Canada Created its Own Trade Barriers

Stéfane Marion, chief economist of the National Bank of Canada, has urged the Canadian government to reconsider their own trade barriers amid criticism of Donald Trump’s proposed tariffs. The International Monetary Fund (IMF) stated in a 2019 study that Canada’s own restrictions are “regarded as the most comprehensive analysis of internal trade barriers.” Rather than tariffs, Canada’s eagerness to attract foreign investments has proved to be a barrier for domestic corporations.

Canada has trade agreements with over 40 nations as it has sought to attract international capital since 1989 since its first free trade deal with the USA. “[C]ompared to an ambitious and successful international trade strategy, progress in reducing internal trade barriers across Canada has not kept pace,” the IMF noted. The astounding amount of red tape has simply made it more expensive for Canadian companies to conduct business. Some estimates believe non-geographical internal trade barriers in Canada are equivalent to a 21% tariff. On the contrary, those barriers amount to a 3% tariff for the United States.

Marion noted that interprovincial trade relevant to international trade has declined from 50% to 40% in recent decades. The Canadian Federation of Independent Business has long fought for government to stop taxing its own corporations into oblivion. “It’s ridiculous that it’s still easier for Canadian small firms to do business overseas or across the border than within their own country,” said Chorine Pohlmann, CFIB’s executive vice president of advocacy.

Canadians are ready to welcome fresh leadership after Trudeau’s failure. Trump’s proposed 25% tariffs on Canadian goods would be disastrous for both economies. However, the Canadian government has shot itself in the foot with policies aimed at boosting international trade while ignoring domestic objectives. We have seen that happen countless times throughout history when nations are so focused on world trade that they end up dampening their own competitiveness. Canada must consider the steps it can currently take to boost business domestically without punishing companies from operating within Canada.