Ontario moves to scrap trade barriers, open door to interprovincial energy deals

Ontario says it wants to break down provincial trade barriers to boost economic growth and unlock new opportunities in energy, infrastructure, and labour mobility—though some observers are watching to see how the changes will play out in practice.

The proposed changes are part of Bill 2, the Protect Ontario through Free Trade within Canada Act, which is meant to “unlock free trade and labour mobility within Canada,” the provincial government said in a release. Ontario says the legislation will “strengthen internal trade, reduce costs for Ontarians, and encourage initiatives to buy local.” Bill 2 went to Second Reading at Queen’s Park on April 16.

It proposes to roll back interprovincial restrictions that Ontario says costs the Canadian economy up to $200 billion each year while lowering gross domestic product by about 8 per cent. The bill includes amendments to the Liquor Control Board of Ontario Act to allow manufacturers to sell across provincial lines, and to the Ontario Labour Mobility Act to make it easier for workers from other provinces to work in Ontario.

Changes to the provincial energy system would be brought about by removing all its party-specific exceptions (PSEs) to the Canadian Free Trade Agreement (CFTA). The CFTA allows for free trade across Canadian jurisdictions, but the PSEs—listed in over 100 pages of amendments to the agreement—restrict the flow of certain goods and services across provincial borders. Ontario has 23 PSEs restricting trade for products like alcohol, vehicles, and some energy procurements. Bill 2 removes them all.

Business groups welcomed Ontario’s proposal, but some economists caution that any measurable economic impact may take years or even decades to materialize, reports the Globe and Mail. Marc Lee, a senior economist with the British Columbia office of the Canadian Centre for Policy Alternatives, said the studies forecasting large gains from reducing trade barriers are based on abstract formulas, but the reality is more complicated.

“There is a major disconnect between the big high-level numbers that are being thrown around” and the measures being proposed, he said. While some are sensible reductions in red tape, he advised, “don’t put any money on this actually delivering massive economic growth.”

Still, there is strong popular support for measures that grow markets for Canadian-made goods, given the tariff threats from Canada’s main trading partner, the U.S.

Ontario is not alone in taking steps—earlier this year, the federal government said it would remove 20 of its 39 PSEs, and Nova Scotia passed legislation that matches other provinces in lifting restrictions. But Ontario is the first to unilaterally lift all the PSEs it set.

Ontario Energy Minister Stephen Lecce told the legislative assembly on April 17 that Bill 2 would “cut red tape and streamline approvals for mining, infrastructure, and energy projects.” If passed, the legislation would use a new “one project, one process” model to reduce timelines for government review by 50 per cent and “establish special economic zones, while protecting our environment.”

“In short, our mission is to position Canada as a clean energy superpower,” Lecce said. “This legislation will further protect our economy, our sovereignty, and our security as we stand up for Canada.”

Some of the PSEs being lifted give Ontario the ability to restrict who can develop or expand electricity and natural gas infrastructure, often favouring Ontario residents or businesses. The Ontario Clean Air Alliance suggested that removing those exemptions could open the door for the province’s Independent Electricity System Operator to consider renewable energy projects from Manitoba and Quebec in future procurements.

If Bill 2 achieves that outcome, it will add to momentum for establishing an east-west electricity grid. In early April, Manitoba Premier Wab Kinew said his province would stop selling electricity to the U.S. once its contract with a Minnesota utility expires, freeing up electricity for export to Canadian jurisdictions, including Nunavut. Kinew also called for federal support for an east-west electricity grid, reports CTV News.