Atlantic Canada may have mostly avoided the worst of the 2008 financial crisis and doesn’t have the big industries that Ontario or Western Canada rely on, but its productivity has fallen for four consecutive years and now trails the national average by roughly 25 per cent.

Part of the reason for that is that decades of protective isolation are evaporating as sagging productivity, trade volatility and artificial intelligence disrupt the status quo, says Nova Scotia billionaire John Risley, who warns the region has hit a breaking point.

“The global economy is changing faster now than at any time in our lifetimes, and I don’t think Atlantic Canadians fully appreciate that,” he said. “We need to wake up before it’s too late.”

But Atlantic Canada’s economic decline isn’t just a regional issue, according to Frank McKenna, deputy chair of TD Bank Group and former premier of New Brunswick.

He said if infrastructure, energy projects and trade corridors stall in the region, it drives up costs and slows growth across Canada.

“What’s good for our region is good for the country,” he said. “If we succeed, the whole nation benefits.”

The choice seems simple on the surface: reform the economic machinery with urgency or risk a permanent slide into the periphery. But changing things is not so easy in reality and the problems Atlantic Canada faces are very similar to those in the rest of the country.

Externally, trade tensions with Canada’s biggest trading partner, the United States, are rising and China is rapidly expanding its electricity generation, which is the backbone of artificial intelligence and advanced industry, the new industrial powerhouses.

Internally, Prime Minister Mark Carney may be promoting nation-building projects across the country, but costly interprovincial trade barriers are still in place.

McKenna points to Quebec’s looming referendum and regional infrastructure bottlenecks as two more risks that could slow the region’s economy even more.

“We’re sleepwalking in Atlantic Canada. The country is more awake than the region,” he said. “We definitely are facing very serious challenges.”

Much of Atlantic Canada’s drag, Risley said, is self-imposed. Different regulations, licensing regimes and procurement systems across the four provinces act as internal trade barriers, making it harder for companies to scale and professionals to move freely.

The cost of these barriers is significant both locally and nationally, where they are the equivalent of a nine per cent tariff on goods and services, according to an International Monetary Fund (IMF) report released in January. Removing these barriers could especially help the Atlantic region by increasing productivity per worker by nearly 40 per cent in Prince Edward Island and more than 23 per cent in Nova Scotia and New Brunswick, the IMF said.

“We don’t need to reinvent the wheel. Go where it’s working, copy what works and implement it. Instead, we spend years designing our own system,” Risley said.

McKenna has long advocated for dismantling interprovincial trade barriers, particularly around professional mobility and goods.

“All the barriers to mobility of professions — nurses, doctors, pipefitters — have got to be disbanded,” he said. “Atlantic Canada is talking the talk, but we have not demolished all of the barriers.”

The region’s economic challenges are even more in the spotlight now as the federal government’s Atlantic Economic Panel tours the region, meeting business leaders and provincial officials in an attempt to power up the economy.

The panel, announced in November by Justice Minister Sean Fraser, who is also responsible for the Atlantic Canada Opportunities Agency, is made up of private-sector leaders and tasked with delivering a one-time report by September that has clear, practical recommendations for both government and business to help the region grow.

McKenna said the importance of strong federal leadership will be the deciding factor.

“For the Atlantic panel to succeed, you need buy in from the prime minister and alignment from the premiers,” he said.

He said he hasn’t seen yet that level of commitment from the prime minister, but what made past nation-building projects work under former prime minister Brian Mulroney is that he took a personal interest in making sure major projects in Atlantic Canada were built, such as highways, frigates and Hibernia, the offshore oilfield.

“Without that level of commitment, nothing moves,” he said.

Risley welcomes the attention but said the four provinces’ premiers and Prime Minister Mark Carney need to come together and shake the region awake.

“We have opportunities in front of us, and the quicker we embrace them, the less costly and painful it’s going to be,” he said.

He said that waiting for a crisis, such as a recession or further decline relative to the rest of North America, is a dangerous strategy.

“It’s like cancer. You catch it early, you can fix it,” he said. “You wait too long, and your ability to do anything deteriorates.”

The urgency for reform is clear in Atlantic Canada’s worsening finances.

Nova Scotia faces a record $1.4-billion deficit, triggering a rare S&P Global Inc. credit downgrade earlier this month. New Brunswick recently ended a seven-year streak of surpluses with a projected $835-million shortfall, and Prince Edward Island’s deficit has soared to a record $367 million.

Even Newfoundland and Labrador, despite its oil royalties, projects a $948-million deficit and carries Canada’s highest ratio of debt to gross domestic product at more than 45 per cent.

The region also heavily relies on government jobs, with the public sector employing nearly 10 per cent more people than the national average. That provides stability, but Risley said it can also dull the region’s response to global economic shocks and slow the push for private-sector growth.

McKenna said restoring the region’s special immigration pilot, which successfully brought in skilled workers, could quickly bolster productivity.

Risley said the solutions are about both scale and ambition because Atlantic Canada needs transformative projects, private-sector-led investment and a willingness to back startups targeting global markets.

“We need to get behind the companies that show real promise, serve global markets and can grow into meaningful employers,” he said. “Let’s put a billion dollars into a fund to shock the system. Let’s make it happen.”

Resource development is another key pillar. McKenna said faster licensing of mining projects and full development of natural gas resources would be useful, while Risley said traditional industries such as fisheries and Newfoundland oil and gas have limited growth potential.

Risley is spearheading Clean Grid Atlantic, a $16-billion transmission network connecting 10 gigawatts of onshore and offshore wind to markets in Quebec and New England. He said the market for electricity is now “insatiable” and that building this backbone is a truly generational project, comparable to the nation-building infrastructure of Canada’s past.

McKenna said Atlantic Canada doesn’t lack for entrepreneurial talent, pointing to those who created the Sobeys grocery empire, John Bragg’s Oxford Frozen Foods Ltd. and the multinational operations of the Irving and McCain families.

But outside those flagship companies, he said risk-taking has softened over time. A heavy public sector, generous income supports in some areas and a culture that avoids confrontation have taken some of the edge off the broader economy.

“Some of those entrepreneurial instincts have atrophied in our region,” he said. “We need to get them back.”

• Email: arankin@postmedia.com