What are interprovincial trade barriers? And can they finally be killed?

Interprovincial trade barriers are a long-standing problem in the Canadian economy. They have been a focus of frustration and a drag on productivity — costing the country as much as four percent of real GDP per capita. In the turmoil sparked by Donald Trump’s trade war, these barriers are suddenly being looked at with some urgency. Could lifting these unnecessary barriers ease at least some of the pain inflicted by tariffs?

Last year, PPF examined the impact of interprovincial barriers, also called non-tariff barriers (NTBs), in the Atlantic region, which due to the smaller size of provinces and their reliance on internal trade, could see an outsized benefit from lifting barriers.

What exactly are interprovincial trade barriers?

From our Open Atlantic report: Interprovincial trade barriers come in a number of forms: different trade and professional licensing standards from province to province (dental hygienists, for example, must re-certify if they move to Newfoundland and Labrador); “buy local” procurement restrictions; varying product standards and business fees; even, famously, a ban on direct-to-consumer shipments of alcohol from other provinces. Live in P.E.I. and want to order a case of Chardonnay from the delightful little vineyard you visited in the Annapolis Valley? Too bad.

Why do they exist in the first place? 

They exist largely as an archaic attempt by provinces to protect jobs, yet they’re a significant drag on economic growth and productivity. They hinder the free movement of labour, exacerbating worker shortages and preventing companies from expanding and achieving economies of scale. They discourage investment, stifle competition and, as a result, innovation. All of which means a less vibrant economy, higher costs for business and higher prices for consumers.

It shows up in the numbers. Economists put the cost to the Canadian economy of NTBs at roughly four percent of real GDP per capita; the International Monetary Fund estimates that eliminating internal trade barriers on goods alone would boost Canada’s productivity by 3.8 percent. For consumers, interprovincial trade barriers add between 7.8 and 14.5 percent to the price of goods and services they buy. (Statistics Canada put it at seven percent for goods alone.)

What’s happening now to get rid of these trade barriers?

The Canadian Federation of Independent Businesses releases an annual report card on the The State of Internal Trade. In its latest 2024 edition, Manitoba was the only province to get an overall A grade in efforts to reduce trade barriers, followed by Alberta (B+). Quebec was in last place with a D.

But there has been considerable movement in recent weeks. Transport and Internal Trade Minister Anita Anand met with provincial trade ministers in late February in an effort to get provinces to recognize each other’s labour certifications and regulations. Ottawa also announced that it had eliminated 20 of 39 federal exemptions in the Canada Free Trade Agreement, which was signed in 2017 to try and make federal and provincial rules more uniform.

Randall Zalazar, director of government relations at the Canadian Chamber of Commerce, welcomed the move at the time, and urged the provinces to get busy on the matter of “mutual recognition,” recognizing the product and labour standards of others so that goods and workers can move freely across the country.

In March, Anand announced that after a first ministers’ meeting “unprecedented progress” had been made on reducing internal trade barriers.

And according to a statement from the Prime Minister’s Office: “All first ministers agreed that now is the time to take meaningful action to further liberalize and support the Canadian market so that goods, services, and workers can move freely.”

Nova Scotia leads the charge

In February, Nova Scotia Premier Tim Houston announced a Free Trade and Mobility Within Canada Act that will drop internal trade barriers with provinces who pass legislation to do the same. As we reported at the time in our Canada-U.S. newsletter: All goods from such provinces could be sold in Nova Scotia without “any further testing or red tape or foolishness,” he said, and all workers, from plumbers and roofers to health-care professionals and teachers, will be able to ply their trade in the province without need for any further accreditation.

“Folks, it’s a two-way street, and my message to other provinces and territories is, ‘Do your part, and we will do ours,’” Houston said. “It’s time to protect Canadian companies by opening access to all 40 million Canadian consumers.”

New Brunswick Premier Susan Holt said her government is considering “legislative changes required to move on some of these mutual recognition pieces.” And Premier Doug Ford said during the recent Ontario election that he would support a labour mobility deal and drop exemptions under the CFTA.

“I can assure people who have been frustrated by this, who have been wondering if the day would ever come, that they are going to be blown away by the level of co-operation and work that is under way right now to address this long-standing issue,” British Columbia Premier David Eby told reporters.

Why has it been so hard to get rid of internal trade barriers? 

On an episode of PPF’s WONK podcast, Newfoundland and Labrador Premier Andrew Furey explained part of the challenge.

“It is not as simple as just saying, ‘let’s get rid of every inter-provincial trade barrier.’ That’s a good political platitude, it’s a good campaign slogan even, but it begs the question, ‘what’s the next sentence and what’s the next sentence after that?’ And when you start to look at it, there are some complexities that exist for a reason, sometimes protectionist and sometimes not.” 

“For example, with respect to credentialing: Dental hygienists here in Newfoundland and Labrador cannot administer anesthesia. They’re not trained to, they’re not licensed to, but they can in Saskatchewan and Alberta. Now surely the people in Saskatchewan and Alberta are not going to want a hygienist who’s not trained to come up and provide anesthesia in that environment.” 

Just identifying all of the interprovincial trade barriers is no simple task. As PPF Fellow Sean Speer writes on X, “no province has a policy called ‘interprovincial trade barrier.’ In fact, there aren’t even many instances where provincial policy is explicitly and intentionally protectionist.”

They are, he notes, “set out under different regulations and statues and often written in different language.”

Speer’s novel idea: “We could enable the elimination of a significant share of interprovincial trade barriers by using AI technology to go systematically through provincial regulations and policies and create an apples-to-apples comparison across the provinces. Provincial governments could then clearly see where these policy divergences exist, determine which ones are matters of principles and which aren’t, and then settle on how best to converge them.”