B.C.-Alberta economic links tightest among Canadian provinces

Canada is a federation made up of provinces and territories with a significant amount of subnational autonomy. The provinces are responsible for delivering health care and education and have jurisdiction over employment standards and occupational regulations governing the labour market. Control of Crown land and regulating the operations of resource industries are also under provincial jurisdiction. Although independent, the provinces co-operate and are integrated and interdependent with each other in an economic sense. The two westernmost provinces, B.C. and Alberta, have especially strong economic connections and exhibit a high degree of economic interdependence.

One significant element of the relationship is the extent of interprovincial trade. In recent years, B.C.’s merchandise exports to Alberta have exceeded $7.2 billion, far more than to any other province. Geography is clearly a factor here, but it is noteworthy that B.C.’s exports to Alberta are two and half times larger than what we export to Ontario (even though Ontario’s economy is roughly three times larger than Alberta’s). Interprovincial trade tends to attract little attention in comparison to international trade. Yet B.C.’s merchandise exports to Alberta exceed the value of what we export to China.

The Alberta situation is slightly different. British Columbia ranks as Alberta’s second-largest provincial export market, after Ontario. Alberta sells around $8 billion in goods to B.C. annually. The comparatively strong B.C.-Alberta ties are reflected in the fact that even though Ontario’s economy is also nearly three times the size of B.C.’s, Alberta’s merchandise exports to Ontario are generally just one and a half to two times larger than exports to B.C.

Alberta benefits greatly from Canada’s transportation linkages to Asia. The majority of the nearly $6 billion in goods Alberta exports to Asia are shipped through British Columbia ports. Many consumer and industrial goods imported by Alberta also come via the B.C. gateway. While B.C.’s gateway connections to Asia are essential to the Alberta economy, the associated economic gains for B.C. are also substantial. Connecting Alberta to overseas markets generates export earnings for B.C. in the form of transportation and related services, which in turn support tens of thousands of jobs in this province.

Services more generally are a significant part of interprovincial trade, and transportation services play a large and growing role in B.C.’s export base. The total value of services exported to Alberta is more than $9 billion, meaning interprovincial trade in services exceeds the value of goods exports. Among all exports to Alberta, transportation services are the second-largest source of export earnings, after natural gas.

The economies of B.C. and Alberta have been comparatively strong for some time, albeit with bumps along the way. Since 2011, B.C. has led the country in average annual economic growth, followed by Alberta (Manitoba and Saskatchewan were close behind).

Job opportunities that accompany economic growth have attracted migrants from other provinces. B.C. and Alberta are the only two provinces over longer periods to consistently record net inflows of people from other parts of Canada. Although the crash in oil prices recently led to a modest amount of net out-migration, cumulatively over the past five years Alberta recorded a net inflow of more than 100,000 people from other provinces. In B.C., the cumulative net inflow over the same period was approximately 55,000. Of interest, all other provinces experienced net outflows of people over the period 2012-16.

In addition to being the only two provinces with net in-migration from the rest of Canada, B.C. and Alberta have the highest levels of bilateral migration between any two provinces. Given the geography of the country, this is not terribly surprising, but it is interesting that geography and close economic linkages between B.C. and Alberta result in more interprovincial migration than occurs between Ontario – with more than three times the population – and any other Canadian province. One could reasonably expect that the greatest interprovincial migration flows would be between Ontario and Alberta or Ontario and B.C. Although language inhibits mobility to some extent, one might also expect substantial migration between Ontario and Quebec, the two most populous provinces. Yet it is B.C. and Alberta that stand out as the two provinces with the largest absolute bilateral flow of people.

The economic connections between provinces are important sources of economic activity. Arguably, theses linkages are most extensive between B.C. and Alberta, especially with respect to labour markets and interprovincial migration. The economic ties between B.C. and Alberta have been strengthened by the Trade, Investment and Labour Mobility Agreement and further reinforced by the successor New West Partnership Trade Agreement that includes Saskatchewan and Manitoba. Policy-makers in both provinces are well advised to keep this in mind and work to further expand and facilitate trade, labour mobility and business connections generally. •

Jock Finlayson is the Business Council of British Columbia’s executive vice-president and chief policy officer; Ken Peacock is the council’s chief economist.