From the Frontier Centre for Public Policy

By Ian Madsen

From telecom ownership limits to convoluted regulations, these hidden obstacles drive up prices, choke innovation, and shield domestic industries from global competition. Canada ranks among the worst offenders. If Ottawa is serious about free trade, it’s time to tackle the red tape, not just the tariffs.

Governments claim to support free trade, but use hidden rules to shut out foreign competition

Tariffs levied by governments on imports are a well-known impediment to trade. They raise costs for consumers and businesses alike. But tariffs are no longer the main obstacle to the elusive goal of “free and fair trade.” A more significant—and often overlooked—threat comes from non-tariff barriers: the behind-the-scenes rules, subsidies and restrictions that quietly block competition from foreign exporters.

These barriers can take many forms, including import licences, quotas, discriminatory regulations and state subsidies. The result is often higher prices, limited product choices and reduced innovation, since foreign competitors are effectively shut out of the market before they can enter.

This hidden protectionism harms both consumers and Canadian firms that rely on imported goods or global supply chains.

To understand the global scope of these barriers, a recent analysis by the Tholos Foundation sheds light on their prevalence and impact. Its 2023 Non-Tariff Barriers Index Report examined the policies, laws and trade practices of 88 countries, representing 96 per cent of the world’s population and GDP.

The results are surprising: the United States, with some of the lowest official tariffs, ranked 65th on non-tariff barriers. Canada, by contrast, ranked fourth.

These barriers are often formalized and tracked under the term “non-tariff measures” by international organizations such as the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization.

UNCTAD notes that while some serve legitimate non-trade objectives like public health or environmental protection, they still raise trade costs through procedural hurdles that can disproportionately affect small exporters or developing nations.

Other barriers include embargoes, import deposits, subsidies to favoured companies, state procurement preferences, technical standards designed to exclude foreign goods, restrictions on foreign investment, discriminatory taxes and forced technology transfers.

Many of these are detailed in a study by the Leibniz Institute for Economic Research at the University of Munich.

Sanctions and politically motivated trade restrictions also fall under this umbrella, complicating efforts to build reliable global trade networks.

Among the most opaque forms of trade distortion is currency manipulation. Countries like Japan have historically used ultra-low interest rates to stimulate growth, which also weakens their currencies.

Others may unintentionally devalue their currency through excessive, debt-financed spending. Regardless of motive, the effect is often the same: foreign goods become more expensive, and domestic exports become artificially competitive.

Canada is no stranger to non-tariff barriers. Labelling laws, technical standards and foreign ownership restrictions, particularly in telecommunications and digital media, are clear examples. Longstanding rules prevent foreign companies from owning Canadian telecom providers, limiting competition in an industry where Canadians already pay among the highest cellphone bills in the world. Similar restrictions on investment in broadcasting and interactive digital media also curtail innovation and investment.

Other nations use these barriers just as liberally. The U.S. has expanded its use of the “national security” exemption to justify restrictions in nearly any industry it sees as threatened. The European Union employs a wide range of non-tariff measures that affect sectors from agriculture to digital services. So while China is frequently criticized for abusing trade rules, it is far from the only offender.

If governments are serious about pursuing freer, fairer global trade, they must confront these less visible but more potent barriers. Tariffs may be declining, but protectionism is alive and well, just hidden behind layers of red tape.

For Canada to remain competitive and protect consumers, we must look beyond tariffs and scrutinize the subtler ways the federal government is restricting trade.

Ian Madsen is a senior policy analyst at the Frontier Centre for Public Policy.

From the Fraser Institute

By Tegan Hill

Following last month’s Liberal election victory, and after a decade of damaging federal policies by the Trudeau government, some Albertans are calling for a referendum on separation. While Premier Danielle Smith said she does not support separation she “will honour” the referendum process. And according to a recent poll, more than one-third of Albertans are open to leaving Canada. But whether or not the referendum actually happens, one thing is clear—Albertans have reason to be frustrated with confederation.

In our current system, Ottawa collects taxes from people and businesses across the country then transfers that money to Canadians for federal and national programs including the Canada Pension Plan (CPP) and employment insurance. Albertans contribute disproportionately to this system thanks to the province’s relatively high rates of employment, higher average incomes and younger population.

For example, from 1981 to 2022 (the latest year of available data), Albertans’ net contribution to the CPP—meaning the amount Albertans paid into the program over and above what retirees in Alberta received in CPP benefit payments—was $53.6 billion. British Columbia was the only other province where workers paid more into the CPP than retirees received in benefits—and Alberta’s contribution was six times greater than B.C.’s contribution.

On equalization—Canada’s transfer program aimed at ensuring each province can provide comparable levels of public services—Alberta has not received payments since 1964/65. In 2022 (the latest year of available data), the federal government spent $21.9 billion on equalization while 13.5 per cent of total federal revenue came from Alberta, which means Alberta taxpayers contributed an estimated $3.0 billion to the equalization program that year—while receiving no payments.

More broadly, Alberta’s total net contribution to federal finances and national programs (that is, total federal taxes and payments paid by Albertans minus federal money spent or transferred to Albertans) was $244.6 billion from 2007 to 2022—more than five times more than the net contribution from British Columbians or Ontarians (the only other two net contributors) despite Alberta’s smaller population.

So that’s the reality—Alberta massively overcontributes to federal and national programs. But that’s not necessarily a problem, in and of itself. The problem is that despite Alberta’s outsized importance within Canada, Albertans have faced a barrage of federal policies that disproportionately and negatively impact the province including Bill C-69 (which imposes complex, uncertain and onerous review requirements on major energy projects), Bill C-48 (which bans large oil tankers off B.C.’s northern coast and limits access to Asian markets), an arbitrary cap on oil and gas emissions, numerous “net-zero” targets, and so on.

On the campaign trail, Prime Minister Mark Carney promised to keep the emissions cap and Bill C-69 (which opponents call the “no more pipelines act”). Yet in a recent interview with CTV, Carney said he will “change things at the federal level that need to be changed in order for projects to move forward” adding that he may eventually remove both the emissions cap and Bill C-69.

That would be welcomed news in Alberta, which continues to punch above its economic weight despite federal policies that prevent the province from reaching its full economic potential. And any policies that restrict Alberta ultimately limit prosperity in Canada.

Albertans may soon face a referendum on separation. The rest of Canada should understand why so many Albertans are frustrated with the status quo. Federal policies specifically target their province’s energy industry despite their disproportionate contribution to the federation. It’s time to undo these federal policies, for the benefit of all Canadians.

Tegan Hill

Director, Alberta Policy, Fraser Institute