In the words of former Bank of Canada governor Stephen Poloz, Canada’s failure to remove interprovincial trade barriers is like “free money lying on the sidewalk but nobody will bend over and pick it up.”
U.S. tariffs, the Bank of Canadaestimates—if they do come in their threatened 25 percent form on all Canadian products—would wipe out 3.4 percent to 4.2 percent from Canada’s GDP. Removing interprovincial trade barriers, meanwhile, could increase GDP by 3.8 percent, according to a Deloitte Canada analysis using International Monetary Fund findings.
But despite comments from some concerned officials and scholars who have been sounding the alarm on the issue for decades—and even with some attempts at national- or regional-level action—the barriers have remained more or less intact.
Former Alberta Premier Jason Kenney attributed the inaction to “special interest” groups and a lack of political focus.
“Behind every barrier to trade, competitive procurement, or labour mobility, there is some interest group seeking protection,” he wrote in an op-ed in the Financial Post in 2022. “There are no strong political incentives to trump that resistance, and internal trade will never be a retail political issue.”
But are things different now, with the threat of external tariffs looming, and talk of Canada’s internal trade barriers becoming mainstream among media and politicians?
“It’s about time we had genuine free trade within Canada,” Prime Minister Justin Trudeau said at the Canada-U.S. Economic Summit in Toronto on Feb. 7. “Admittedly, it is a tall order to eliminate regulatory barriers in goods and services but it can be done,” Anita Anand, the federal minister whose portfolio includes the issue, wrote in a Jan. 31 op-ed in the Toronto Star. Trudeau will be replaced by a new leader on March 9, and Anand has said she will not be running for re-election.
Barriers
One of the more commonly known barriers to internal trade in Canada is the movement of alcohol between provinces. But there are many more restrictions that limit the movements of goods, services, and labour, including various rules and regulations on trades and certifications, and even opposition to natural resource projects that cross provincial boundaries.
A customer shops at a liquor store in Fredericton, N.B., in a file photo. The Canadian Press/Stephen MacGillivray
A Fraser Institute analysis says interprovincial trade barriers add between 7.8 percent and 14.5 percent to the price of goods and services in Canada.
Most provinces have their own liquor retailers, with different rules around procurement, storage, sales, and labels of alcoholic beverages.
This system was originally set up to prevent smaller liquor retailers from being trampled by larger producers from other provinces. Although the provinces made a deal in 2018 allowing Canadians to transport more alcohol across provincial borders, major barriers still remain.
According to Stephen Williamson, professor of economics at Western University, the provinces also have barriers when it comes to safety standards and product regulations, with all of them requiring different certifications.
“There are regulatory issues with trucking, various standards … dealing with safety regulations,” Stephenson cited as examples in an interview with The Epoch Times.
Trevor Tombe, a professor of economics at the University of Calgary, noted in a 2020 report that the various trucking regulations increase the costs of shipping goods across Canada, and that the different provincial standards and certifications inhibit accessibility for trades and professions. As well, different labelling laws, including Quebec’s French-language laws, make selling between provinces more difficult.
“In Manitoba, to highlight a particularly stark example, one cannot offer legal services without maintaining a physical office in the province,” Tombe said.
“Denturists are not free to move into Quebec without recertifying, for example, nor are podiatrists into Alberta, dental hygienists into Newfoundland and Labrador, social workers to Ontario, and so on. Fewer people will therefore relocate, even if expected wages are higher.”
Michelle Auger, senior policy analyst for the Canadian Federation of Independent Business (CFIB), cited the example of a B.C. farmer who is unable to sell chickens in Alberta because of regulatory differences.
“It’s not that they’re any less safe in one jurisdiction or another, they’re just different parameters, which causes extra paperwork for business owners,” Auger said in an interview. “Just visually recognizing each others’ rules has been our big message to all the provincial governments, so they don’t have to try to come to one rule that’s the same.”
