JAY GOLDBERG: Time to open up domestic economy is now

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It’s time for Canadians to open up our economy — to ourselves.

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A year into the ongoing trade conflict with the U.S., Canada’s politicians continue to talk a good game about tearing down the nation’s internal trade barriers.

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After pronouncing he would eliminate all Canadian internal trade barriers by July 1, 2025, Prime Minister Mark Carney has since walked that back, claiming only that the federal government would eliminate federal barriers to Canadian internal trade.

But because the vast majority of Canada’s internal trade barriers are provincial, federal action without concrete steps from the provinces is woefully insufficient to achieving true internal free trade within Canada.

Talk is cheap

Carney talks a good game about Canada becoming its own best customer, but that can only happen if provincial governments act to tear down internal trade barriers.

To their credit, some premiers, led by Ontario Premier Doug Ford, having signed deals with other provinces to tear down some barriers in some sectors. But without a comprehensive deal, Canada will continue to fall short of its economic potential.

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That truth was laid bare in a recent report by the International Monetary Fund.

According to the IMF, non-geographic, policy-related barriers within Canada are creating the equivalent of a 9% tariff nationally.

And that’s just on average.

The IMF looks at some sector-specific data as well, and notes that barriers in some sectors, such as educational and health services, represent the equivalent of a 40% tariff.

As the authors note, “such a level would be prohibitive in most international free trade agreements.”

And yet, it’s the norm in Canada.

The costs are greatest for Canada’s smaller provinces, as these provinces have smaller internal markets and would benefit most from having access to other provincial markets without such high barriers to access.

Just how much would the economy benefit from eliminating non-geographic internal trade barriers? According to the IMF, Canada’s real GDP would increase by a whopping 7% over the long run — roughly $210 billion in today’s terms.

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This increase would be driven by higher productivity: “more efficient allocation of capital and labour, stronger competition, and better scale for high-performing firms.”

The IMF calls it “a gift that would keep giving.”

Smaller provinces would benefit the most. P.E.I., for example, would see a real GDP per worker increase of almost 40%. Manitoba ranks somewhere in the middle, with potential GDP per worker gains of about 12%. Ontario, with Canada’s largest internal market, would still benefit with gains of about 4%. Roughly 80% of the total GDP gains would come through liberalizing the service sector, according to the IMF.

Sectors that deserve prioritization include finance, transport, and telecommunications.

Canada sacrificing growth

Canada can no longer afford to sacrifice economic growth for the sake of preserving provincial fiefdoms. Every provincial politician seems to pay lip service to tearing down internal trade barriers, but few have chosen to act in a meaningful way.

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The IMF study is clear. Canada’s “internal trade barriers remain large, economically costly, and increasingly out of step with the needs of a modern, vibrant, service-intensive economy. Removing them offers one of the most powerful — and least fiscally costly — levers to raise productivity, strengthen resilience, and support inclusive growth.”

It’s time for Carney to convene a meeting of the premiers to discuss a real plan of action on tearing down internal trade barriers. The federal government sends tens of billions of dollars to the provinces in a whole host of policy areas each and every year. Why not make some of that funding conditional on action on internal trade barriers, to ensure premiers don’t just talk, but actually deliver?

Diversifying international trade, which appears to be a recent focus of Carney’s, is important. But building up the economy here at home through knocking down internal trade barriers is essential.

The time for real action is now.

Jay Goldberg is the Canadian Affairs Manager at the Consumer Choice Center

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