The Case for Ending Interprovincial Trade Barriers in Canada

By Jacob Friesen (AIMS On Campus Student Fellow) 

The arguments for ending interprovincial trade barriers are clear and decisive. It is estimated that reducing interprovincial trade barriers would add 3-7%, or $50-$130 billion, to Canadian GDP. Increased GDP brings new jobs, higher living standards, and more revenue for public services and tax relief. Additionally, economically struggling regions have the most to gain from interprovincial trade liberalization, and bear the worst of the costs of current interprovincial trade barriers. This essay will make the case for ending interprovincial trade barriers with reference to one particular industry: consumer health products. While the benefits of interprovincial trade liberalization have been assessed for a variety of industries and products, this essay will focus on consumer health products because the interprovincial barriers these products face are good examples of how interprovincial trade barriers are imposed, these products are immediate in the lives of many consumers, and the consequences of current interprovincial policies and the potential benefits of liberalization are clear in the case of these products.

Discussing and tackling interprovincial trade barriers can be difficult from the outset because explicit barriers such as tariffs are not in use. Rather, interprovincial trade barriers consist of a variety of provincial regulations which restrict the movement of goods and services between provinces. Such restrictive regulations include provincial licensing requirements for various professions, different regulations for freight transportation, and different product safety standards.

 

One important aspect of the regulatory treatment of consumer health products—the process through which products can be reclassified from prescription drugs to non-prescription drugs—is a prime example of an interprovincial trade barrier. The current process for drug reclassification is as follows. First, a company seeking to make one of its products more accessible to Canadians proposes the reclassification of its product to Health Canada.5 Next, Health Canada determines whether to allow the product to be reclassified. This process usually takes at least 17-21 months.6 Health Canada’s decision has no immediate impact on the availability of the product. Its availability only changes after provincial processes following Health Canada’s decision. For every province other than Quebec, the decision to allow reclassified drugs to be sold behind the counter or in front of the counter in pharmacies, or to disregard Health Canada’s reclassification of the product, depends on an assessment by the National Association of Pharmacy Regulatory Authorities (NAPRA). Whether a drug is sold behind the counter or in front of the counter is important, as consumers are often less aware of behind the counter products.

NAPRA usually takes up to four months to complete its assessment. The provinces of Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, and Prince Edward Island automatically implement NAPRA’s decision, and allow for the product to be reclassified and sold differently in their provinces. In British Columbia, a separate process, which can take up to 2 years to complete, determines whether NAPRA’s assessment will be implemented in the province. Quebec automatically moves drugs reclassified by Health Canada behind the counter. For a company to have its product sold in front of the counter, a separate process, which on average takes 4 years to complete, must be initiated. Thus, drug companies wanting to improve access to their products in Canada face a complicated, uneven regulatory environment and great uncertainty. Canada is unique among most major economies in having different orders of government independently involved in the regulation of consumer health products, among other products and industries. The consequences of these interprovincial barriers are severe. On average, products are made more accessible to Canadians 7-9 years after the same products are made more accessible to consumers in the US and EU. Within Canada, consumers in BC might receive greater access to a product 2 years after consumers in other provinces, and consumers in Quebec might never learn of the changed accessibility of a product. Additionally, because of provincial regulations Canadians are forced to use public health resources to gain access to drugs which a globally respected regulator, Health Canada, has deemed safe to consume without a prescription. This means that public health resources are diverted to appointments to fill prescriptions for safe products and away from more urgent needs.

This is an illustrative example of how interprovincial barriers can disadvantage Canadians. It also illustrates the challenges and opportunities presented by liberalization efforts.

 

Beyond the normal challenges of liberalization, such as confronting vested interests and persuading the public, efforts to tackle interprovincial trade barriers will need to address complex networks of regulations in multiple jurisdictions. However, the benefits of tackling interprovincial trade barriers—the greater accessibility and affordability of many products and services, higher growth rates, and the more efficient use of resources, to name a few—are too great to pass over. Canada’s interprovincial barriers to trade must end.

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