Most Canadians are stunned to learn that the biggest tariffs Canadians pay aren’t to the U.S., but to each other.
The IMF estimates that interprovincial trade barriers are equal to a national tariff of 9.5%. This is far higher than the Bank of Canada’s assumed U.S. tariff on Canadian goods of 5.8%.
In fact, across Canada, internal trade barriers artificially inflate the cost of everyday goods and services by 7.8% to 14.5%. If we were to dismantle these domestic bottlenecks Canada’s GDP would grow by $161 billion a year, putting $2,300 to $4,000 a year back into the pocket of every Canadian.
So, why don’t we? Well, it’s complicated. But the angel is in the details.
Let’s look at just one of the hundreds of barriers that make Canada the perennial back-of-the-packer in terms of productivity.
I’ll start with the fact that Canada is the only developed country without a national securities regulator. The U.S. has the SEC, the Securities & Exchange Commission. We, whose economy is one-thirteenth the size of America’s, have 13 provincial and territorial regulators, alongside the Canadian Investment Regulatory Organization (CIRO). Each has separate fee schedules with different methodologies, structures, and bureaucracies.
So if you’re a young Canadian company that wants to go public, or a public company from outside Canada that wants to offer its shares to Canadians, you have to pay every provincial and territorial regulator where you sell shares to file your application.
True, this is a lot better than two decades ago, when each jurisdiction also got to approve your application. In 2008, a passport system came into effect so that if your ‘principal’ regulator signed off on your application, the others accepted it. Every province but Ontario signed on. It held out for a national regulator that never came, and there have been many attempts since to “Get a single regulator!”
But even under the passport, a company must still file a prospectus and pay a fee to 13 separate regulators. The passport gave companies one window to file in, but the duplicate fees stayed. Today, Ontario charges $3,800 to file. Alberta charges $2,000. B.C. proposes to raise its fee from $2,500 to $3,800. Then once you’re public, you pay an annual fee in every province where you report. The OSC now wants to triple its top annual charge for the largest issuers from $100,500 to $331,500.
If this reads like toll-gating, it is. These filing fees may be small change for a big company. But the big cost is in lawyers who are fluent in 13 rulebooks, plus months of waiting while 13 jurisdictions go through their slightly different motions to stamp “Approved” on your application. In fact, each extra jurisdiction adds to the cost of an offering, and raising money in all 13 jurisdictions doubles your regulatory bill. Ultimately, a company raising $1 million nationally loses about 16% of it to regulatory costs. That’s a tax on precisely the young, growing firms we claim we need.
What’s worse than the toll-gating is the feather-bedding. The OSC has 750 staff positions and a $190 million budget. Quebec’s AMF employs 868 people, though it also polices insurance and deposit-taking. BC has 285 employees and Alberta 236. Now add the smaller operations, from New Brunswick’s 113 to Nova Scotia’s 20, and you get well over 2,000 people. Is that a lot? Well, the SEC in Washington oversees the world’s biggest market with about 4,100 employees.
But now there’s an opening. On July 15 in Charlottetown, federal Finance Minister Francois-Philippe Champagne announced that Ontario would join the national passport system it had stayed out of for nearly 20 years. Ontario’s Finance Minister Peter Bethlenfalvy called it “an important step” and has told the OSC to work out the details. But the passport alone won’t close the toll booths.
What will?
First, why not let a company file once, get one invoice from its principal regulator, and have the provinces divide the money behind the scenes, as Harvey Naglie of the C.D. Howe Institute proposes? Then cap filing fees at the actual cost of the work, as the Canadian Forum for Financial Markets urges. That single step would close the toll booths without asking a single premier to give up a single commission.
Second, Ottawa and the provinces can put the idea of a cooperative capital markets regulator, which Ontario, BC, and some smaller provinces signed up for before it stalled, back on the table.
In 2018, the Supreme Court ruled this constitutional. Ottawa would pay for the transition and invite the willing jurisdictions to join, and let Quebec and Alberta watch the cost of capital fall in Toronto and Vancouver before deciding whether their pride is worth the premium.
Mark Carney wants $1 trillion in new investment over five years. Having a single regulator instead of 13 is one way to make that happen.
