Buy American policies, Buy China policies, new Brazilian steel tariffs, new Russian auto and plastics tariffs, and the list goes on and on. New trade barriers seem to face Canadian companies at every turn.
Ottawa’s job is to try and remove these barriers. Setting Canada’s international trade policies, negotiating free trade agreements, and lobbying hard in Washington to protect Canada’s access to the US are key federal government responsibilities.
Or are they? Technically, the Feds are responsible for removing these barriers. But provincial governments may be the new international trade kingmakers.
Two recent examples involving access to Canada’s key markets illustrate this.
Ottawa wants to seek an exemption from new US stimulus package requirements to Buy American. The provinces hold the cards here. Currently, provincial governments do not allow US companies to bid on their contracts. If the provinces promise to open up to US companies, Ottawa may be able to win an exemption for Canada from Buy American. Ottawa hopes to have just such an agreement between the provinces in the coming weeks. Then it can negotiate with Washington. Meanwhile, Ottawa waits for the provinces, and Canadian businesses may be losing deals today.
Another important example is the just-launched Canada-European Union free trade negotiations. Ottawa has been asking the Europeans to launch negotiations for some time. With multilateral negotiations looking grim, the Europeans finally agreed. That is, under one condition: the deal has to be ambitious, and include access to provincial government contracts. Provinces, therefore, will be at the negotiating table for the first time ever in Canada’s free trade negotiation history.
Even without getting involved in international negotiations, provinces have much more power than we might think to eliminate trade barriers. Making changes to domestic policies matter more for Canada’s global economic success than do negotiations with other countries, as a Conference Board report shows. Many of these policies are partly or fully in provincial hands. Infrastructure policies are one example.
If the provinces’ power in Buy American and Canada-EU talks is a sign of things to come, there are important implications. For one, provincial presence at the table sets a precedent for future trade negotiations. In essence, for negotiations to have teeth, provinces now need to be on side.
Looked at from a different angle, this could, in turn, work in Ottawa’s favour. With trading partners demanding changes in areas of provincial responsibility, the federal government can push provinces more aggressively to make those changes. This could potentially eliminate long-standing provincial and inter-provincial barriers that impede Canadian companies’ global success.
But this may be bigger than trade alone. For example, pressure from trade partners may give Ottawa leverage to push the provinces to adopt common or mutually recognized standards for areas beyond trade, such as professional accreditation. And, as Canada’s former Ambassador to the US Allan Gotlieb said at a recent forum, these developments challenge federal and provincial roles, and may have constitutional implications.
If these examples set precedents, this is a major development.
For it to benefit Canada, provinces need to use their newly discovered seat at the international trade table to help advance broad public interests. Now is the time for provinces to move boldly to address long-standing trade barriers that hold hostage Ottawa’s ability to win broader access to global markets. If, instead, provinces continue to hold on to the status quo, instead of being crowned the new international trade dealmakers, they will be the trade deal breakers.