Jean-Philippe Fournier, an economist and former policy adviser to Quebec’s minister of finance, said in a Feb. 2 social media post that the majority of interprovincial trade barriers are regulatory in nature, consisting of “10 provinces introducing rules and regulations for all sorts of things and slowly diverging.”
An example of this “regulatory creep,” Fournier said, was when Quebec only allowed synthetic stuffing to be added to padding for car seats, meaning it could not use car seats produced in Ontario. Although the Quebec government removed this regulation, he said many business groups were upset by the change.
“When we looked at other regulatory dragons to slay, it turned out that we weren’t ready to pay the political price. We ended up not doing anything else because we were afraid of the pushback,” he said.
Given that 97 percent of all Canadian crude oil exports goes to the United States and that U.S. President Donald Trump has threatened 10 percent tariffs on energy products, there has been renewed attention toward not hindering the movement of oil and gas from the Western provinces.
However, energy products are tricky to export without pipeline infrastructure, and the provinces can also act as barriers to trade when they block these projects, as in the case of Quebec’s opposition to the Energy East pipeline. The project, which would have allowed Alberta oil and gas to flow to the East Coast, was cancelled in 2017 due to regulatory hurdles and opposition by Quebec and the federal government.
Removing the Barriers
According to Fournier, reducing the interprovincial trade barriers would require a “total war effort” from the federal and provincial governments against hundreds of economic lobbies and special interest groups. He noted that this would also include the provinces reducing their autonomy in some cases, which they have historically not been open to doing.
Realistically, not all barriers could be removed in their entirety given Canada’s system of federalism. But still, the trade barriers are particularly excessive, Tombe notes in his report.
The prime minister, premiers, and senior federal government figures attend a press conference concluding a first ministers meeting, in Ottawa on Jan. 15, 2025. The Canadian Press/Sean Kilpatrick
Attempts at removing the trade barriers at a national level were most recently made in 2017 with the creation of the Canadian Free Trade Agreement (CFTA). The pact, signed by the federal government and the provinces and territories, expanded the scope of coverage to more areas of the economy compared to previous such agreements, and as well extended coverage to the energy sector. However, provinces have introduced a multitude of exceptions to the agreement, thereby maintaining the barriers.
“While [CFTA] provides some progressive relief measures on specific areas such as procurement, much of the 300-page document is dedicated to exemptions, creating opt-out measures on many key files that continue to pose significant issues at the sub-national level,” says the Canadian Chamber of Commerce.
“Moreover, there exist many persistent regulatory concerns that fall outside of the CFTA’s intended purview.”
At a regional level, some provinces have also made attempts at reducing the barriers. In 2009, British Columbia, Alberta, and Saskatchewan formed the New West Partnership, which eliminates some barriers, such as registration redundancies. Manitoba joined the pact in 2017.
But Brian Crowley, managing director of the Macdonald-Laurier Institute (MLI), argues that such pacts won’t be able to solve the problem at a fundamental level. What is needed, he says, is for the federal government to step in and create a “charter of economic rights” that would force the provinces into action with the use of the courts.
“Canada’s Founders gave the federal government both the responsibility and the power to ensure an open domestic market in Canada,” Crowley co-wrote in a report for the MLI in 2010, reflecting on the failure of the predecessor to the CFTA, the Agreement on Internal Trade, signed in 1994.
But how fiercely that may be opposed by the provinces is a different issue, given increased grievances from provinces such as Alberta on several federal policies, as well as Quebec’s historic dispute with English Canada.
Fraser Institute economic analysts Jake Fuss and Grady Munro urge the federal government to implement a “mutual recognition” policy that would see the provinces recognize each others’ certifications. But they say the premiers themselves need to also unilaterally remove the “self-imposed barriers,” pointing to the time in 2019 when a newly elected Kenney voluntarily got rid of several barriers to interprovincial trade in his province.
