How interprovincial barriers are making a joke of free trade

On January 14, 2013, Carl Sparkes’ winery business received a marketing plug that most entrepreneurs can only fantasize about.

Sparkes is the president and owner of Nova Scotia’s Devonian Coast Wineries Ltd. The company, which Sparkes bought nearly three years ago, sells wine under the labels Jost Vineyards, Gaspereau Vineyards, and Mercator.

On the day in question, Jay Leno highlighted one of Jost’s wines during his regular Headlines segment on The Tonight Show. The wine is a blend of four grape varieties called “4 Skins”.

“I’m sure it’s a wonderful wine. It just has a name that does not appeal to me,” Leno cracked. For Leno, the name served as fodder for an obvious joke. For Sparkes, the reference provided invaluable promotion.

As thanks, Sparkes’ wife, Donna, sent a case of wine to Leno in California. The comedian later called Donna and talked to her for 20 minutes about cars and wine. He invited the couple to his show, and thanked them for sending the wine from Canada.

“If Jay was operating out of Toronto, that would be illegal,” Sparkes notes.

His point: while he is able to ship wine to Leno in the U.S., regulations in this country prevent him from shipping his wine to customers in other Canadian provinces.

Devonian Coast wines are sold in liquor stores in more than half the provinces, but inter-provincial trade regulations prevent him from shipping directly to customers in other provinces.

“From my vineyards I can see Prince Edward Island but I can’t do a direct shipment to a consumer there,” he says. “You can order practically anything from anywhere in the world, yet if you’re in Amherst, N.S., you can’t order wine from Magnetic Hill in New Brunswick. It’s just ludicrous.”

Sparkes says the restrictions limit customer selection and hamper the growth prospects of businesses like his. “It’s a highly restrictive, archaic position,” he adds. “It just makes no sense.”

To further illustrate the stupidity of the regulations, Sparkes offers a final example. It involves a winery owner in British Columbia who sent two parcels to her family in Ontario.

“In one was a case of wine and in the other was a shotgun,” Sparkes says with a chuckle. “The shotgun was legal but the wine was not.”

Such commerce-restricting regulations are very familiar to Erin McGrath-Gaudet. Based in P.E.I., McGrath-Gaudet is the director of intergovernmental policy for the Canadian Federation of Independent Business (CFIB), which represents 11,000 small and medium-size businesses in Atlantic Canada.

The region, she contends, is home to a slew of unnecessary trade, tax and labour regulations that zap the economy of vigour and force entrepreneurs to spend time navigating bureaucratic mazes when they should be growing their businesses.

At the heart of the issue is a lack of regional cooperation.

What else explains the fact that of the 70 recognized trades in Atlantic Canada, there is not a single example of apprenticeship requirements being the same in all four provinces. “That really inhibits the ability of workers to move in the region,” McGrath- Gaudet adds.

And her list of grievances goes on: differing spring weight restrictions on roads across Atlantic Canada, differences in workers’ compensation rules, and varying tax codes. “There are all these little pesky barriers that inhibit trade between provinces,” she concludes.

A more regional approach (and fewer bureaucratic barriers) she argues, will aid Atlantic Canada as it attempts to battle deficits, debt, a rapidly aging population, and sour economic prospects.

“It’s more important now than ever before to create an environment where Atlantic Canadian businesses have some competitive advantage to counter the environment of high taxes and overly complicated regulation and red tape,” she wrote in a recent blog post. “Making these moves will require much more effort on behalf of the Atlantic premiers on regional cooperation.”

Gerry Pond has long called for more regional cooperation, particularly within his area of influence: tech startups. Pond, the former CEO of NBTel, was named Canadian angel investor of 2011 by Techvibes, and was the first angel to put money in both Radian6 and Q1 Labs. Those two companies were acquired in recent years by Salesforce and IBM, respectively, with Radian6 fetching more than $300 million.

Pond notes Atlantic Canada’s combined population is not even 2.5 million. “It’s a small city in the world,” he says. “But that’s probably a big enough catchment area to get six really good companies in tech.”

The odds of producing world-class tech companies will be increased greatly if each city and province views itself as part of a region, not as an individual competitor. “It takes the community of Atlantic Canada to raise a world-class company,” he says. “It’s so important that we don’t beat one another up.”

Pond is one of the key figures behind the Launch36 tech startup accelerator. He is often miffed by the insistence of reporters to call it a “Moncton-based” accelerator. The program’s executive director is based there, but the accelerator is open to startups from across the region and holds many events outside of Moncton. It’s a “regional” accelerator, Pond says.

“We want to get above this notion that people need to come to one city to do business, because it’s a parochial thought process and it agitates other cities,” he adds. “And I don’t think we can afford a really good program without being regional. I don’t think we’ll get enough high quality candidates without being regional. It’s just the way it is.”

Donald Savoie recalls a conversation he had some years back with then Nova Scotia Premier John Savage. Savage lamented that his “biggest challenge” in pushing economic development in Nova Scotia was Frank McKenna – then the premier of neighbouring New Brunswick.

