Canada’s premiers have wanted to scrap internal trade barriers for years. Why is it hard to do?

As Canada’s premiers and federal officials continue to push for the removal of interprovincial trade barriers in order to safeguard against potential trade conflicts with the United States, the potential economic benefits of such a move have come to the forefront. Prime Minister Justin Trudeau recently convened a virtual meeting with the premiers, where it was agreed that there is a need to facilitate internal trade further.

Internal Trade Minister Anita Anand highlighted the significant impact that eliminating these barriers could have on the Canadian economy. She stated that it could lead to a reduction in prices by up to 15%, an increase in productivity by up to seven percent, and the addition of up to $200 billion to the domestic economy.

But what exactly are these provincial trade barriers and why do they exist in the first place? According to a report from the International Monetary Fund, there are four main categories of trade barriers in Canada: natural, prohibitive, technical, and regulatory. These barriers range from geographical challenges to restrictions on certain products and varying technical standards across provinces.

Perrin Beatty, President and CEO of the Canadian Chamber of Commerce, emphasized that many Canadians are not even aware of the existence of these barriers. He pointed out that these barriers have been in place since Confederation and have hindered both mobility and commerce within the country.

While Canada took a step forward in 2017 with the signing of the Canadian Free Trade Agreement (CFTA), which aimed to reduce existing trade barriers, progress has been slow. Each province and territory negotiated a detailed list of exemptions, resulting in a total of 245 exemptions across the country as of 2023.

Former Quebec Premier Philippe Couillard shed light on some of the challenges in reducing these barriers. He highlighted the reluctance of politicians to make changes that could impact provincial Crown corporations, which play a crucial role in generating revenue for the government. Couillard also mentioned the political sensitivity around amending certain laws, such as Quebec’s French language requirements, which serve as a barrier to outside businesses.

Carlo Dade, Director of Trade Infrastructure with the Canada West Foundation, suggested that more provinces should consider joining the New West Partnership Trade Agreement (NWPTA) as a model for greater cooperation. The NWPTA has successfully streamlined regulations and labor mobility provisions in Western Canada.

As Canada faces the looming threat of trade conflicts with the United States, there is a growing recognition among premiers that it is imperative to address internal trade barriers. By working together to eliminate these barriers, Canada can enhance its economic efficiency and competitiveness, ultimately benefiting all Canadians.