“So how did Alberta bust through the inertia to virtually eliminate internal trade barriers? It’s not complicated. We just did it. It’s called leadership,” Kenney said in his 2022 op-ed.
Kenney, who came to the provincial premiership from the experience of having been a federal cabinet minister, said that upon going to his first Council of the Federation meeting as premier in 2019, he already knew that it would just entail talk of removing the barriers “followed by no real action.”
“I was determined to break the mould. So, after doing a very quick disaster check with Cabinet colleagues and senior officials, I simply informed my fellow premiers that Alberta was immediately dropping virtually all our CFTA exemptions, would introduce legislation to automatically recognize other provinces’ professional credentials and would explore unilateral recognition of other provinces’ regulations,” he wrote.
In its annual ranking of the provinces in terms of which had fewer barriers, the CFIB ranked Manitoba and Alberta as having the highest scores in 2024, followed by Saskatchewan and British Columbia. Quebec and New Brunswick were at the bottom, meaning they have the most restrictions.
Crowley and his co-authors, historian and Epoch Times contributor John Robson and Robert Knox, who managed the 1994 Agreement on Internal Trade negotiations, note that one of the driving forces for Confederation in 1867 was to remove trade barriers between the colonies given the uncertainty about access to the American and British markets.
“Consider first the explicit statements of the people who negotiated and legislated Confederation, starting with the impassioned speech in favour of Confederation in the Legislative Assembly of the United Province of Canada on Feb. 8, 1865, by George Brown,” the report says, adding Brown’s quote: “The proposal now before us is to throw down all barriers between the provinces—to make a citizen of one, citizen of the whole.”
Train cars are seen on the tracks in an aerial view at Canadian National Rail's Thornton Yard on the Fraser River, in Surrey, B.C., on Aug. 22, 2024. The Canadian Press/Darryl Dyck
Other Jurisdictions
In the United States, it is embedded in the Constitution that states should not impose any duties on inter-state imports without the consent of Congress. Over the years, as state governments evolved, state-wide regulations have increased, but when it comes to protectionist measures by states, courts have ruled to uphold the intention of the clause in the Constitution.
“[E]ven in a Constitution that gives all residual power to the states rather than the central government, American courts have generally upheld federal exercise of the trade and commerce power to remove internal barriers to the free movement of goods, services, labour and capital,” says the report by the Macdonald-Laurier Institute.
Still, given the decentralized nature of the United States, there are grievances by businesses operating nationwide regarding the numerous technical specifications from the various states, as noted in the report.
As Australia was experiencing economic decline in the latter half of the last century, the country implemented a number of reforms, including removing internal anti-competitive policies starting in the 1980s. In the 1990s, Australia implemented laws and launched institutions to remove internal barriers to the trade of goods and labour, and to facilitate an agreement for the states to recognize each others’ regulations, as explained in a paper by the School of Policy Studies at Queen’s University.
The Macdonald-Laurier report notes that the reforms helped Australia move up to 8th place in per capita income in OECD country rankings from 16th place. The authors note, however, that Australia differs from Canada in that it had fewer barriers to begin with and doesn’t have a politically distinct region, such as Quebec, that is more dramatically out of step with the other states or provinces.
Under Switzerland’s federal system, the cantons (regions) have held considerable autonomy. However, facing a more unified Europe under the European Union system, Switzerland adopted the EU’s technical standards even though it is not part of the EU. This in turn helped remove internal trade barriers in the country as well, says a study published by the University of Calgary’s School of Public Policy.
Switzerland’s example may not be very relatable to Canada, given the different geographies and with aversion to loss of autonomy in conforming with foreign regulations if there isn’t a compelling market reason. However, Switzerland also has a Competition Commission that is similar to Canada’s Competition Bureau, but with more teeth. This allows it to intervene in legal proceedings on internal trade disputes, says the University of Calgary paper.
Omid Ghoreishi is with the Canadian edition of The Epoch Times.
