Inflated claims about major benefits of enhancing the Canada Free Trade Act (CFTA) as part of Canada’s frenzied interprovincial trade barrier campaign have an ulterior purpose: they are designed to shift the narrative away from the disappointing impacts of Canada’s international and domestic free trade policies.
They divert attention from examining the evidence about the way in which deepening trade liberalization, including that promoted by the CFTA, will further undermine the exercise of basic government functions.
Unfortunately, the federal government and the provinces and territories, including Manitoba and B.C., have joined the chorus—promoted by the corporate media—to enhance the CFTA by removing almost all of the existing provincial exemptions.
The exemptions are protections that maintain provincial and federal policy flexibility.
Doing so will abandon many of the remaining policy tools and impose further constraints on public policy making.
The approach reflects a fundamental misunderstanding of the purpose and impact of this agreement and the role of current exemptions in preserving some of the remaining provincial and federal regulatory and policy tools.
However, this is precisely what those campaigning to remove these protections advocate.
Another significant feature of the CFTA is that it is entirely about restricting the role of government in the economy.
It places no obligations on corporations or investors.
No positive side
There is no positive side, such as commitments to expand public programs and services or strengthening regulations on the private sector. These are left to governments to address outside the CFTA’s policy framework.
Instead, the agreement is designed to shift, incrementally, more and more social and economic functions from government to the market as part of the process of implementing the neoliberal agenda.
In reducing government policy capacity, it gives corporations more scope to pursue their economic interests free from effective public oversight.
The CFTA is anti-democratic because its rules are designed to prevent future governments from enacting new regulatory policies if they interfere with the private market, regardless of the economic, social and environmental value of such policies. It includes mechanisms for both individuals and governments to challenge any government that has put in place regulatory or other standards that they believe are unnecessarily restrictive of trade.
It has no place for evidence-based policy making—that is policy making that is open to implementing new policies that may involve further public regulation of the market or expanding the role of government as an investor or service provider. Like a ratchet turning, once governments abandon their regulatory capacity, the CFTA is designed to prevent them from regaining it.
Similarly, once governments privatize, the agreement is designed to prevent them from reversing this process. It is a one-way street. The economic theory underlying the agreement assumes that trade liberalization is essential for achieving a better economy and society. It fails to acknowledge the positive economic role of governments and makes no provision for enabling governments to implement new regulations or expand their economic activities.
In the CFTA world, markets are always better, so enhancing public programs and services is never a desirable option to be encouraged by a trade agreement. Framed this way, the underlying neoliberal ideological basis of the CFTA is clear.
“Burden” claim is wrong
A key part of the campaign to eliminate the remaining exemptions in the CFTA is the claim that provincial and federal government policies and regulations are a huge burden on the economy—a burden, we are told, that prevents Canada from taking measures to address Trump’s threat.
This claim is simply wrong. As Stuart Trew and Marc Lee of the Canadian Centre for Policy Alternatives and Jim Stanford have extensively documented, the economic impact of these so called ‘barriers’ is marginal and removing some will be clearly harmful. A 2016 Bank of Canada report estimated that eliminating interprovincial barriers would only increase Canada’s GDP by between one-tenths and two-tenths of a percentage point, not much more than a rounding error in the bigger picture.
Advocates of eliminating interprovincial barriers cherry pick a few examples of problematic regulations, such as differences in packaging standards, trucking inspection rules, variations in food and agricultural regulations, procurement requirements, alcohol controls or requirements by provincial licensing bodies that health and other professionals meet provincial qualification standards.
But the core of the changes they are pursuing is not fundamentally about these individual issues. Rather, they are much broader. They are intended to remove the ability of government to regulate business by imposing general constraints that apply in a wide range of public policy areas. This is reflected in obligations that force governments to demonstrate that the measures they enact are the least intrusive on business of all the options available, a test designed to promote regulatory chill.
The idea that sweeping away provincial, territorial and federal regulations will improve the welfare of Canadians is also mistaken. Many government policies make sense because they address important economic, social or cultural priorities of Canadians.
Canada is a large country with a diverse geography, climate and population. Accordingly, regulations need to be formulated in the context in which they operate, which, inevitably, means accepting the need for a diverse regulatory framework.
The constitution gives citizens in Canada’s various jurisdictions the right to make certain kinds of decisions. The CFTA is designed to take away some these rights under the guise of promoting the free movement of goods and services.
One of the ‘barriers’—which none of the business interests promoting an expanded CFTA acknowledge—is language.
Requiring products and services to be provided in French is an important component of maintaining Quebec’s identity and significantly distinguishes us from the U.S. The preservation of French is something about which Canadians have every right to be proud.
But it does cost more to duplicate English and French on the production and sale of many goods and services. Requiring companies to use bilingual labels is clearly a barrier to trade. But it is one that is reasonable and reflects the identity, cultural heritage and preferences of Canadians. The agreement provides exemptions for Quebec’s language policies, ignoring the fact that this is already the province’s right under the Canadian constitution.
Another frequently cited barrier is the restriction that most provinces and territories place on the sale of alcohol and their accompanying liquor taxes.
In its March 5, 2025 statement outlining its interprovincial trade initiatives, the federal government announced that, in cooperation with the provinces, there has been significant “progress” in allowing Canadians to purchase alcohol from any province without restriction.
While alcohol can be viewed simply as a tradable good, its consumption has significant health and social impacts on individuals, society and health care, justice and police expenditures. In 2020, Canada spent $19.7 billion to address the economic and social costs of alcohol. This was $6.4 billion more than the $13.3 billion raised from alcohol taxes, according to a 2024 federal Health Promotion and Chronic Disease Prevention study.
