Internal Trade Conference

On March 30, I attended the federal government’s conference on “Internal Trade: Opportunities and Challenges,” which was hosted by Human Resources and Skills Development Canada and by Industry Canada. Other attendees included academics, federal and provincial civil servants, and representatives of business and professional organizations.

The academic and policy people all agreed that the material costs of alleged inter-provincial barriers are insignificantly small relative to the economy. Representatives of nursing and legal associations indicated that their members have no difficulty transferring between provinces and perceive no meaningful barriers to labour mobility.

Several participants, including Patrick Grady, poked fun at the Conference Board of Canada’s claim that TILMA will increase BC’s Gross Domestic Product by about 3.8%. The Conference Board’s representative made no attempt to defend this estimate or the document from which it came.

Despite the near consensus that there is not much of a problem, there was some discussion of potential “solutions”: expanding TILMA, deepening the Agreement on Internal Trade, or applying the World Trade Organization’s rules to intra-national trade. The main arguments in favour of such proposals were that:

1. Canadians have an absolute right to trade, invest, and work between provinces;
2. Such arrangements would prevent provincial governments from introducing larger barriers in the future; and
3. Canada must “get its own house in order” to facilitate further integration with the US.

This final argument is a bit strange since American inter-state barriers seem larger than Canadian inter-provincial barriers. More importantly, it appears to confirm the link between TILMA and the Security & Prosperity Partnership suggested by some critics.

Many participants had not scrutinized TILMA and its likely negative consequences. Although John Helliwell and I tried to raise some of these potential pitfalls, I fear that many people have concluded that this agreement entails minor benefits but no costs.

The conference’s main premise was that more research is needed on internal trade. However, as Grady pointed out, previous research indicates that inter-provincial barriers are extremely low and they have fallen since this research was conducted. Therefore, economists are unlikely to spend their time researching such barriers simply to confirm that they barely matter. Research that might lead to significant findings is far more appealing.

My concern is that, with or without additional research, political leaders are pushing ahead with TILMA. BC’s government and Saskatchewan’s official opposition continue to cite the Conference Board’s discredited figures. In Budget 2007, the federal government committed “to work with interested provinces/territories to examine how the Alberta-British Columbia Trade, Investment and Labour Mobility Agreement [TILMA] could be applied more broadly.”

The optimistic conclusion is that Marc, I, and others have been somewhat successful in dispelling the fantasy that TILMA will yield significant economic benefits. The pessimistic conclusion is that much more needs to be done to inform people of TILMA’s economic, social, and environmental costs.