In an era when Canada boasts free trade agreements with countries across the globe, the persistent maze of regulatory barriers hampering commerce between its own provinces stands as a stark economic paradox. Industry experts and economists are increasingly pessimistic about the federal government’s ambitious goal of eliminating these internal trade barriers, despite repeated promises from successive administrations.
“We’ve become quite skilled at negotiating international trade deals while failing to address the fragmented marketplace within our own borders,” says Trevor Tombe, economics professor at the University of Calgary and a leading researcher on interprovincial trade barriers. “The economic cost of these internal barriers is estimated at $50-90 billion annually—equivalent to thousands of dollars per Canadian household.”
The Canadian Free Trade Agreement (CFTA), implemented in 2017, was supposed to be a watershed moment for internal trade liberalization. However, seven years later, provinces continue to maintain a complex web of regulations that restrict the movement of goods, services, and labor across provincial boundaries. These barriers range from different trucking regulations and professional certification requirements to varying alcohol distribution rules and government procurement practices.
Some of the most problematic barriers involve regulated professions. Engineers, accountants, nurses, and other professionals often face bureaucratic hurdles when attempting to practice across provincial lines. According to a recent report from the C.D. Howe Institute, these labor mobility restrictions alone cost the Canadian economy approximately $10 billion annually in lost productivity.
Provincial protectionism remains deeply entrenched, particularly in government procurement. Quebec’s stringent local content requirements for public contracts and Ontario’s “Buy Ontario” policies exemplify how provinces continue to favor local businesses over those from neighboring provinces—practices that would be illegal under international trade agreements like CUSMA with the United States.
“The irony is not lost on business owners,” says Perrin Beatty, President of the Canadian Chamber of Commerce. “A company in Halifax might find it easier to sell to customers in Boston than in Montreal due to interprovincial regulatory differences.”
The federal government maintains its commitment to reducing these barriers, with Innovation Minister François-Philippe Champagne recently reiterating the government’s dedication to creating a seamless national marketplace. However, constitutional jurisdiction remains a significant obstacle, as provinces fiercely guard their regulatory authority.
British Columbia and Alberta have made some progress through their bilateral Trade, Investment, and Labour Mobility Agreement (TILMA), demonstrating that targeted agreements between willing provinces can yield results. Similarly, the four Atlantic provinces have worked to harmonize trucking regulations and professional standards.
“These regional successes highlight what’s possible when political will exists,” notes Laura Jones, Executive Vice-President of the Canadian Federation of Independent Business. “Unfortunately, that same political will doesn’t seem to exist at the pan-Canadian level.“
Small and medium-sized businesses bear the brunt of these barriers. Unlike large corporations that can establish operations in multiple provinces to circumvent trade restrictions, smaller enterprises often find the costs of navigating differing provincial regulations prohibitive.
Catherine Swift, a Toronto-based manufacturing entrepreneur, describes the challenge: “I can ship my products to California with less paperwork and regulatory compliance costs than sending the same goods to Quebec. It’s absurd that we’ve created these artificial borders within our own country.”
Economic research suggests that free interprovincial trade would increase Canada’s GDP by approximately 4%—a significant boost at a time when productivity growth has stagnated. Moreover, enhanced internal trade would strengthen Canada’s position in global markets by fostering more competitive domestic firms.
As Canadians face increasing economic pressures from inflation and global competition, the question becomes increasingly urgent: can our federation overcome provincial self-interest to create a truly integrated national economy, or will we continue to surrender billions in economic potential to protect local fiefdoms?