To assume that eliminating all barriers to the sale of alcohol is desirable simply ignores these facts. For example, restricting sale to minors is good public policy and not a costly barrier to be added to the list of those to be removed. Many countries have been putting in place new restrictions on alcohol, something proponents of lowering barriers simply ignore.
The assumption that we should all drink more to expand our GDP is self-evidently misguided but seems to be at the root of much of the narrative promoted by those cheering the elimination of this barrier to trade because they believe it is popular to promote the narrative that the nanny state should not deny us the freedom to drink.
Facilitating downward competition among provinces in alcohol tax rates, which is a likely outcome of this policy change, may benefit the liquor industry—among Canada’s most powerful lobbyists—but it raises the thorny question of how provinces will pay for the adverse effects of increased consumption that cheaper, more accessible alcohol will facilitate as well as whether encouraging more alcohol consumption is itself good public policy.
Limits on government spending powers
Key provisions of the CFTA place limits on how governments use their spending powers. They restrict governments from requiring suppliers to provide local employment, use local businesses or purchase locally made products and services.
For example, the agreement requires most provinces to allow any Canadian registered corporation to supply food for schools and hospitals from local farmers on contracts of over $100,000, effectively undermining efforts to promote local food self-sufficiency. This benefits the multinational agri-business industry at the expense of small, domestic farmers.
Provincial taxpayers may feel that their tax dollars should support provincial economic development. However, the CFTA already bars most of these measures. Worse, it enables companies to challenge government procurement decisions.
Provinces are restricted from requiring companies to provide investment offsets, performance requirements or impose conditions on giving approval for projects built within their jurisdictions.
It bars governments from requiring investors to include a percentage of local content, buy local services or goods or transfer technology as part of the investment approvals process. Corporations have the right to challenge any such decision. Yet offsets can greatly enhance the overall benefits the public obtains.
The CFTA has an entire chapter that restricts the activities of Crown corporations and other public agencies to ensure that they can only operate based on narrow, commercial principles and do not unnecessarily compete with private corporations or investors in the provision of goods or services (using the negative U.S. term ‘monopoly’ to describe them).
It effectively hamstrings many of the potential economic functions that these public corporations historically have carried out in Canada. This is a particularly important constraint on Canada’s major public hydroelectric companies, which are forbidden to make use of the advantages that they can have by integrating their generation, transmission and distribution functions. The agreement is designed to undermine many of the fundamental objectives of public enterprise.
Justifiable barriers
While the CFTA assumes that regulations are too often an unnecessary burden, the reality is that, in a wide range of areas, government regulatory policies have a sound rationale and provide important benefits to Canadians.
Higher occupational health and safety standards may marginally raise the costs of production. But they play a vital role in protecting workers’ health.
They are barriers, but ones that are fully justified. In fact, there is a pressing need for much stronger occupational health and safety regulations in all Canadian jurisdictions, as documented by many researchers in the labour and population health communities.
But the CFTA does not even require provinces to raise standards to the best identified by the Rotterdam Convention, the International Labour Organization (ILO) Conventions, the World Health Organization (WHO) and many other international treaties dealing with occupational health issues.
Incredibly, the ILO is not even mentioned in the section of the text that deals with the issue. While the CFTA says that provinces should be mindful of international standards, it identifies none, leaving it up to the individual jurisdictions to sort out how to protect workers.
Despite its major gaps, consumer protection legislation can play a valuable role in forcing companies to meet evidence-based quality standards. This can marginally raise costs. But most Canadians support such regulations because they clearly address problems of fraudulent or harmful products and misleading advertising.
Canadians want government to protect them from being victimized. However, instead of creating a process for developing better national consumer protection regulations, the CFTA is silent on the changes that are clearly needed, relying instead on its rule that new regulations are a matter for the various jurisdictions to address, bearing in mind that they must be the least trade restrictive as the options available.
Similarly, requirements by provinces that those performing certain jobs should be licensed is an important way to ensure that the public is protected from shoddy, incompetent or dangerous health, professional, labour and other services. Requiring all jurisdictions to accept the licensing standards of the others sounds like a sensible policy as it can facilitate labour mobility. However, the agreement leaves it up to each jurisdiction to determine the qualification standards for the occupations it regulates. At the same time, it forces every jurisdiction to recognize the standards of the others, automatically.
Pressure to lower standards
What is missing is a requirement that all jurisdictions must adopt standards that reflect evidence-based assessments of occupational competencies. It effectively gives equivalency to the weakest credentials, forcing other jurisdictions to accept these, even if they are inferior to what they have established for their own residents.
If a jurisdiction refuses to recognize the standard of another jurisdiction, it has to prove that the standard is inferior to its own. This is a high bar, given the challenge of evaluating every component of an occupational qualification, a process which encourages simply acquiescing to whatever other jurisdictions establish.
Labour agreements that ensure workers receive negotiated union benefits reflect the industrial relations compromises reached in various provinces. But labour mobility changes to the CFTA may further undermine collective agreements by permitting corporations to gain a competitive advantage by allowing them to employ construction, transportation and other workers from provinces with lower labour standards in those with higher standards without complying with the higher standards.
This is one reason why some corporate interests are so keen to reduce provincial barriers. They understand that the CFTA can be a back doorway to undermine labour rights.
The CFTA is an agreement designed to privilege markets. However, collective agreements justifiably place limits on the operation of the labour market and give workers a voice in regulating their terms and conditions of employment. Their existence is clearly out of step with the goal of reducing barriers to unregulated market activity.
While the CFTA acknowledges that the different jurisdictions have the right to establish their labour policies, the neoliberal economic theory on which it is based creates an ongoing tension with maintaining union rights. The labour mobility goals it promotes can significantly erode them.
