A recent report from the International Monetary Fund (IMF) suggests that Canada’s economy has the potential to grow by almost seven percent, translating to $210 billion in real GDP, by eliminating internal trade barriers among the country’s 13 provinces and territories. The report, co-authored by IMF researchers Federico J. Diez and Yuanchen Yang in collaboration with University of Calgary economist Trevor Tombe, estimates that barriers related to regulations are akin to a national tariff of around nine percent on average.
In specific service-oriented sectors such as healthcare and education, the barriers are even higher, exceeding 40 percent due to strict regulations hindering professional mobility between provinces. The impact of these barriers is disproportionately felt by smaller provinces and northern territories, resulting in increased costs compared to larger provinces with more diversified economies.
According to the report, the removal of trade barriers would particularly benefit the Atlantic provinces, with Prince Edward Island projected to see significant economic gains. The report highlights that some industries have long advocated for the removal of internal trade barriers, with the movement gaining momentum following trade disputes with the United States.
While progress has been made, with provinces like Ontario and Manitoba signing bilateral agreements, the issue gained national attention in November when the federal government, provinces, and territories agreed to eliminate trade barriers on most goods, excluding alcohol and food. However, the report emphasizes that services, which account for the majority of internal trade costs and are crucial for GDP growth, were not adequately addressed in the agreement.
Key sectors such as finance, telecom, transportation, and professional services are identified as significant contributors to the economy but are burdened by internal barriers that increase costs for businesses. The authors of the report stress the importance of removing these barriers to enhance productivity, resilience, and inclusive growth within the Canadian economy.
