Ottawa to remove half exceptions in Canada Free Trade Agreement

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The federal government has announced the removal of half its exceptions in the Canadian Free Trade Agreement (CFTA) in an effort to improve interprovincial trade, according to a release issued on Friday.

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The agreement was first signed by the federal government and the provinces and territories in 2017. Its intention was to modernize the Agreement on Internal Trade signed in 1995 and was designed to increase the flow of goods, services and labour across provinces and promote regulatory co-operation within Canada.

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However, critics of the agreement argue that a large number of exceptions remain in the agreement that render it less effective in fostering free internal trade in Canada.

The federal government initially had 56 exceptions in the agreement, before removing 17 of them last July, mostly related to procurement. Friday’s announcement brings the total number of federal exemptions down to 19. Examples of federal exemptions in the agreement include ones that are related to national security, international trade obligations and its responsibility to support regional interests.

Some premiers have expressed a willingness to improve interprovincial trade, with Nova Scotia Premier Tim Houston announcing on Thursday his intention to table a bill that will remove barriers and make trade with other provinces easier, provided they are willing to do the same.

Anita Anand, Canada’s internal trade minister, is set to meet with the committee on internal trade next week, where she expects a progress report from provincial counterparts on the removal of interprovincial  barriers.

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“We are all hands on deck to promote freer trade here at home,” she said, in a statement. “The removal of these federal exceptions from the CFTA is yet another step towards eliminating barriers to internal trade, reducing costs for Canadian businesses, increasing productivity and foreign investment, and adding billions to the Canadian economy.”

A number of exceptions by the provinces remain in CFTA, designed to protect a number of industries ranging from forestry, real estate services, mining, agriculture, fisheries, energy, alcohol and much more.

For example, in the case of Nova Scotia, the exemption for alcohol explicitly states “the above measure allows the Government of Nova Scotia, through the monopoly of the Nova Scotia Liquor Corporation, to regulate and issue various authorizations relating to the movement, purchase, importation, possession, delivery, transportation and sale of liquor and merchandise.”

In recent weeks, there has been a renewed sense of urgency in making Canada’s economy more resilient in light of trade threats by U.S. President Donald Trump. A 30-day pause on Trump’s threat to impose a 25 per cent tariff on Canadian goods and a 10 per cent tariff on Canadian energy, is set to end March 4.

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In total, internal trade represents 18 per cent of Canada’s gross domestic product (GDP). A 2022 study by the Macdonald-Laurier Institute, based on research done by University of Calgary professor and economist Trevor Tombe, found that the country’s GDP is between 3.2 per cent and 7.3 per cent smaller because of internal trade costs.

A report published by the Canadian Federation of Independent Business this past summer estimates the removal of internal trade barriers would boost the Canadian economy by as much as $200 billion annually.

Randall Zalazar, director of government relations at the Canadian Chamber of Commerce welcomed the news on Friday, but argued for the need to do more.

“Now is the time for provinces to push forward on broad mutual recognition, streamlining the regulations and standards that make the cross-country flow of workers and goods needlessly difficult,” said Zalazar, in a statement. “In the face of tariffs and serious trade disruptions, capitalizing on the benefits of internal trade is too important to miss out on.”

• Email: jgowling@postmedia.com

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