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Trump ‘tariffs’ threat should hasten trade liberalization among provinces

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From the Fraser Institute

By Jake Fuss and Grady Munro

To much fanfare, President-elect Donald Trump has threatened to impose a 25 per cent tariff on all imported products coming into the United States from Canada. The premiers will meet with Prime Minister Trudeau this week to discuss the situation and possible next steps. While the discussion will no doubt focus on trade with the U.S. and other countries, they should also consider trade reform within our national border.

Indeed, provinces and territories have considerable autonomy to set rules for trade with other Canadian jurisdictions. These rules (or barriers) include different inspection and labelling requirements for agricultural goods, different trucking regulations, different standards and certifications for professionals, provincial monopolies over alcohol distribution, and more.

As with international barriers, trade barriers within Canada inhibit the free flow of goods, services and labour between provinces, which reduces productivity and increases prices. In other words, Canadians pay the price for our interprovincial trade barriers. And the costs are significant. Research suggests that interprovincial trade barriers add between 7.8 per cent and 14.5 per cent to the price of goods and services including groceries and other necessities.

More broadly, according to a 2020 study published by the Fraser Institute, interprovincial trade barriers cost the Canadian economy more than $32 billion per year or approximately 1.4 per cent of GDP. According to a TD report released last month, a 10 per cent across-the-board tariff by the U.S. (and the subsequent retaliation by Canada on U.S. imports) would reduce Canada’s GDP by approximately 2.4 percentage points over two years, compared to current baseline projections. Therefore, if Canadian policymakers removed interprovincial trade barriers they could mitigate much of the economic harm caused by potential new U.S. tariffs.

What would those changes look like?

While the Canadian Free Trade Agreement (CFTA)—a 2017 agreement between the federal government and all provincial and territorial governments—was an important step toward greater trade liberalization in Canada, the Trudeau government should propose a policy of “mutual recognition” so that any item that meets the regulatory requirements of a single province or territory automatically satisfies the requirements of another.

And while the federal government should promote free trade within Canada, provincial and territorial governments should also reduce barriers. In addition to negotiating agreements among themselves (such as the New West Partnership Trade Agreement between British Columbia, Alberta, Saskatchewan and Manitoba) provinces can unilaterally eliminate self-imposed trade barriers (as Alberta did in 2019 with grazing permits for livestock and other reforms).

Trade is fundamental to economic activity, opportunity and prosperity for Canadians from coast to coast. In light of Trump’s aggressive trade posture, now more than ever the federal government and the provinces and territories should work together to remove interprovincial trade barriers to mitigate any economic damage from a hostile trade regime south of the border.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

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While Canada’s population explodes, the federal workforce grows even faster

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From the Fraser Institute

By Ben Eisen and Milagros Palacios

Hiring by the federal government in excess of population growth cost taxpayers $7.5 billion in 2022/23.

The federal workforce has grown more rapidly than the Canadian population starting in 2015/16, imposing significant costs on taxpayers, finds a new study published by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.

Federal government employment has grown significantly faster than the Canadian population starting in 2015/16, and we’re already seeing the consequences,” said Ben Eisen, senior fellow at the Fraser Institute and author of Growing Government Workforce Puts Pressure on Federal Finances, the first in a series of studies on federal reform.

The study finds that between 2015/16 and 2022/23, the latest year of data available, the number of full-time federal workers has increased by 26.1 per cent compared to growth in the overall Canadian population of 9.1 per cent.

“Growth in federal employment has almost tripled the rate of population growth since 2015/16, which is simply unsustainable” commented Eisen.

How much will this growth in government cost Canadian taxpayers?

According to the study, if federal hiring had simply kept pace with the rate of Canada’s population growth taxpayers would have saved $7.5 billion.

The reduced spending on federal employees would lower the federal deficit, which is expected to exceed $35.3 billion in 2022/23.

“The growth in the number of federal employees has been a major contributor to the growth in federal government spending and the size of deficits in recent years,” Eisen said.

