With the U.S. changing its trade policies under the Trump administration, more people in Canada are paying attention to trade issues within our own country. What used to be something only economists talked about is now part of a bigger national conversation.
Removing trade barriers between provinces is an important step to help Canada’s economy grow and rely less on trade with the U.S.
It’s surprising, but true — Canadian businesses often find it easier to sell their products to other countries than to other provinces. This is because each province has its own rules, making it harder for businesses and workers to grow across the country. Some examples of these trade barriers include:
Extra costs – Businesses must pay more to follow different rules in each province.
Limited access – Companies may not want to expand outside their province because it’s too complicated or expensive.
Fewer job options – Workers have fewer chances to find jobs in other provinces.
Higher prices – With fewer businesses competing across provinces, prices go up.
Complicated rules – Different rules and standards in each province cause problems like:
- Trouble selling products in other provinces
- Having to re-certify skilled workers when they move
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According to a 2019 International Monetary Fund (IMF) study, “Internal Trade in Canada: Case for Liberalization,” these trade barriers were like having a 21% tax on goods and services between provinces in 2015. Some industries, like textiles and chemicals, faced smaller barriers (around 7%), while others, like metals and food, faced much higher ones (over 27%). In comparison, Canada’s average tax on goods from other countries was just 1.4% in 2022, according to RBC.
Anita Anand, a former Minister of Transport and Internal Trade who is now the Minister of Foreign Affairs, said that removing these barriers could lower prices by up to 15% and increase productivity by 7%. But to make this happen, the federal government will need to work with each province, manage local politics, and help everyone adjust.
Prime Minister Mark Carney supports this change. He said that removing trade barriers between provinces could grow the Canadian economy by $250 billion. That’s a big deal.
With U.S. tariffs still a threat, this is a key moment for Canada. Strengthening trade within our own country and helping provinces work together is more important than ever. By removing these barriers, Canada can become stronger, create more jobs, and better handle global challenges.
Sources:
IMF Working Paper “Internal Trade in Canada: Case for Liberalization”
Six questions about the significance of interprovincial trade barriers in Canada – RBC
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Head of Investments
Yelena Stepanyan is the Head of Investments at Embark. A lover of all things related to the financial markets, she is the past Chair of the CFA Society Toronto's Institutional Asset Management Committee, where she currently serves as a Senior Advisor.
