Canada's economic landscape is a fascinating puzzle, one that reveals a unique challenge: a nation divided by small, yet significant, provincial differences. This fragmentation, as Giles Gherson, president and CEO of the Toronto Region Board of Trade, points out, is a major impediment to Canada's economic growth.
The issue, in my opinion, is not just about the economic cost, which is substantial, but also about the underlying mindset it fosters. Canada, with its 51 free trade agreements globally, seems to struggle with the concept of free trade within its own borders.
The Cost of Protectionism
Protectionism, a strategy often employed to shield local industries, has led to a complex web of regulations and standards that vary from province to province. This not only discourages innovation and expansion but also makes it incredibly difficult and costly for businesses to operate across the country.
The numbers are eye-opening: nearly 20% of Canada's GDP comes from internal trade, and the country is potentially leaving $200 billion on the table annually. That's a staggering amount, equivalent to almost half of Toronto's GDP, which could be translated into jobs, investment, and a much-needed boost in competitiveness.
The Impact on Business and Investment
Businesses are voting with their feet, relocating to the United States to benefit from a larger, unified market and lower costs. Those that remain face an uphill battle, struggling to attract investment due to Canada's fragmented capital market.
The absence of a single federal regulatory body for securities is a major deterrent for investors. They are reluctant to navigate the complexities of multiple sub-national jurisdictions, choosing instead to avoid investing in Canadian businesses.
Progress and Future Prospects
Despite these challenges, there are signs of progress. The Canadian Securities Administrators' (CSA) passport system, for instance, aims to facilitate easier access to capital markets and reduce regulatory burdens. Ontario's recent decision to join this system is a step in the right direction.
However, as Gherson notes, the current approach lacks comprehensiveness and certainty. Future governments could potentially undo the progress made, which is a significant concern.
The path forward, as I see it, is clear: harmonized rules across the country, particularly in core sectors. This would not only simplify operations for businesses but also send a strong signal of Canada's commitment to a unified market.
A Call for Action
The Council of the Federation, meeting this week in Charlottetown, has an opportunity to make history. In the face of America's 'America First' policies, which restrict access to the southern market, Canada can assert its economic independence by creating a self-reliant, single market worth $3 trillion and serving 41 million people.
This is not just an economic strategy; it's a statement of Canada's resilience and unity. It's time to bridge the gaps and unite under a single, prosperous Canadian economy.
