A recent report by the International Monetary Fund (IMF) suggests that Canada’s economy stands to benefit significantly by eliminating internal trade barriers among its 13 provinces and territories. The report estimates that removing these barriers could potentially boost the country’s real GDP by nearly seven percent, equivalent to $210 billion over time.
According to the report, internal trade barriers, primarily related to regulations, have a substantial impact, akin to a national tariff of around nine percent on average. In sectors like healthcare and education, where professional mobility between provinces is heavily regulated, the estimated tariff can exceed 40 percent, significantly impeding economic growth.
The report highlights that smaller provinces and northern territories bear a disproportionate burden from these trade barriers, facing higher costs compared to larger provinces with more diversified economies. The removal of these barriers could lead to a more cohesive economy, particularly benefiting regions like the Atlantic provinces, with Prince Edward Island potentially saving nearly 40 percentage points in real GDP per worker.
Alicia Planincic, director of policy and economics at the Business Council of Alberta, emphasized the fragmented nature of Canada’s economy due to existing trade barriers between provinces. She noted that smaller provinces heavily rely on interprovincial trade, making the removal of internal barriers crucial for fostering economic growth, especially in regions like Ontario and Alberta.
While progress has been made with bilateral agreements between some provinces and territories, the report underscores the pressing need to address internal trade barriers comprehensively, particularly in service sectors that account for a significant portion of GDP gains. Planincic highlighted the complexity involved in aligning rules and regulations across provinces, emphasizing the importance of political will and concerted efforts to streamline interprovincial trade policies for sustained economic benefits.