Canada stands to benefit significantly from the removal of internal trade barriers between its provinces and territories, according to a recent report by the International Monetary Fund (IMF). The report suggests that eliminating these barriers could boost the country’s real GDP by nearly seven percent, equivalent to $210 billion, over time.
The report highlights that current regulation-related barriers within Canada are akin to imposing a nine percent national tariff. This figure is even higher in service sectors like healthcare and education, where barriers can exceed 40 percent due to strict regulations on professional mobility between provinces.
Smaller provinces and territories, as well as the northern regions, are disproportionately affected by these internal trade barriers, facing higher costs compared to larger provinces with more diversified economies. The report emphasizes that removing these barriers would create a more cohesive economy, particularly benefiting regions like the Atlantic provinces, with Prince Edward Island projected to see significant GDP growth per worker.
While some industries have long advocated for the removal of these barriers, the issue gained traction following trade tensions with the United States. Several provinces have taken steps to address internal trade barriers, with bilateral agreements signed between provinces like Ontario and Manitoba. A national agreement was reached in November to eliminate trade barriers on most goods, excluding alcohol and food.
However, services, which represent a significant portion of internal trade costs and potential GDP gains, were largely excluded from the recent agreement. The report underscores the importance of addressing barriers in sectors such as finance, telecom, transportation, and professional services to unlock productivity and foster inclusive growth in Canada’s economy.
In conclusion, the IMF report emphasizes that removing internal trade barriers presents a powerful and cost-effective opportunity to enhance productivity, resilience, and overall economic growth in Canada.