Canada’s economy stands to benefit significantly from the elimination of internal trade barriers among its 13 provinces and territories, potentially leading to a nearly seven percent increase in real GDP amounting to $210 billion over time, as per a recent report by the International Monetary Fund (IMF). The report suggests that regulatory hurdles within the country equate to a national tariff of around nine percent on average, with service-centric sectors like healthcare and education facing even higher barriers exceeding 40 percent due to stringent regulations on professional mobility.
The impact of these barriers is particularly burdensome on smaller provinces and northern territories, resulting in increased costs compared to larger, more diversified provinces. The report highlights that internal trade restrictions create a fragmented economic landscape where geographical and regulatory factors limit growth opportunities, dampening the benefits typically associated with economies of scale.
The removal of trade barriers is projected to have the most substantial positive effects on the Atlantic provinces, with Prince Edward Island poised to realize significant gains in real GDP per worker. The authors of the report emphasize that these internal obstacles are not only economically detrimental but also incompatible with the demands of a modern service-oriented economy, underscoring the urgent need to address these challenges for enhanced productivity and inclusive growth.
Alicia Planincic, Director of Policy and Economics at the Business Council of Alberta, points out that the existing trade barriers create a scenario where Canada operates more like ten separate economies rather than a unified entity. The inefficiencies stemming from restrictions on labor mobility and market access hinder job opportunities and business expansion within the country, making it imperative to streamline internal trade regulations.
While some progress has been made through bilateral agreements between certain provinces and territories and the recent national accord to remove barriers on most goods, excluding alcohol and food, services remain a significant area of concern. The IMF report underscores the importance of addressing internal trade barriers in sectors such as finance, telecom, transportation, and professional services to unlock substantial GDP gains and reduce business costs across the board.
Planincic emphasizes that overcoming these challenges requires a combination of political will and intricate coordination among provinces to harmonize the myriad rules and regulations governing internal trade. The complexity of aligning these diverse regulatory frameworks underscores the need for concerted efforts to facilitate smoother interprovincial trade and bolster Canada’s economic resilience and competitiveness.
