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RUSSELL WANGERSKY: Free trade comes with a cost


They were talking about it in the mid-1980s when I got into the news business, and they are still talking about it now.

And, sure, as topics go, it’s as exciting as the proverbial drying paint.

But finally, the provincial and federal governments seem close to finding a way to drop interprovincial trade barriers.And perhaps a broken-down 48-year-old Newfoundland ferry might be a good way to explain the issue.

We may be a nation that has struck all kinds of agreements on free trade with other nations, but inside the federation there are all kinds of barriers facing a company in Province X doing business in Province Y.

Newfoundland and Labrador, for example, has an extensive ferry fleet, but repairs and refits of its vessels are usually tied to shipyards inside the province. Tenders for the work include clauses like this one, for a $5-million repair to the MV Sound of Islay. “Due to operation restrictions vessel is unable to travel outside of the territorial waters of the island portion of the province of Newfoundland and Labrador. Due to provincial occupation health and safety jurisdiction, vessel is unable to travel out the province of Newfoundland and Labrador.”

That’s all well and good, of course, but the ferry has been out of service since last fall and has no working propulsion or electrical systems. Since the ship has to be towed to wherever work would be done, it’s hard to see why those clauses should even apply.

But those kinds of clauses do mean that the work will have to be done at a shipyard in the province — a very small field to make a competitive bid.

Changing restrictive rules over bidding could mean lower bids for work; some estimates suggest getting rid of all sorts of interprovincial trade barriers would be the equivalent of increasing the nation’s GDP by about three per cent. Maybe the Sound of Islay’s repairs would cost less than $5 million somewhere else in Atlantic Canada — chances are, some place like the Halifax Shipyard would want to at least bid.

Complaints about changing the system will come, of course, from those with the most to lose. Making a system more competitive may be fine for consumers and governments, but not for those on the other side of the equation — those who can’t compete on a level playing field.

The argument has been made for years that Canada’s main brand beer consumption could be handled by a few days’ work at the country’s largest modern breweries. If there is free commerce in beer and other alcoholic beverages, it’s likely that smaller, less-efficient individual breweries within the operations of the two largest brewers in the country will fall victim to their more-efficient cousins.

Likewise in the construction business. There are economies of scale in many industries, and it would not be surprising to see the bigger players from Central Canada elbowing their way fully into construction in provinces where smaller players have been protected by local-preference policies. But if the work goes somewhere else, there will be those who lose it as well.

That being said, you can go back to a different part of the beer industry to talk about how trade barriers stifle. Consider the case of an Ottawa brewer who wanted to sell his product across the river in Quebec, but found it far easier to sell in New York State. To make its way into the Quebec marketplace, the brewery had to sell beer to that province’s regulator, and then buy it back again from the regulator’s warehouses in order to be able to legally distribute it. That’s not sensible regulation — it’s just plain government stupidity.

Dropping barriers has to happen, but anyone who argues that the changeover will be smooth or painless is just plain wrong.

Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.

And, sure, as topics go, it’s as exciting as the proverbial drying paint.

But finally, the provincial and federal governments seem close to finding a way to drop interprovincial trade barriers.And perhaps a broken-down 48-year-old Newfoundland ferry might be a good way to explain the issue.

We may be a nation that has struck all kinds of agreements on free trade with other nations, but inside the federation there are all kinds of barriers facing a company in Province X doing business in Province Y.

Newfoundland and Labrador, for example, has an extensive ferry fleet, but repairs and refits of its vessels are usually tied to shipyards inside the province. Tenders for the work include clauses like this one, for a $5-million repair to the MV Sound of Islay. “Due to operation restrictions vessel is unable to travel outside of the territorial waters of the island portion of the province of Newfoundland and Labrador. Due to provincial occupation health and safety jurisdiction, vessel is unable to travel out the province of Newfoundland and Labrador.”

That’s all well and good, of course, but the ferry has been out of service since last fall and has no working propulsion or electrical systems. Since the ship has to be towed to wherever work would be done, it’s hard to see why those clauses should even apply.

But those kinds of clauses do mean that the work will have to be done at a shipyard in the province — a very small field to make a competitive bid.

Changing restrictive rules over bidding could mean lower bids for work; some estimates suggest getting rid of all sorts of interprovincial trade barriers would be the equivalent of increasing the nation’s GDP by about three per cent. Maybe the Sound of Islay’s repairs would cost less than $5 million somewhere else in Atlantic Canada — chances are, some place like the Halifax Shipyard would want to at least bid.

Complaints about changing the system will come, of course, from those with the most to lose. Making a system more competitive may be fine for consumers and governments, but not for those on the other side of the equation — those who can’t compete on a level playing field.

The argument has been made for years that Canada’s main brand beer consumption could be handled by a few days’ work at the country’s largest modern breweries. If there is free commerce in beer and other alcoholic beverages, it’s likely that smaller, less-efficient individual breweries within the operations of the two largest brewers in the country will fall victim to their more-efficient cousins.

Likewise in the construction business. There are economies of scale in many industries, and it would not be surprising to see the bigger players from Central Canada elbowing their way fully into construction in provinces where smaller players have been protected by local-preference policies. But if the work goes somewhere else, there will be those who lose it as well.

That being said, you can go back to a different part of the beer industry to talk about how trade barriers stifle. Consider the case of an Ottawa brewer who wanted to sell his product across the river in Quebec, but found it far easier to sell in New York State. To make its way into the Quebec marketplace, the brewery had to sell beer to that province’s regulator, and then buy it back again from the regulator’s warehouses in order to be able to legally distribute it. That’s not sensible regulation — it’s just plain government stupidity.

Dropping barriers has to happen, but anyone who argues that the changeover will be smooth or painless is just plain wrong.

Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.

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