Fixation on internal free trade is a distraction from Trump’s economic warfare

Since January 20, Canada has been at economic war with its largest trading partner and closest international ally. Though  U.S. President Donald Trump has paused his promised  25 per cent tariff on most imports from Canada and Mexico for 30 days, the threat of those tariffs will hang over us for weeks and probably months to come. 

Trump’s strategy is coercive and probably long-term, aimed more at sucking investment out of Canada and Mexico than addressing the opioid crisis. The tariffs would grind trade to a halt in some sectors, while making all Canadian goods uncompetitive in their largest market. Tens of thousands of Canadians could lose their jobs, at least temporarily. Clearly, the Canada-U.S. trade relationship is not as secure as the current and past federal governments have promised. 

Trump’s lingering tariff threat has sparked an important public debate about the future of the Canadian economy. People are asking how we can insulate ourselves from the whims of U.S. presidents looking to put America First, even at the cost of blowing up the Canadian economy. 

The public has warmed to the idea of counter-tariffs, export restrictions on energy and critical minerals, and public orders to remove American goods and services from Canadian inventories where there are alternatives. 

One idea for economic renewal should be tossed aside as futile: removing so-called interprovincial trade barriers. This is a false solution aimed at deregulation and boosting corporate profits, rather than securing new investment and protecting jobs in this country. 

Industry and some government officials in Canada have seized on Trump’s tariff threat to, once again, call for eliminating “red tape” and lowering costs for businesses. For decades, these voices have complained about the ability — you could say responsibility — of provinces to impose administrative and licensing requirements on businesses operating within and across provincial borders.

Besides trucking regulations, Quebec’s language laws and provincial liquor monopolies, there is scant evidence of widespread barriers to interprovincial trade. Econometric studies predicting GDP growth in the tens or even hundreds of billions of dollars from mutual recognition of all provincial standards and regulations are unprovable and cannot be taken at face value.

At best, focusing on eliminating internal trade irritants is a distraction from the large and urgent challenges in front of us. At worst, it could impede governments’ ability to foster local industry and create jobs.

What business labels “trade barriers” are often government protections for nascent local industries and manufacturers, and safeguards for workers and consumers. As studies point out, the costs of mutual recognition of public protection and licensing requirements are likely to fall disproportionately on workers. We ought to pull together for the fight ahead, not pick fights with unions.

Increasing trade within Canada should be a priority for the federal and provincial governments. But there are better ways to do it than new trade rules, tax cuts and deregulation.

With trade-exposed industries and communities at risk, Canada must improve our east-west trade infrastructure, including rail, roads and energy transmission lines. Companies will ship more within Canada if it is easier to do so. (Ironically, they are more likely to do so with a U.S. tariff on Canadian exports, as it would neutralize the gravitational pull of the American market for profit-seeking Canadian firms.) East-west infrastructure could connect with ports to help diversify exports away from the United States.

Green energy generation and transmission and modernizing our telecommunications network require large-scale investment to bring uniform, top-quality service to communities in all parts of Canada. Government contracts with Elon Musk-backed Starlink should be cancelled, as Ontario Progressive Conservative Leader Doug Ford proposed this week, so that Canadian public and private sector firms can do the job and connect remote and rural communities to the internet.

We also have a golden opportunity to expand investment and employment in inward-oriented activity, like affordable housing construction, modular home manufacturing, and expanding high-quality care for Canadians. By lowering the cost of living in Canada, we lower the cost of doing business. 

To “Buy Canadian,” we need more made-in-Canada goods and services. This will require fostering and scaling up industries, services and the care economy in all parts of Canada — not just in central Canada. All regions will be affected by U.S. tariffs, and all parts of the country should benefit from investment programs and job creation efforts. 

This may require provincial governments to take steps to rescue shuttered plants and foster local manufacturing and high-quality jobs. Provincial governments must have the tools (such as local construction codes) to foster local manufacturing — up to and including imposing requirements on companies to invest and employ locally. 

Overheated rhetoric about removing so-called interprovincial trade barriers will not help us meet the existential threat of a long-term 25 per cent tariff on exports to the U.S. It will not get resource projects up and running faster or ensure there are global markets for Canada’s energy products.

Looking for new ways to hamstring governments with internal trade rules points us in precisely the wrong direction. In the weeks, months and years ahead, governments will need more, not less, leeway to preserve and expand manufacturing capacity and good jobs. 

This ought to be the fixation, not reaching the nirvana of frictionless trade.

Chris Roberts is director of social and economic policy at the Canadian Labour Congress, Canada’s largest central labour body. 

Stuart Trew is director of the Trade and Investment Research Project at the Canadian Centre for Policy Alternatives.