Reducing Trade Barriers Between Ontario and Quebec Would Benefit Over 200,000 Small, Medium Businesses: Report

Trucks and other vehicles enter and exit the Louis-Hippolyte-La Fontaine Tunnel in Montreal on Jan. 2, 2023. (The Canadian Press/Graham Hughes)

If trade barriers were reduced and strategic alliances improved between Ontario and Quebec, more than 200,000 small- and medium-sized businesses would see a benefit, according to a new report by the Canadian Federation of Independent Business (CFIB).

“Ontario and Quebec: Unlocking an Economic Corridor for SMEs,” published on July 26, found that nearly a quarter (22 percent) of Ontario businesses, and two in five (39 percent) of Quebec businesses either purchase or sell goods in the other province. More than 10 percent of business revenue is generated in trade with the other province, 12 percent in Ontario and 15 percent in Quebec.

“There are hundreds of thousands of businesses with economic ties between Ontario and Quebec. Both economies only stand to gain by reducing trade barriers and making it easier to operate across the provincial border,” Ryan Mallough, vice-president of legislative affairs for CFIB Ontario, said in a news release.

The report estimates 215,000 businesses could benefit from improved trade relations between provinces.

“Prioritizing economic cooperation is a win for small business and a win for our economies,” Mr. Mallough said.

CFIB said that business owners in both Ontario and Quebec responded that improving trade between the two provinces would benefit the Canadian economy (70 percent), their own industry (59 percent), and their individual businesses (51 percent).

Barriers

The report lists obstacles small business owners in Ontario and Quebec face when operating in the other province, and key public policies that can improve trade and economic growth.

Almost half (47 percent) of Ontario businesses identified the language barrier as their main challenge to operating in Quebec, followed by high shipping costs (24 percent) and complexity of provincial regulations (19 percent).

While one-third of Quebec businesses (29 percent) said they have no challenges, 27 percent identified shipping costs as a barrier to trade with Ontario, followed by complexity of provincial regulations (19 percent) and the language barrier (17percent).

“While there is a clear eagerness to expand, various barriers hinder small business growth prospects in both Ontario and Quebec. These barriers are not insurmountable, and governments possess the power to reduce them, but they need the political will,” said Riley Locke, CFIB policy analyst and co-author of the report.

“There needs to be greater cooperation in areas including labour mobility, internal trade, and reducing regulatory hurdles. Regarding languages barriers, both provinces, in collaboration with the federal government, should also move to expand French and English language and translation supports for business owners to help spur interprovincial investment and create jobs.”

The majority, 74 percent in Ontario and 69 percent in Quebec, said they support recognition of each other’s worker’s compensation boards to allow employees to work in either or both provinces without extra paperwork.

The CFIB report makes a number of suggestions to improve trade between provinces, including recognizing professional credentials to allow for greater labour mobility, implement joint economic targets—such as  increasing productivity, increasing GDP, and increasing interprovincial investment—and reducing taxes for small businesses.

The report also calls on the provincial governments of Ontario and Quebec to harmonize tax rules to make it less complicated for businesses operating in both provinces, and to eliminate interprovincial trade barriers. It suggests allowing direct-to-consumer alcohol shipments as one example.