Does free trade benefit the whole or does it benefit each individual jurisdiction?

There was an interesting article in the G&M from Newfoundland and Labrador arguing that free trade in booze would mean no more beer production in the province. The article cites an expert suggesting that all of Atlantic Canada could be easily served by a large brewery in Quebec or Ontario.

What’s the point of free trade in beer? Presumably, the cost per beer goes down or the quality goes up or there are other benefits of ‘scale’. Overall there would be benefits (presumably) but not necessarily for every jurisdiction. If you are living on the Rock, it could mean the loss of an industry. Right now, Newfoundland and Labrador rules have led to it actually being an exporter of beer – in 2021 it shipped $63 million worth of the suds to other provinces mainly to Nova Scotia but also all other provinces in small amounts (except NB interestingly). It imported only $4 million from other provinces and $13 million from out of the country – I guess if you want Guinness you have to import it?

Newfoundland and Labrador imports hundreds of millions of dollars’ worth of food, almost all of the clothing, computers and cars purchased each year ($900 million of vehicles). It imported $400 million worth of drugs in 2021. Even the trucks that transport product to and from the Rock generate little economic value in the province. The province ‘imported’ $350 million worth of road transportation services in 2021.

If you move on to services a lot of finance and insurance services are provided by firms in Toronto and beyond ($1.2 billion in 2021). Even gambling services generated $57 million worth of imports (presumably ALC is a big part?).

So, the province puts a few barriers in place to ensure that pop and beer and a few other goods and services are produced locally, and, the local union reps say, the free traders come along and want to take even the scraps.

The province does export certain products and services – mostly minerals, oil and fish (more than 80%+ of the value of all exports). But NL also exports newsprint ($162M), $287 million in telecommunication services, $127 million in insurance brokerage activity (one of big ones is based there?) and a whopping $355 million in architectural, engineering and related services. Don’t forget that scrappy IT sector - $230 million worth of exports in 2021 and surely much more since.

As I have said before, the ‘greater good’ only goes so far. If you push beyond ‘so far’ you get JD Vance.

So, what is to be done? Places like Newfoundland and Labrador need to think long and hard about those sectors that would benefit from freer trade and see if there are ways to strengthen the value proposition. I don’t want to go all Mariana Mazzucato on you but if freer interprovincial trade actually hurts certain provinces and, possibly, by a lot – you risk a backlash.

Ideally, freer trade generates ‘greater good’ benefits but it also allows provinces - even the small ones - to build on what they are good at.