Let’s get Atlantic Canada Out of its Have-Not Status

Published on February 07, 2017

Last Saturday, at the debate in Halifax, other candidates accused me of abandoning Atlantic Canada. They said that my proposal to freeze the equalization budget until we review its funding and the way the money is being distributed is going to hurt the region economically.

Of course, in the short term, some people might not like this idea. But transferring money from the rest of Canada to the Atlantic has been going on for decades. And if we do nothing, it will likely continue for several more decades. Shouldn’t we be thinking about solutions beyond the short term?

The question we should be asking is: How can we create the best conditions for Atlantic Canadian entrepreneurs to create jobs and wealth? (Including in Newfoundland & Labrador, which hasn’t received equalization money for some years because of revenues from offshore oil, but still has a weak economy and very high unemployment.)

Equalization should not be a permanent program to keep whole regions and provinces poorer than the rest of the country. Unfortunately, that’s what it does.

Various studies have shown that it encourages the growth of the public sector in the recipient provinces, which bids away resources and workers from the private sector and weakens it. It encourages provincial governments to keep taxes high and to intervene more in their economies. They don’t have as much incentive to make their economies more competitive because more private sector growth will lead to less equalization money.

Bigger governments, less competitive private businesses: That’s the recipe for economic stagnation.

Kevin O’Leary said last week that he would “force” provinces to adopt some policies that he favours, such as developing natural gas in Nova Scotia. And that he would be “very punitive” if they don’t comply. This is a totally arrogant and reckless approach, one that will bring back constitutional quarrels between Ottawa and the provinces.

My approach is not to impose Ottawa’s will on the provinces, but rather to reform the equalization program so that it provides the right incentives for economic development. I will respect the provinces and our Constitution.

A second very important change that needs to be made to help Atlantic Canada become more prosperous is to eliminate interprovincial trade and labour barriers. It’s a shame that after 150 years, our country is still not a unified market.

If you are a consumer, you can pay a fine for crossing a provincial border with too many beers, as happened to Gérard Comeau in New Brunswick. If you are a worker, you may need a new licence, or see your qualifications not recognized, when you go to work in another province. And if you are an entrepreneur, you may need more permits, have to go through bureaucratic loopholes, or simply face a closed door, when you try to export to another province.

A Senate committee estimated that these barriers may cost our economy up to $130 billion a year. That’s almost half the federal budget!

But it’s even more costly for small provinces with tiny markets that are more dependent on trade. They cannot benefit from the economies of scale of a larger market. It’s more difficult for their businesses to grow. And costlier for their consumers who can’t buy stuff produced elsewhere.

The Atlantic Provinces Economic Council released a report last October explaining why the region can’t afford these barriers. The study says removing all trade barriers between provinces could create gains as high as 3.3% of GDP, but that the gains would be more than double that for the Atlantic provinces at 7.6% of GDP.

Our Constitution says these barriers should not exist. Provinces have been talking and negotiating for decades. But why should we expect those who created the problem to solve it? We need a strong central government to systematically deal with this problem. I propose to create an Economic Freedom Commission with the power to take provinces to court when their regulations infringe upon your freedom.

Atlantic Canadians need real solutions, not paternalism. Instead of pandering to those who like the status quo, or adopting an authoritarian approach, we should be supporting those who are fighting for change. Like the people at the Atlantic Institute for Market Studies in Halifax who have been proposing sound policies for many years. Like Conservatives who are calling for less government and more free-market solutions at the provincial level.

That’s the vision I’m offering Atlantic Canadians, based on freedom, responsibility, fairness and respect. And I am hopeful many of them will embrace it so that Atlantic Canada can one day take its rightful place among the prosperous regions of our country.