Canadian free trade: How free is it exactly?

After the meeting of the Council of the Federation here in Whitehorse last week, one of the big stories was that the provinces and territories had reached an “agreement in principle”...

After the meeting of the Council of the Federation here in Whitehorse last week, one of the big stories was that the provinces and territories had reached an “agreement in principle” on loosening up barriers for trade across provincial borders.

The final details still need to be sorted out (hence the “in principle” part) and the so-called “Canada Free Trade Agreement” is still some ways off, but the announcement was nevertheless heralded by the premiers as a “historic” achievement.

As is typically the case these days, the announcement of another free trade deal — even without any details — was treated by just about everyone as a good news story. There are few mantras as widely shared in mainstream political discourse as the notion that more free trade agreements are a good thing.

This can be seen in the fact that the agreement in principle has the support of provincial premiers as ideologically divergent as Alberta’s NDP Premier Rachel Notley and Saskatchewan’s conservative Premier Brad Wall (operating under the ideologically ambiguous Saskatchewan Party label). At the federal level it has gotten to the point where successive prime ministers keep score to see how many new deals they can rack up.

And to be sure, there is good reason for more open trade between provinces. It is indeed strange that in an economic union as Canada purports to be, there is greater mobility across international borders than there is within our own country. Promoters of the new pact played on our love of booze in the rollout by highlighting some of the sillier barriers we have in place in this country relating to the movement of beer and wine between provinces (although these remain among the sticking points).

But outside of political officialdom the debate about free trade continues. The success of both Bernie Sanders and Donald Trump in the United States have grown, in part, from a sense of frustration with some of the negative side effects of free trade.

While there is certainly truth in the notion that a “rising tide raises all ships,” the expansion of free trade in recent decades has produced some real losers as regional and national economies are forced to adjust to new competitors. For instance, while there are certainly many factors that drove its decline, the so-called rust belt in the United States has seen a significant loss of manufacturing jobs as a result of free trade. That region’s economic prosperity was sacrificed for the benefit of consumers elsewhere in the country — but sacrificed it was.

So how will the Yukon fare under this new agreement on interprovincial trade? Should Yukoners be excited about this news? Or is there a chance that we could come out a loser in all of this?

Well, at this point it is hard to say because we haven’t actually seen the details. The premier has stated “Yukon and the other two territories as well as other provinces have exemptions in place” but has offered little in the way of specifics.

One of the areas of potential concern is the proposal to open up government procurement processes to greater competition. The Council’s release stated that the new agreement would “provide a more level playing field for Canadian suppliers by expanding access to contracts tendered by all levels of government and will open up procurement markets to competitive bidding by Canadian businesses, increasing choice and value for taxpayers.” Or in other words — less discretion to prefer local businesses in government contracting.

Given the role that government spending plays in the Yukon relative to the size of the economy, it seems plausible that this clause could have negative repercussions for this territory if more contracts go Outside. The granting of government contracts to Outside firms has already been something of a sore spot among local contractors and other Yukoners. Premier Darrell Pasloski has said the existing Business Incentive Program will remain in place under the agreement, but could those protections be eroded over time?

Alberta Premier Rachel Notley tried to push back on the public procurement portion of the agreement by attempting to obtain an exemption allowing preferential treatment for Alberta companies in the rebuilding of Fort McMurray. Notley said it’s “important to ensure that, where there’s a need for provincial governments to engage intentionally in economic stimulus or regional development, that they’re able to do that.”

She has a point.

Certain areas of this country are reeling economically (like Alberta) while others are heavily dependent on government spending as a source of economic activity (like the territories). Others are doing much better. Without the ability to favour local contractors, how will provincial and territorial governments ensure that such spending accomplishes its economic objectives?

It is also noteworthy that, in general, we Yukoners import a lot, and export very little. How will that imbalance play into the net impact of the agreement? Fundamentally, will reductions in the costs of goods and services we consume combined with increased export opportunities offset any losses suffered by local businesses facing greater competition from the South?

Pasloski is obviously of the view that this new agreement is good news for the country and the territory and he is the one who has actually seen the details. But until I see those details and what exemptions the premier has negotiated for us, I won’t automatically assume that freer trade is what is best for our small, remote, government-driven economy.

Kyle Carruthers is a born-and-raised Yukoner who lives and practises law in Whitehorse.

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