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The CFTA: How Canada Signed a Trade Deal With…Itself?
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The CFTA: How Canada Signed a Trade Deal With…Itself?

Staff

We hear about trade deals all the time. These trade agreements typically involve at least two countries, and sometimes over a dozen. Given this, how can the Canadian Free Trade Agreement, or the CFTA, be a trade deal if it only involves one country? Did Canada really sign a free trade deal with itself?

What Is the CFTA?

The CFTA went into effect on July 1st, 2017, Canada Day. It replaced the 22-year-old agreement on internal trade. The previous deal gives a sense about what this agreement entails: internal trade. The CFTA governs trade between the Canadian provinces and territories.

Canada has 10 provinces which are similar administrative divisions to the 50 states of the US. Canada also has three sparsely populated territories in the north that do not have quite the same autonomy. All these provinces have their own economies, tax schemes, and their own trade. Canada is one of the more decentralized federations in the world, so individual provincial governments and premiers have a sizable amount of control over their economies.

Given this, the CFTA is similar to other trade agreements between sovereign nations. Rather than focusing on what Canada imports from China or exports to the US, the CFTA aims to remove barriers on inter-provincial trade. This makes it easier for manufacturers in Alberta to sell their products in Ontario, for example.

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Room for Improvement

No trade agreement is perfect, of course, and the CFTA has its critics. Some provinces have not fully delivered on their promises to remove barriers to trade. According to a study published in 2019, eliminating barriers to interprovincial trade could increase Canada’s GDP per capita by as much as 3.8%.

Alcohol has been a particular sticking point. Some of the impetus for the negotiation of the CFTA came from a 2012 arrest and fining of 17 people for illegally importing alcohol across the Quebec-New Brunswick border and a court challenge by one of those fined. That challenge was brought to the Supreme Court of Canada and ultimately lost, but it led many people to consider a rethink of how much control each province has over their own alcohol distribution and consumption. According to a 2019 Ipsos poll, 87% of respondents believe that Canadians should have a right to bring any legally purchased product with them across provincial borders.

Rethinking Trade Deals

Ultimately, if you don’t live or operate a business in Canada, the CFTA has very little relevance to you. But it’s important to remember that these types of deals are significant for millions of people all over the globe. It’s not only international trade agreements involving dozens of countries that have the power to affect consumers, small businesses, and corporations.

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