IMF says Canada could add $210 billion to its economy—what’s blocking trade inside the country?

Canada’s internal trade barriers are costing the country a staggering economic opportunity. According to the International Monetary Fund (IMF), Canada could unlock an additional $210 billion in GDP if it were to successfully remove barriers that hinder trade between provinces. While international free trade agreements often dominate headlines, a less sexy but critically important issue has remained persistent for decades: interprovincial trade restrictions. These barriers, rooted in regulatory discrepancies and governmental red tape, prevent businesses and workers from operating freely across Canada’s own internal markets.

From inconsistent rules governing the transport of goods to obstacles that impede workers from moving between provinces with professional credentials intact, the complexity and fragmentation within Canada’s own borders impose a hidden tax on growth and innovation. The IMF’s projection is startling and eye-opening—it suggests that by unleashing a truly unified internal market, Canada could dramatically improve productivity, competitiveness, and economic resilience amid global uncertainty. So, what’s holding the country back from realizing this multi-billion-dollar gain?

Key insights at a glance

Why internal barriers hurt the Canadian economy

Canada is often praised for its stable economy and robust international trade network, but within its borders lies a patchwork of regulatory standards that disrupt the free movement of goods, services, and labour. These barriers include everything from varying trucking regulations and alcohol distribution laws to credential recognition for tradespeople and health professionals. As a result, efficiency is lost, duplication occurs, and business growth is curtailed.

For example, a construction company operating in British Columbia may face significant legal and bureaucratic hurdles to doing business in Alberta, Newfoundland, or Quebec. This creates a disincentive for expansion and investment while also stifling competition — a key driver of innovation. The IMF argues that this “balkanization” of commerce within Canada is significantly reducing the country’s economic output potential.

The economic payoff: A $210 billion opportunity

In a recent statement, the IMF highlighted that removing these internal trade barriers could boost Canada’s GDP by up to $210 billion—a compelling incentive for federal and provincial governments to prioritize economic integration. That number represents more than 9% of Canada’s current GDP, effectively translating into higher incomes, more employment opportunities, increased business productivity, and improved public services through elevated tax revenues.

This is low-hanging fruit. Canada doesn’t need to negotiate with foreign nations—it simply needs to align internally.
— Placeholder, Economic Policy Analyst

Now more than ever, as global supply chains stutter and inflation disrupts traditional growth channels, maximizing internal efficiencies has become imperative. Fostering a seamless trading environment across provinces could create resiliency, reduce costs, and offer Canadian businesses a competitive edge right in their own backyard.

What’s standing in the way of progress

Despite repeated political promises to break down interprovincial trade barriers, progress has been slow. One key reason is the Constitutional framework assigning significant autonomy to provinces in regulating commerce within their jurisdiction. This leads to individualized policies that conflict with broader national interests. Resistance from vested interests—such as provincial monopolies, regulatory bodies, and localized trade unions—also helps maintain the status quo.

Moreover, while the Canadian Free Trade Agreement (CFTA), introduced in 2017, was designed to remove trade barriers across provinces, it falls short of complete harmonization. Several exemptions, limitations, and opt-outs dilute its effectiveness, and enforcement mechanisms are relatively weak compared to international standards.

Canada has the world’s 10th largest economy yet acts like a collection of smaller economic islands.
— Placeholder, Business Leader

Efforts made and how they fell short

Over recent years, various federal and provincial governments have taken steps to address the issue. The federal government has openly supported harmonization efforts, while provinces have launched pilot projects to mutually recognize professional certifications and standardize rules in specific industries. However, these efforts are piecemeal and often restricted to bilateral agreements between two provinces rather than a nationwide mandate.

One notable area of friction remains in the alcohol distribution system. Canadian consumers still face restrictions when ordering wine, beer, or spirits from other provinces, a decades-long issue that persists despite public demand and political backing for change. Similarly, healthcare professionals find it challenging to move interprovincially due to inconsistencies in licensing requirements—a situation made particularly visible during the early months of the COVID-19 crisis.

Who wins and who loses from reform

What needs to happen next

The IMF recommends a federal-provincial summit on internal trade that results in a renewed commitment to eliminate all non-essential barriers. Uniform standards across industry sectors, a single certification body for professions, and centralizing dispute resolution are some of the impactful steps that could be taken.

Additionally, governments must set measurable milestones and deadlines for progress, moving beyond political lip service to concrete, reportable outcomes. Enabling unrestricted interprovincial e-commerce, open job mobility, and standardized supply chain regulations could modernize Canada’s internal market—once and for all.

Canada is overdue for a reset on internal trade. The economic cost of waiting is too high.
— Placeholder, Federal Policy Advisor

The global lens: Why internal trade matters more now

With rising global uncertainties—from geopolitical tensions to inflationary pressures and technological disruption—nations must seek growth from within. Canada’s dependence on international trade makes it vulnerable to global shifts. By strengthening internal commerce, Canada not only becomes more self-reliant but can also cushion the national economy against international shocks.

Furthermore, a more unified domestic market would allow Canadian firms to scale up operations before entering international markets, making exports more competitive. It also improves Canada’s attractiveness to foreign investors who often struggle with navigating its fragmented regulatory landscape.

Short FAQs about Canada’s internal trade barriers

What are interprovincial trade barriers in Canada?

These are rules and regulations that differ from one province to another, making it harder for goods, services, and workers to move freely across provincial borders.

How do these barriers affect businesses?

They increase compliance costs, reduce market access, and create inefficiencies that make it harder for businesses to grow and trade across Canada.

What is the Canadian Free Trade Agreement?

Implemented in 2017, it’s an agreement among provinces and the federal government aimed at reducing trade barriers, but many exemptions and weak enforcement limit its effectiveness.

Who benefits from removing internal trade barriers?

Consumers, workers, and most businesses benefit through lower prices, greater mobility, and expanded markets.

What could be done to remove these barriers effectively?

Government actions like harmonizing regulations, recognizing credentials across provinces, and creating stronger enforcement mechanisms could break down these barriers.

How much economic gain is possible by removing these barriers?

According to the IMF, as much as $210 billion in additional GDP could be realized if internal trade within Canada is fully liberalized.