Thread by @JeanPFournier

Little anecdote about Canadian “internal trade barriers” from my time in Quebec’s ministry of Finance. 🧵

At one point the minister asked us to look into low hanging fruit to liberalize and improve free trade between Qc and other provinces. The cost of these apparent barriers, we were told, were so high that even some quick wins should surely give at least a bit of a boost, no?

Well, turns out not really. Other than the very stupid rules on alcohol, the so-called interprovincial trade barriers are all *regulatory* in nature. In other words, they’re the result of 10 provinces introducing rules and regulations for all sorts of things and slowly diverging.

And these rules don’t ever target other provinces directly. They’re just rules that kinda touch every aspect of our lives but were made without taking into account what other provinces were doing. Diverging regulatory creep.

Here’s an example:

We had a situation where the rules for the stuffing of car seats - their filling - was different in Qc vs Ontario. This means Qc couldn’t use the car seats made or used by the main car producing province in Canada. You see the issue here.

And the regulated difference made kind of sense - Qc allowed only synthetic stuffing to go into car seats padding, whereas Ontario accepted whatever.

At one point though Qc realized that this stricter regulation didn’t actually matter and we ended up removing it.

But wouldn’t you know, some people were pissed! Some businesses had specialized to conform to Qc’s regulatory reality!

They probably ended up adapting, but it shows that even the most random regulatory change can face interest group ire. It probably cost them a pretty penny too

And when we looked at other regulatory dragons to slay, it turned out that we weren’t ready to pay the political price.

We ended up not doing anything else because we were afraid of the push back. Even though most changes just required harmonization, it would create local losers

And we didn’t even start to look at the worst offenders: labour mobility and professional orders playing gatekeepers. Anyone who knows anything about Canada understands how powerful the doctor lobby can be, for example. Even thinking about touching this would amount to nuclear public affairs war.

And these interest groups usually think they’re actually defending the public interest somehow. For example I once had a doctor from the Qc order of doctors tell me with a straight face we had to keep Albertan doctors out cause their training sucked. It’s complete lunacy.

Now imagine this but across the entire economy. Millions of businesses and individuals claiming to be protecting Canadians. Hundreds or thousands of lobbys and interests groups protecting themselves and fighting for their survival.

Whether its protected economic fiefdoms, artificially created regulatory power or economic benefits, turns out that for the economy as a whole each change to barriers can be microscopic - but it can mean hundreds of thousands or millions of dollars in costs for others.

To succeed it will require a Total War effort from the feds and ALL provinces. People and provinces WILL be pissed and yell.

Quite frankly, it means that provinces will have to reduce their autonomy on some things. Are we ready to have that discussion? Will provinces agree when push comes to shove and their back is against the wall with lobbyists breathing down their neck? Historically the answer has been a resounding and hard No.

Until we get people to realize that this will amount to pulling teeth from provincial mouths, and that it might unfortunately have to be forced on some provinces, we will get useless interprovincial trade treaties.

And then, we will need to figure out to keep the harmonized regs harmonized in the future.

I hope we find a way, but this will likely be harder than building the first trans-canadian railway. But it will probably be even more worth it in the long run.