Meanwhile…
1. Politics by other means. Just pay my Amex bill! Former Trump Jr. fiancée Kimberly Guilfoyle gets ready to be fired by Trump Sr. And even the loyalists are bailing. And there’s a golden naked statue of Donald Trump on display at the European Parliament. JD Vance on transgender children. And across the pond and very to the left, Emmanuel Macron.
2. Will AI ever be as big as food? It will have to be to sustain itself. And a sheik, a Prime Minister, and a Prince walk into a gas station. And Ronan Farrow on how “AI might kill us all.” And on how the U.S. military is using AI to boost its kill rate.
And this week, a robot tried to sexually assault a teenage girl in Germany
Now, take a close look at this ultra-cute video of a baby hummingbird. It’s not real, of course. I used AI to show me its AI tells.
Finally, who do we arrest when AI commits a crime?
3. Life and death, by the numbers. First, what lowers your risk of dying early. Next, what will likely kill you. And finally, how to add years to your life. Also, how your senses change as you age; how much symptomatic treatments for Alzheimer’s actually help; and why sunscreen isn’t the only option.
4. Ah for just one more time, I would take the Northwest Passage. In August 2028, Jean and I are taking friends on a trip across the top of the world. 20 days, one expedition ship, two helicopters, expert speakers. Read all about it here and learn all about it at our information reception on Oct. 21. Book by Oct. 31 and save $2,700+ per person.
5. The arts belong at the heart of health policy. The fact that this appeared in The Lancet, one of the most prestigious medical journals in the world, suggests more than a doctor prescribing a visit to a museum to boost your mental health. Indeed, it makes a stronger cause-and-effect connection.
Also, a day at the ballet, a new sound of silence, the barefoot trumpeter and the lost joy of music piracy.
6. The decline of deviance. “We’re in a recession of mischief, a crisis of conventionality, and an epidemic of the mundane.” Plus, vertical microdramas are rewriting the rules of storytelling. And most obits spun mega-selling novelist, politician and convicted criminal Jeffrey Archer as a charming scoundrel. Not this one.
7. Openly Jewish. Toronto Metropolitan University University is hosting a special day-long symposium on antisemitism at Canadian universities on Tuesday, Oct. 20. Tickets $50. Apply to attend here.
8. There’s fast… Then there’s 1,300 MPH in an F-16. And if you want to stop a bullet, wear this. Plus the odd global success of Canada’s Arc’teryx. Plus another New York consumer program we don’t have here, and should. Speaking of speed, watch this short-necked raccoon.
And finally, the opposite of speed, 180,000 giant tortoises were just discovered on one Seychelles island. That’s a long time to discover 180,000 giant anythings, no?
9. No one can find the world’s greatest explorer. It seems Sir Ranulph Fiennes is dementing and his wife has kidnapped him. Even the King can’t reach him. A tragic story about a heroic man.
Speaking of explorers, John Geiger, the CEO of the Royal Canadian Geographical Society, had a big hand in finding Franklin’s ships in the Northwest Passage a decade ago and this year led the expedition to find Ernest Shackleton’s last ship in the Labrador Sea. He has launched a new book about Shackleton: Quest: Shackleton’s Last Ship and the End of the Heroic Age. Michael Palin calls it “an enthralling story of marine discovery.”
10. How to live. Why were the Victorians so effective for so long? Plus Morgan Housel on how to spoil your kids and why. And how couples meet and Dave Barry analyses Hallowe’en. And “What is it about my bitchiness?” And how Gen Zers deal with reality. And finally, Tom Lehrer sings the periodic table.
11. At age 96, Robert Bateman is still painting. Not to put food on the table. Bateman is one of the most successful and financially stable living artists in Canadian history. He creates daily from his studio on Salt Spring Island simply because he’s never outgrown his childhood love for nature and art. Paul Gilbert has written his biography, The Rover Boys. And Alison Reid directed the documentary of that journey, The Art of Adventure, available on Apple TV. Despite this, Bateman’s work has never been exhibited in the National Gallery of Canada.
Guaranteed 100% written by Bob Ramsay, human.