  • The Canadian federal government workforce has grown more rapidly than the Canadian population starting in 2015/16, imposing significant costs on taxpayers.
  • In fact, between 2015/16 and 2022/23, the latest year of data available, the number of full-time federal government workers has increased by 26.1 per cent, compared to growth in the overall Canadian population of 9.1 per cent.
  • If federal hiring had simply kept pace with the rate of Canada’s population growth taxpayers would have saved $7.5 billion.
  • The reduced spending on federal employees would lower the federal deficit, which is expected to exceed $35.3 billion in 2022/23.

Ben Eisen

Senior Fellow, Fraser Institute

Milagros Palacios

Director, Addington Centre for Measurement, Fraser Institute
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From Smug to Subservient, Justin Trudeau Bows to MAGA Realities at Mar-a-Lago

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The Opposition with Dan Knight

After years of mocking Trump and betting on a woke Washington, Trudeau now finds himself groveling to save Canada’s economy from MAGA’s hardball tactics.

Justin Trudeau has spent years mocking and deriding the MAGA movement, banking on a continuation of woke, progressive leadership in Washington. He bet everything on a Kamala Harris presidency, believing the days of Donald Trump’s America-first agenda were a distant memory. Now, with Trump back in office, Trudeau finds himself groveling at Mar-a-Lago, trying to salvage what’s left of Canada’s crumbling economic future.

This is the same Justin Trudeau who painted MAGA as a dangerous fringe movement, aligning himself with global elites and lecturing Americans on their supposed moral failings. He openly scoffed at Trump’s tariffs, his immigration policies, and his tough-on-China stance. Trudeau’s bet? That a Democrat-controlled America would reward his sycophantic pandering with favorable trade deals and continued subsidies for his progressive fantasies.

But Trudeau’s gamble failed. Trump is back, and Trudeau’s entire house of cards is collapsing. Canada’s economy, propped up by unfair trade advantages and U.S. energy consumption, is suddenly exposed. The 25% tariff threat on Canadian imports has Trudeau scrambling, not with bold leadership, but with empty promises and nervous laughter at Mar-a-Lago.

In a moment of pure irony, Trudeau, who once lectured Trump about values, now finds himself kneeling to kiss the ring. MAGA, what? Gone is the smug defiance, replaced by desperate platitudes about border security and economic cooperation. But let’s be clear: Trudeau isn’t there to protect Canadian interests; he’s there to save face. His government is woefully unprepared for Trump’s hardball tactics, and the Prime Minister’s office knows it.

During a recent dinner at Mar-a-Lago, President-elect Donald Trump reportedly suggested that Canada could become the 51st U.S. state if it couldn’t handle the economic impact of proposed tariffs. This remark came after Prime Minister Justin Trudeau expressed concerns that a 25% tariff on Canadian imports would “kill” Canada’s economy.

Trump’s comment underscores the significant economic interdependence between the two nations. In 2022, trade between the U.S. and Canada exceeded $900 billion, with the U.S. accounting for 63.4% of Canada’s global trade. This deep economic integration means that shifts in U.S. trade policy can have profound effects on Canada’s economy.

Trump’s quip about Canada becoming the “51st state” wasn’t just a joke; it was a power move, a reminder of who holds the cards in this relationship. While Trudeau nervously laughed, the message was clear: Canada needs the U.S. far more than the U.S. needs Canada. Trudeau’s weakness has brought us here. Instead of securing energy independence, he’s strangled Alberta’s oil industry with crippling regulations. Instead of standing up to China, he’s kowtowed to Beijing while relying on U.S. trade to keep his agenda afloat.

And now, Trudeau is at the mercy of a man he spent years mocking. Trump’s tariffs are a direct consequence of Trudeau’s inability to lead. His failure to address illegal immigration and the fentanyl crisis has made Canada not just a bad neighbor, but a liability.

Trudeau’s Liberals have always been more concerned with appearances than action, more focused on virtue signaling than real governance. But now, the bill has come due. And the man holding the ledger is none other than Donald J. Trump.

So here we are: Justin Trudeau, the woke globalist, reduced to pleading for mercy at Mar-a-Lago. His smugness replaced by desperation, his rhetoric exposed as hollow. MAGA what, indeed.

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