The Province of Ontario passed a controversial piece of legislation in early June that allows the government to create Special Economic Zones (SEZs) in certain designated regions, among other things. Known as Bill 5, which is called the Protect Ontario by Unleashing Our Economy Act, the legislation aims to remove regulatory hurdles to economic development in specific parts of the province.
“We need to get rid of unnecessary red tape, make it easier for companies to invest, to hire and to grow, and that’s exactly what Bill 5 is going to do,” said Vic Fedeli, Minister of Economic Development, Jobs and Trade. The legislation was brought forward by Premier Doug Ford’s Progressive Conservative Party, which was re-elected to a third consecutive majority government earlier this year.
While this legislation is the first of its kind in Canada, the idea of governments creating special zones with relaxed regulations to attract investment is nothing new. The Ford government points to countries like Singapore, South Korea, Poland, and Panama, which have experimented with SEZs in recent decades.
Part of the justification for this move is the threat that Trump’s tariffs pose to the Canadian economy. If Canada can strengthen its economy through selective deregulation, Ford reasons, then the damage that might come from the trade war can be mitigated. In particular, the idea is to use SEZs to speed up major resource and infrastructure projects, such as mining initiatives in the Ring of Fire — a rich mineral deposit in northern Ontario — and a possible tunnel under Highway 401 through Toronto to help with traffic congestion.
A Three-Pronged Pushback
The pushback on Bill 5 has predominantly come from three main groups: First Nations leaders, environmentalists, and labor unions. “Essentially, the cabinet could give corporations a free pass to circumvent all sorts of important protections,” said Anaïs Bussières McNicoll, a director of the Canadian Civil Liberties Association.
First Nations leaders have been especially vocal opponents of this legislation, arguing that it infringes on their treaty rights.
“The breathing lands are within the peatlands, the muskeg in Treaty Nine territory, where the Ring of Fire is proposed, and already over 30,000 claims have been staked without the consent of any Indigenous communities,” says Kerrie Blaise, legal counsel for Friends of the Attawapiskat River.
At a Queen’s Park rally outside the Ontario legislature in late May, protestors pushed back directly against Ford’s rhetoric, chanting “Indigenous rights are not red tape.”
Environmental groups, meanwhile, are raising concerns about the government relaxing environmental protection laws. “Bill 5 would, if passed, deal a body blow to the environment and hopes for energy sovereignty in Ontario,” said the group Environmental Defence in a statement before the bill was passed. “This Bill represents a direct attack on species at risk, clean and healthy communities, clean energy and the rights of Indigenous peoples.”
Labor unions have echoed these sentiments, adding that worker protections are also weakened with this legislation. “Existing Ontario labour law won’t apply in these special economic zones,” noted CUPE Ontario President Fred Hahn. “Under the cloak of an impending economic crisis and the guise of fighting tariffs, Doug Ford plans on delivering workers to the wild west of working conditions, all to the benefit of big business.”
While the concerns of these three groups seem overstated, many Ontarians are sympathetic to the general points that are being made. There is widespread fear that relaxing regulations, even only slightly, could allow large corporations to run roughshod over Indigenous people, the environment, and workers.
But while those concerns are worth taking seriously, the other side of the trade-off also needs to be weighed: the threat of a stagnating economy.
Unleashing the Entire Economy
The Ford government has made an interesting admission with the introduction of the SEZ law: the regulations that they themselves have been maintaining have been detrimental to the economy. In other words, they are explicitly recognizing that there is a trade-off between regulation and economic growth.
What this means, plainly, is that slow economic growth is really a policy choice; it is not simply unavoidable bad luck. The government is fully aware that they are putting a sizable check on our well-being, that with their mountains of regulations and lengthy permitting schemes they are holding us back from more affordable groceries, healthcare, housing, better education, and so on — and their justification for this notable hindrance on public welfare boils down to “well, sorry, we had other priorities.”
Just how much of an impact do regulations have? It’s hard to measure, but there’s no doubt it’s significant. “Most Ontarians would be surprised by the magnitude, scope, and costs of the province’s regulatory burden,” write researchers Charles Lammam and Sean Speer in a 2018 policy report for Ontario 360. “The Ontario government’s own count, which was performed back in 2012, pegs the number of regulatory requirements on businesses and individuals at over 386,000. According to one analyst, that number is twice as many as the next closest province.”
Lammam and Speer cite a 2018 report from the Canadian Federation of Independent Business (CFIB), which put the cost of government regulation in Ontario for 2017 at $15 billion, the highest of all the provinces both in absolute terms and on a per-business basis (which provides a more apples-to-apples comparison between different-sized provinces). According to the latest CFIB report, that number had risen to $20.4 billion in 2024.
Here’s another way to think about it: if the government is bragging about all the economic benefits that will result from relaxing just a few regulations in a few designated zones in the province, why wouldn’t they unleash trillions in growth by relaxing a lot of regulations in the entire province?
What if we unleashed the entire Ontario economy, and not just a tiny percentage of it?
To be sure, this doesn’t mean companies should be allowed to do whatever they want. Protections for legitimate property rights and enforcement of contracts are an important part of a free market, so those should never be on the table.
But we need to start questioning just how much special interest groups should be allowed to hold the economy back. Whether it’s Indigenous groups, environmentalists, labor unions, or some other body, these groups always want more privileges, more power, more special legal protections at the expense of others — which often come in the form of economic restrictions. And as sympathetic as their case may sound, there has to come a point where freedom and economic welfare are simply deemed too important to give up. Everyone in these groups is entitled to their property rights, but special favors from the government should be viewed with considerable suspicion.
And to those who point out that giving a company an SEZ is itself a special favor from the government, my response is simply: I agree, and let’s fix that by extending the deregulation to the entire province.