“I asked why?” recalls Savoie, a Université de Moncton professor. “Savage said: ‘Every time I go to Toronto to hustle business to come to Nova Scotia, Frank was there two weeks before.’ That explains a good part of the problem.”

The problem, according to Savoie, is that Atlantic Canadian cooperation is nearly non-existent. “Not only have we not moved the yardstick, we’ve started to go backwards,” he says. And that must change if the region is to tackle the myriad of challenges it faces.

Savoie, perhaps Canada’s foremost expert on public administration and government, recalls fondly the “heydays” of regional cooperation: the 1970s. That’s when Louis Robichaud, New Brunswick’s Acadian premier, helped launch the Council of Maritime Premiers. Robichaud had desired a union of the four Atlantic provinces. “But Joey Smallwood quickly told Louis to piss up a rope; he had no interest,” Savoie says.

So the Maritime premiers went at it without Newfoundland and Labrador. The resulting Council of Maritime Premiers achieved some “solid” work on files such as higher education. “But we’ve lost momentum. It doesn’t do solid work anymore,” Savoie laments.

He argues the group’s performance faded after Newfoundland eventually joined in and the group became the Council of Atlantic Premiers. “That frankly was the killer. It was hard enough to get the three Maritime provinces to agree on cooperation,” Savoie huffs, noting Newfoundland’s unique history, culture and economy. “It didn’t only slow it down. It crippled it. We can’t move anything (forward) anymore.”

About the only thing the four provinces agree on now is taking a “good kick at the federal government.”

“We’ve gone backwards. It’s hurt us and it continues to hurt us. And I don’t think we can afford to do that much longer.”

That’s because Savoie says the region is facing a dim future of smaller federal transfers, a bloated public service in need of trimming, and continuing fiscal struggles.

In the mid-1980s, at the request of Prime Minister Brian Mulroney, Savoie drafted a report that established the Atlantic Canada Opportunities Agency. He is also a long-time advocate of a Maritime Union. And though he acknowledges the politicians won’t touch that concept, he insists other forms of cooperation are easily achievable, and would be of great benefit to the region.

“Could we not have a Maritime license plate? Could we not have a Maritime liquor control commission? Could we not have a Maritime health commission to rationalize our health facilities?” he says, his voice picking up speed.

Despite his enthusiasm, Savoie isn’t optimistic about the prospects of such measures coming to fruition.

Though based in New Brunswick, Savoie drives often to Nova Scotia. “There’s a sign that pisses me off to no end every time I go to Nova Scotia,” he reports. The source of his aggravation is a sign that warns against the importation of bees across the New Brunswick-Nova Scotia border. “So if you’re a bee in Sackville fooling around on a flower, and you decide to go to Amherst, that sign will instruct you to go back to Sackville,” he says sarcastically. “When we can’t agree on a bee flying from Sackville to Amherst, well, what can we agree on?”

Scott Brison believes most Atlantic Canadians can at least agree on one truth: the current state of affairs isn’t sustainable. “The public knows that what we’re doing now is not working. They know because their children and grandchildren have voted with their feet to be somewhere else,” says the Liberal MP and former investment banker.

Brison, who represents the Nova Scotia riding of Kings-Hants, believes much of the region’s problems are self-inflicted. “The regulatory and trade and labour barriers between our provinces makes smaller what is already a small market. Some of the biggest impediments we have to growth and prosperity in Atlantic Canada are things that we impose on ourselves,” he says. “I’ve heard it said there’s more trade barriers between Nova Scotia and New Brunswick than there is between Canada and Chile,” he adds.

“It’s absolutely inane.”

The Atlantic region, Brison argues, should follow the lead of British Columbia, Alberta and Saskatchewan. Those three provinces launched the New West Partnership Trade Agreement, which created Canada’s largest, barrierfree, interprovincial market.

Under the NWPTA, which was fully implemented on July 1, 2013, the three provinces agree to full recognition of each other’s trade, investment and labour rules. The goal is to “remove barriers to the free movement of goods, services, investment, and people within and between the three provinces.”

Brison has been calling for a New East Partnership modeled on the western version. “For them it was an option, for us it’s a necessity,” he says.

The New East Partnership would, as Brison envisions it, be an economic union of all four Atlantic provinces. It would ensure common labour and regulatory standards; common accreditation; and free and open trade between the provinces.

“Sadly the most sustained model of regional cooperation we have is the Atlantic Lottery Corporation,” Brison says. “We can help low income people gamble away all their savings together, but we can’t make real progress economically together. It’s frustrating.”

He would extend the Atlantic Lottery model of regional cooperation to liquor sales, government procurement, energy, health care, and immigration policy. There should also be one securities regulator. It’s “asinine”, he says, for four small provinces to each have a securities regulator.

“People say the status quo is not an option. It’s a cliché. The status quo is an option. It’s just a bad option,” Brison says.

He goes on: “It’s not difficult to predict the result of the status quo. It will be decline… The future is a region that is economically slower and poorer.

“Every year we wait to address these issues we lose more control over our future and over our destiny. Right now we still have options. At some point the options narrow.”