How Canada WinsPublished May 03, 2025 • Last updated 3 hours ago • 4 minute readNova Scotia Premier Tim Houston said he will work to eliminate interprovincial trade barriers with provinces that pass similar legislation. Houston made the comments in Ontario in February alongside Progressive Conservative Leader Doug Ford. ScreenshotWhen economists talk about productivity it can be easy to think about it in terms of working harder or longer to produce more.At a recent event, Ian Munro, Halifax Partnership’s chief economist, described productivity as people creating more value while they’re working, which improves the profitability of firms and provides the basis for wage growth.Productivity, or the efficiency of producing goods and services, is a crucial driver of GDP per capita. A recent report ranks Nova Scotia last in GDP per capita among all other Canadian provinces and American states.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY.Subscribe now to access this story and more:Unlimited access to the website and appExclusive access to premium content, newsletters and podcastsFull access to the e-Edition app, an electronic replica of the print edition that you can share, download and comment onEnjoy insights and behind-the-scenes analysis from our award-winning journalistsSupport local journalists and the next generation of journalistsSUBSCRIBE TO UNLOCK MORE ARTICLES.Subscribe or sign in to your account to continue your reading experience.Unlimited access to the website and appExclusive access to premium content, newsletters and podcastsFull access to the e-Edition app, an electronic replica of the print edition that you can share, download and comment onEnjoy insights and behind-the-scenes analysis from our award-winning journalistsSupport local journalists and the next generation of journalistsRegister to unlock more articles.Create an account or sign in to continue your reading experience.Access additional stories every monthShare your thoughts and join the conversation in our commenting communityGet email updates from your favourite authorsSign In or Create an AccountorArticle contentAs municipalities, provinces and our federal government face increasingly long-run fiscal pressures to address demands for more infrastructure and more social programs with an aging population, there’s only one way to deal with this and that is faster growth.Economist Paul Krugman famously said, “Productivity isn’t everything, but, in the long run, it is almost everything.” So, what is the solution?Carolyn Rogers, the deputy governor of the Bank of Canada, initially sounded the alarm on Canada’s productivity performance last March. She pointed to several potential solutions, including:Increasing competitionFocusing on sectors and companies that add greater value to the economyFocusing on technologies that improve efficienciesLabour skills development and retrainingIn a recent speech at a Halifax Partnership event on productivity, Andrew Coyne, a columnist for the Globe and Mail, touched on several of these points and highlighted a pro-growth agenda (the Solow-Swan growth model) as a guiding beacon for Canadian policy makers.Article contentIt emphasizes the role of capital accumulation, labour and technological progress in driving long-term economic growth. It highlights that sustained economic growth can occur through improvements in technology and increases in capital per worker.While labour and improvements to human capital are key elements in addressing productivity, Coyne argued that the more immediate problem is on the capital side. He pointed out that the alarming deterioration in productivity performance closely tracks the extraordinary relative decline of business investment in Canada.The Organization for Economic Co-operation and Development tracks investment growth and fixed capital formation across its 38 member states, plus nine others. From 2011 to 2015, Canada’s performance was 37th out of 47. From 2015 to 2023, it was 44th.“If per capita growth has been similarly lagging, it is much more to do with the shortage of capital than a surplus of labour. Our workers are less productive than other countries’ workers because they have less capital to work with,” Coyne wrote in April 2024.Article contentTherefore, how do we raise capital (investments)?High rates of taxation on capital income are a significant barrier as Canada’s tax rates remain higher than in many comparable countries – not only on corporate taxes but especially on personal income tax.Tax reduction and affordability measures have been long-standing advocacy positions for the Halifax Chamber of Commerce in many of our recent pre-budget submissions for municipal and provincial governments. We were very excited to see the Province of Nova Scotia announce tax reductions in the most recent budget for small businesses, personal income taxes, and on goods and services.While this was a positive step, there is still a lot of work to be done at the municipal and federal level in terms of tax reform. While these reforms will help to incentivize greater domestic investment, Canada also needs to address tax policies to improve foreign investments to fully enable our ability to form new capital.Article contentThe other area of focus we believe is critical for the productivity problem is competition, which was mentioned by both Rogers and Coyne. Competition incentivizes businesses to innovate, which drives productivity. Unfortunately, there are many examples throughout Canada where competition is stifled. One of the biggest examples has been interprovincial trade barriers.The recent trade war with the United States has highlighted the need to address these barriers. In January, the federal Committee on Internal Trade wrote that eliminating interprovincial barriers could add as much as $200 billion to the Canadian economy, lowering prices and expanding productivity.This is exactly what Nova Scotia’s newly proposed legislation, Bill 26, the Free Trade and Mobility Within Canada Act, intends to address. This bill, a first of its kind in the country, aims to foster an environment of mutual recognition of goods, services and labour mobility across all sectors. A unified set of standards would lower barriers to competition as firms creating products in neighbouring provinces would have greater access to new domestic markets.Article contentTo ensure that the momentum continues to eliminate interprovincial trade barriers, the chambers of commerce representing the four Atlantic capital cities hosted the first roundtable discussion on Atlantic interprovincial trade. The virtual discussion brought together members and staff from each of the chambers, including industry associations from each province, representing sectors such as construction, transportation and shipping, post-secondary education and training, and alcohol.The discussion focused on effectively accelerating recent provincial efforts to eliminate interprovincial trade barriers among the Atlantic provinces.By working together, the chambers can identify areas of opportunity, support the process of harmonizing regulations, and enable our region to improve productivity, competitiveness and prosperity across Atlantic Canada.While interprovincial trade barriers are only one piece in the large productivity puzzle, the Halifax Chamber of Commerce will continue to work with members, key decision makers and subject matter experts to ensure we are advocating for the conditions that will maximize the economic prosperity of our members and our community.Patrick Sullivan is president and CEO of the Halifax Chamber of Commerce. 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COMMENTARY: Seeing solutions for productivity performance
