In response to the looming threat of a trade war with the United States, efforts to remove barriers to Canada’s interprovincial trade have been reignited. Indeed, in a recent interview, Anita Anand, the federal Minister of Transport and Internal Trade, suggested that Canada’s interprovincial trade barriers could be removed within a month. Canada’s agriculture and agri-food sector is one of the industries that may be most impacted by reduced barriers to interprovincial trade. The domestic market presents a tremendous opportunity for Canada’s agriculture and agri-food sector; however, agriculture is also one of the industries that may be most resistant to lowering trade barriers. This article considers what barriers to interprovincial trade currently exist in the industry and considers the impacts of removing those barriers.
Current barriers to interprovincial trade
There are four categories of non-tariff internal trade barriers in Canada: natural barriers (i.e. geography), prohibitive barriers (such as restrictions on the sale of alcohol in other provinces), technical barriers and regulatory and administrative barriers. Technical barriers are sector specific regulations that differ across provinces and territories, and regulatory barriers are permits, licences and other requirements imposed on businesses that operate in multiple jurisdictions.
Efforts to remove barriers to interprovincial trade in Canada have been ongoing for decades. In 1995, the Agreement on Internal Trade (AIT) came into force, an intergovernmental trade agreement aimed at lowering barriers to interprovincial trade. The AIT was fairly narrow in scope, adopting a positive list approach focused on removing trade barriers in 11 sectors. In 2017, the AIT was replaced by the more comprehensive Canadian Free Trade Agreement (CFTA). The CFTA was signed by the federal government and all provinces and territories. Its objective is to reduce and eliminate, to the extent possible, barriers to the free movement of persons, goods, services and investments within Canada and to establish an open, efficient and stable domestic market. Unlike the AIT, the CFTA adopted a negative list approach, meaning that its provisions automatically apply to all sectors unless specifically excepted. Regional agreements also exist, such as the New West Partnership Trade Agreement between the four Western provinces, and the Trade and Cooperation Agreement between Ontario and Quebec.
Despite these efforts, barriers to interprovincial trade remain in effect. For instance, a detailed list of exemptions from the CFTA was negotiated by each province and territory. Examples of exceptions include dairy and other farm products and trucking regulations. A 2023 report by the Montreal Economic Institute found a total of 245 exemptions to the CFTA across all the provinces and territories.
Impact of removing interprovincial trade barriers in the agriculture and agri-food sector
Barriers to internal trade that impact the agriculture and agri-food sector include dairy quotas, trucking requirements, health and safety regulations, packaging and labelling requirements, business registration and professional licencing differences across provinces, among other things. Collectively, it is estimated that these barriers cost the industry approximately CA$1.7 billion annually.[1] The Canadian Federation of Agriculture (CFA) has identified the two largest barriers to interprovincial trade in agriculture as: differing provincial transportation regulations, and inconsistencies between provincial and federal inspections required at meat processing facilities.
In the trucking industry, a patchwork of provincial regulations limits market efficiency and raises prices for consumers. Examples include differences in acceptable truck sizes and weights, permitting and licensing requirements and safety standards. For instance, certain regulations require a commercial vehicle to get a second inspection when crossing a provincial border. Some trucks are allowed on BC roads at night, but only allowed on Alberta roads during the day. The impact of reducing interprovincial barriers to trucking will vary by province; however, it is estimated that it would reduce trade costs in the sector by an average of 8.3 percent, resulting in cost savings of approximately CA$500 million per year.[2]
Parallel federal and provincial regulations for meat-processing facilities pose another significant barrier to interprovincial trade in the agriculture and agri-food sector. A meat processing facility that only sells their products within the province where they are located is under provincial jurisdiction. However, in order to sell across provincial borders, the facility must be registered with the Canadian Food Inspection Agency (CFIA) and comply with federal regulations under the Safe Food for Canadians Act. The requirement for provincially registered facilities to meet federal regulatory requirements in order to trade interprovincially is a significant burden and barrier to internal trade. It is estimated that barriers to interprovincial trade in meat costs the industry approximately CA$500 million per year.
Conclusion
The Trump administration’s tariff threats against Canada have reinvigorated efforts to remove interprovincial trade barriers, which place a significant damper on the Canadian economy. It is predicted that removing barriers to interprovincial trade would be a boon not only to Canada’s agricultural and agri-food sector, but to the economy as a whole. A 2022 report by the Macdonald-Laurier Institute estimates that eliminating interprovincial trade barriers could increase Canada’s GDP between 4.4 and 7.9 per cent.[3] However, there will be always be some actors who currently benefit from internal trade barriers who will lose out if those barriers are removed. For instance, this article has not considered the role of supply management systems or regulated marketing of agricultural products as barriers to interprovincial trade—a blog for another day. It is unlikely that these systems will be targeted in the current push to remove interprovincial trade barriers when more low-hanging economic fruit, such as provincial trucking regulations and meat processing facility regulatory requirements are available.
For more information on this topic, please reach out to the authors, Morgan Camley or Kathryn Gullason, or a member of Dentons’ Litigation and Dispute Resolution or National Regulatory Practice groups, who have expertise in the agricultural and agri-food sector.
[1] Elisabeta Lika and Al Mussell, “Analysis of Regulatory and Non-Regulatory Barriers to Interprovincial Red Meat Trade in Canada”, The Canadian Agri-Food Policy Institute (July 2022), available online, < https://capi-icpa.ca/wp-content/uploads/2022/07/2022-07-15-Interprovincial-Meat-Trade_EN.pdf>.
[2] Ryan Manucha and Trevor Tombe, “Roadblocks ahead: Internal barriers to trade in Canada’s truck transportation sector”, Macdonald-Laurier Institute (May 2024), available online, < https://macdonaldlaurier.ca/wp-content/uploads/2024/05/20240430_Roadblocks-ahead-Manchua_Tombe_PAPER-v3-FINAL.pdf>.
[3] Ryan Manucha and Trevor Tombe, “Liberalizing internal trade through mutual recognition: A legal and economic analysis”, Macdonald-Laurier Institute (September 20, 2022), available online: < https://macdonaldlaurier.ca/liberalizing-internal-trade-through-mutual-recognition-a-legal-and-economic-analysis/>.
