province to the next, which discourages companies from carrying out their activities beyond the borders of their province.

"Many barriers remain within Canada itself, preventing the Canadian economy from reaching its full potential. In this context, let's hope that the decision handed down in New Brunswick opens the door to a greater liberalisation of interprovincial trade, as this could stimulate the economy without costing the federal government a single penny."

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

SOURCE Montreal Economic Institute

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