Some of the Premiers – mostly the western Premiers – are pushing for more free trade between the provinces. It’s outrageous we are told that it is easier to trade with some other countries than between provinces.
I’m a believer in free trade. Absolutely. If you read Jarrod Diamond’s stuff he talks about how trade brought about the modern economy – coastal tribes traded fish for arrow heads with inland tribes.
But I always come back to this issue of mutual benefit. If only one party benefits from free trade, it could become unstable.
New Brunswick already has a $2.5 billion interprovincial trade deficit and if you took petroleum products out of the mix it would be billions more. That means the GDP, jobs and tax benefits are skewed against us (I suspect some economists would argue this point).
I’m just saying that provinces like NB need to sharpen their pencils and think about how we could benefit from freer trade between the provinces.
Take the issue of government procurement. The free traders would like zero restrictions. If it costs one dollar less to buy a product or service from another province, that’s what provincial governments and agencies should be obliged to do.
But I allow some wiggle room for economic benefit. If a company will do the work in New Brunswick for $1million and the guy outside NB will only charge $900k I might still go with the $1M guy because he is generated $150k in taxes within NB making the net cost to government -$50k. In addition, some of the larger government service providers have been dangling more export-based jobs in return for favorable treatment (think IBM in Nova Scotia).
Now the purists will decry my perversion of Adam Smith but think about this logically. It happens all the time in the private sector. The legal firm for Apple could get Samsung phones for 10% less than iPhones but as a gesture of goodwill they pay the premium for iPhones. Do the Smithians cry bloody murder? No. That is part of doing business.
The same with government procurement.
Now, there are absolutely limits. We should never pay $2 million to a local provider when some external firm would charge $1 million. We don’t want to use a local software developer in the place of Windows. That kind of industrial policy doesn’t create champions – it creates losers.