From maple syrup to milk producers, telcos to taxi companies, Canadian firms “are walled from competition” that has led to stunted trade, investment and innovation in the country and left consumers with fewer choices, according to a new report.
An estimated 35 per cent of Canada’s economy is protected from foreign competition, via rules, government intervention and varying interprovincial requirements, according to a new study by Fraser Institute, a Vancouver-based think tank.
Authored by Vincent Geloso, a senior fellow at the Institute, the study ranks the level of protectionism in Canada against other developed nations. While there are protectionist factors outside of human control such as geography and distance, the lack of foreign competition in Canada largely comes down to governmental factors.
“When governments in Canada protect industries, Canadian consumers pay higher prices, have less choice and/or less innovations compared to consumers in other countries,” Geloso said in a report published Thursday.
The study highlights several industries where protectionism is exacerbated, chief among them air transportation, telecommunication and broadcasting. For example, in telecommunications, a firm with more than 10 per cent of the market share cannot have more than 20 per cent of the voting shares owned by non-citizens.
The study acknowledges further barriers such as state monopolies, including Canada and Quebec’s liquor sales and the Crown-owned Canada Post. With these factors, the low-bound estimate of restriction is around 22 per cent.
However, the report goes beyond the regular definition of protection to include both interprovincial barriers and the potential impact of occupational licensing, which is how the study arrives at its 35 per cent figure. Interprovincial barriers refers to the difficulties in marketing across provincial borders, such as the restrictions inherent in selling alcohol from Ontario in Alberta.
Such restrictions gives firms less incentive to improve, cut costs, and improve efficiency.
“In turn, this lowers the living standards of Canadians. Provincial and federal governments in Canada should thus consider avenues to remove those barriers to competition and provide a framework that is more amicable to economic growth,” Geloso said.
The Fraser study also cites the Organisation for Economic Co-operation and Development’s (OECD) foreign direct-investment restrictiveness index, where Canada ranks 48th out of 62 countries — behind Ukraine and Korea and slightly ahead of Russia, Mexico and India.
In specific industries such as air transportation, Canada ranks 54th out of 62. In both telecommunications and media, the country is 59th out of 62.
The report concludes that the Canadian government should lessen restrictions to increase economic freedom.
“If provincial and federal policymakers want to help improve living standards for Canadian families, they should remove barriers to competition and allow companies to freely compete for our business,” Geloso said.
