Breaking down interprovincial trade barriers: What’s in it for the food sector?
Provincial trade deals are poised to open fresh opportunities for Canada’s food sector.
Amid ongoing trade wars with the United States and China, provinces are looking at their own backyards—dismantling interprovincial trade barriers that have long hindered the free flow of goods, services and workers within the country.
On May 14, Ontario Premier Doug Ford and Manitoba Premier Wab Kinew announced a “memorandum of understanding” (MOU) designed to ease trade barriers between the two provinces. The agreement includes measures such as expanded direct-to-consumer alcohol sales and improved labour mobility. It follows similar agreements Ontario made with Nova Scotia and New Brunswick, with more expected to come.
READ: Nova Scotia smashes food trade barriers—will the rest of Canada follow?
Gary Sands, senior vice president, public policy & advocacy at the Canadian Federation of Independent Grocers (CFIG) says the entire industry welcomes the elimination of interprovincial trade barriers. “It’s long overdue and—coupled with the upsurge in demand for Canadian products—is something we welcome.”
Trade barriers within Canada cost the economy up to $200 billion each year and lower GDP by nearly 8%, according to the Government of Ontario. For the agriculture and agri-food business alone, the cost is estimated at $1.7 billion annually, per Dentons. The barriers are wide-ranging, from trucking and packaging requirements to dairy quotas and professional licensing differences across provinces.
What’s the impact on food manufacturers?
Labour mobility is one issue for the food manufacturing sector, particularly for companies with multiple facilities across the country. Eliminating barriers like different licensing requirements between provinces would allow manufacturers to deploy skilled workers more efficiently. “Trade mobility becomes a benefit because you can move technical people who may be certified in one province to another province for a period of time without having to go through multiple recertification programs,” says Michael Graydon, CEO of Food, Health & Consumer Products of Canada (FHCP).
Where food manufacturers really feel the impact of interprovincial trade barriers is on the transportation front. “Market access tends not to be a real issue to any great extent because many regulations, as they relate to food, are essentially held by the federal government,” says Graydon. “Where there’s a benefit to [eliminating barriers in] the manufacturing sector is around efficiencies with distribution and transportation.”
Those inefficiencies can create major headaches for manufacturers. Logistics rules—such as the maximum weight a trailer can carry, how long a driver can operate a vehicle and even the type and size of tires allowed on a tractor-trailer—differ between provinces.
“You may get as far as Saskatchewan and have to transfer the load to a new trailer and continue on your journey because [the original one] does not comply,” Graydon explains. “So, getting those sorts of efficiencies across the board will be very helpful for manufacturers distributing their product.”
Eliminating interprovincial trade barriers could also open up new markets, particularly for small and mid-sized businesses that are constrained by high distribution costs and complexities. Graydon says some companies might look at shifting part of their production—currently destined for export to the U.S.—to focus more on Canadian markets.
“For small and medium-sized companies, that could be a win, enabling them to scale up and grow their business,” he says. “For many, it’s [currently] a lot easier to truck goods from Ontario to New York State than it is to go to Vancouver. So, if you can take some of the complexities out of the equation, it can open more opportunities for growth.”
That could ultimately benefit Canadian consumers. “From a consumer perspective, there’s an opportunity to have a bit more choice and variety,” says Graydon. “Access to niche, unique or innovative products may be more of a likelihood going forward.”
The need for free—and fair—trade
As provinces work to eliminate trade barriers, CFIG’s Sands raises a vital consideration: free trade must be coupled with fair trade. “As we press the reset on our supply chain, we have to ask, are all areas of Canada being served fairly? They’re not. And we have to change that.”
Sands explains that there are numerous rural and remote areas in Canada where an independent grocery store is the only grocery store in that community. If they’re not fairly supplied, food-security issues result.
“It’s incumbent upon industry and government to ensure that as we change supply chain access from the North-South to the East-West, we have to ensure that we address the issue of fair supply in those areas,” says Sands. “That means we’re going to have to invest in industry, including investing in greenhouse technologies, rail and trucking… so that we can continue to feed our nation.”
Supply management—last to the table?
While many interprovincial trade barriers are being addressed, supply management remains a significant hurdle. Sylvain Charlebois, senior director of the Agri-Food Analytics Lab at Dalhousie University says it’s the “big elephant in the room.”
In a recent column, Charlebois explained that provincial boards, backed by quota allocations and regulatory power, hold significant sway over the dairy industry. This reinforces regional monopolies that make real change virtually impossible, he wrote.
READ: Ridding milk quota system would have its downsides, farmer says
“This is the reason why Quebec produces almost 40% of all the milk that we need in Canada, even though they barely have 20% of the population,” he tells Canadian Grocer. “This really restricts a lot of things when it comes to growth. So, eliminating interprovincial trade barriers for jobs, for permits, for transportation—that’s the easy part. I think the hard part is supply management.”
Charlebois believes the quick solution is to harmonize the allocation of new quotas nationally, “but Quebec and Ontario will never want that,” he says. “If you’re a cheesemaker in P.E.I. and there are no quotas, you have to basically relocate to Quebec. So, those are things that politicians are absolutely avoiding to talk about because it is a highly sensitive issue politically.”
