For decades, Canada has been stuck in a cycle of big talk and small steps when it comes to interprovincial trade. Now, as we worry about our ability to trade north to south, the irony is that Canada does not have free trade from east to west in goods, services and labour.
Reducing interprovincial trade barriers isn’t a new idea. We’ve talked the talk and slowly walked the walk. But now, it’s time to run.
U.S. President Donald Trump has threatened to hit Canada with 25-per-cent tariffs, risking a mutually beneficial trade relationship that has been built over decades of cooperation—which has been a key pillar of our shared prosperity. So, what can we do mitigate the negative consequences of this potential trade disruption? One thing that is in our control is to create the conditions for a stronger, more competitive economy. But we can’t do that when businesses continue to face arcane regulatory barriers between provinces that make it easier to trade with Tokyo than with Toronto.
Consider this: It’s illegal in most provinces to order beer, wine and spirits from another province. Until recently, first-aid kits had to comply with province-specific rules, despite serving the same purpose nationwide. Truckers carrying oversized loads face a bureaucratic maze of inconsistent permitting rules. For example, companies must apply for separate permits in each province, each with different weight allowances, escort vehicle requirements and restrictions.
These aren’t minor irritants. They’re economic roadblocks that cost businesses billions in lost productivity and investment. A 2020 Fraser Institute study estimated that interprovincial trade barriers cost the Canadian economy more than $32 billion annually, or approximately 1.4 per cent of GDP. They also increase costs for consumers, with research showing they add between 7.8 per cent and 14.5 per cent to the price of goods and services.
Testifying to the impact of these barriers, there has been little growth in interprovincial trade over time. In B.C., interprovincial trade has flatlined or declined over the last decade. In 2013, imports from other provinces accounted for 19.6 per cent of B.C.’s economy, while exports to other provinces made up 15.3 per cent. A decade later, interprovincial imports remain nearly unchanged at 19.5 per cent and interprovincial exports have fallen to 13.7 per cent.
In the context of Trump’s threats to our north-south trading links, the provinces should act decisively and tear down the walls of interprovincial barriers by mutually recognizing each province’s regulatory standards.
It’s as simple as this: If a product, service or professional certification meets the standards of one province, it should be accepted in all others. Alberta’s safety regulations are good enough for Alberta, why shouldn’t they be good enough for B.C.? To ensure flexibility, the province could maintain a “negative list” of specific standards or regulations that, for valid reasons, would not be aligned with those of other provinces.
Not only would mutual recognition eliminate the economic drag of interprovincial trade barriers, but it would help set Canada on a path of long-term prosperity. A Macdonald Laurier Institute study suggested that adopting mutual recognition policies to eliminate internal trade barriers could boost Canada’s GDP by between 4.4 per cent to 7.9 per cent in the long term, equivalent to an additional $110 billion to 200 billion annually, or $2,900 to $5,100 per person.
Reducing interprovincial trade barriers is a high-impact policy tool with little-to-no fiscal cost. While it’s not a silver bullet, it’s one of the most immediate and practical steps we can take to improve our economic foundation and reverse years of stagnant labour productivity and dwindling investment in Canada.
Consider a manufacturing company that produces industrial equipment and supplies clients across multiple provinces. Right now, they face different trucking weight limits, varying safety certification requirements and inconsistent provincial procurement rules. By streamlining these regulations, the company could expand across Canada, lowering its unit costs by spreading fixed costs across greater scale, freeing up money to invest in capital and to pay higher wages, while offering lower prices to customers. It’s a win-win.
Nova Scotia is already leading the way on mutual recognition, announcing plans to introduce legislation to lift internal trade barriers for any province that passes similar laws. If enacted, this would be the most significant step toward mutual recognition Canada has seen in decades. If B.C. wants to be recognized as the leader on this file—rather than playing catch-up—it must act quickly and decisively.
When it comes to trade, now more than ever, we need to be one country rather than 10 provinces and three territories. We have a choice: Continue to crawl or finally sprint forward. Let’s run.
Jairo Yunis is director of policy at the Business Council of British Columbia.
