Tearing Down the Walls in Canada’s Push to Eliminate Inter-provincial Trade Barriers
Canada’s inter-provincial trade barriers have long been a thorn in the side of the nation’s economic potential, costing the country an estimated $200 billion annually and reducing GDP by approximately 4%. Canadian governments at all levels have accelerated efforts to dismantle these internal barriers, recognizing that strengthening domestic trade is crucial for economic resilience.
The urgency of this initiative has been underscored by Prime Minister Mark Carney’s ambitious Canada Day deadline to eliminate federal barriers to interprovincial trade, while provinces have simultaneously launched their own bilateral agreements and legislation to create a more unified Canadian market, more work is yet to be done.
The One Canadian Economy Act
On June 6, 2025, the federal government introduced Bill C-5, known as the “One Canadian Economy Act,” which represents the most comprehensive federal effort to date to address interprovincial trade barriers. The legislation is divided into two key components:
The *Free Trade and Labor Mobility in Canada Act* aims to align federal and provincial standards for goods and services, ensuring that products meeting provincial requirements automatically satisfy comparable federal requirements for interprovincial movement. Additionally, federal regulatory bodies would be required to recognize provincial and territorial labor certifications and issue equivalent federal approvals to qualified applicants.
The *Building Canada Act* focuses on streamlining the approval process for major infrastructure projects deemed to be in the national interest, shifting federal reviews from “whether” to build projects to “how” to best advance them.
Canadian Free Trade Agreement Reform
The federal government has made significant progress in reducing its own exceptions to the Canadian Free Trade Agreement (CFTA). In February 2025, the government announced the removal of 20 additional federal exceptions, reducing the total from 39 to 19 . This followed the removal or narrowing of 17 exceptions in July 2024, meaning the federal government has eliminated 64% of its CFTA exceptions since the agreement launched in 2017.
The majority of these removed exceptions relate to government procurement, providing Canadian businesses with greater opportunities to compete across the country. The federal government has committed to removing further exceptions by July 2025.
Leading Provincial Initiatives
Nova Scotia, has emerged as a leader in interprovincial trade liberalization with its Free Trade and Mobility within Canada Act, introduced in February 2025 . The legislation focuses on three key areas: ending CFTA exemptions, allowing automatic recognition of goods and services from other provinces, and removing labor mobility barriers by requiring regulators to process equivalent licenses within 10 business days.
Ontario, has been particularly active in forging bilateral agreements, having signed memorandums of understanding (MOUs) with multiple provinces. The province introduced the “Protect Ontario Through Free Trade Within Canada Act” and became the first province to remove all its party-specific exceptions under the CFTA without exception.
Quebec, tabled Bill 112 in May 2025, which aims to remove restrictions on the use and sale of products from other provinces, though it maintains government authority to exclude certain goods and publish exceptions online.
Bilateral Trade Agreements
The momentum for interprovincial trade liberalization has resulted in numerous bilateral agreements:
– Ontario-Manitoba MOU (May 2025): Valued at $19.5 billion in annual trade, this agreement focuses on boosting the flow of goods, services, investment, and workers, including direct-to-consumer alcohol sales and improved labor mobility.
– Ontario-Prairie Provinces MOUs (June 2025): Ontario signed separate agreements with Saskatchewan, Alberta, and Prince Edward Island, all aimed at mutual recognition of goods, workers, and investments.
– Nova Scotia Multi-Provincial Agreement: Nova Scotia has struck deals to reduce trade barriers with Ontario, Alberta, British Columbia, Manitoba, and Prince Edward Island, with immediate effect for Alberta and P.E.I.
Current Economic Costs
Interprovincial trade barriers impose substantial costs on the Canadian economy through various mechanisms. Provincial taxation and tariffs were ranked as the top barrier by 57% of business leaders, while transportation and logistics restrictions affected 54% of respondents. A staggering 95% of businesses reported facing delays or unexpected costs due to interprovincial transportation or warehousing regulations.
The International Monetary Fund estimated in 2019 that eliminating interprovincial trade barriers could add 4% to real GDP per capita in Canada, equivalent to $2,300 per person annually. More recent estimates suggest the benefits could reach $161 billion per year while lowering consumer prices.
Mutual Recognition Framework
The Conference Board of Canada has proposed a mutual recognition agreement as a straightforward solution to interprovincial trade barriers. This model, successfully implemented in Australia since 1992, would require all provinces to accept the certifications of other provinces, immediately eliminating the need for products or professionals to meet varying requirements across jurisdictions.
Infrastructure Challenges
Interprovincial trade barriers significantly impact infrastructure development across Canada. Provincial building codes, material certification requirements, and procurement policies often fail to align, creating costly delays and inefficiencies. For example, reinforced steel or concrete products approved in Quebec may require additional testing before acceptance in Ontario or British Columbia, despite meeting similar safety standards.
Transportation infrastructure faces particular challenges, with inconsistent regulations creating bottlenecks. Oversized trucks permitted only during nighttime hours in British Columbia face restrictions to daytime-only operations in Alberta, creating narrow windows for cross-border movement.
Energy Sector Opportunities
The energy sector represents one of the most significant opportunities for interprovincial trade enhancement. The concept of a national energy corridor has gained traction as a “nation-building” project that could unlock billions in investment and create high-value jobs. Such a corridor would fast-track pipelines, transmission lines, and railways, positioning Canada as an energy superpower.
However, current interprovincial barriers continue to fragment energy markets. For instance, federally licensed red-meat-processing facilities can trade across provinces and internationally, while businesses with provincial licenses face restrictions that “stifle productivity and efficiency”.
Projects with Implementation Potential
The Building Canada Act component of Bill C-5 specifically addresses major infrastructure projects deemed to be in the national interest. These include highways, railways, ports, airports, oil pipelines, critical minerals facilities, mines, nuclear facilities, and electricity transmission systems.
The new streamlined approval process would minimize uncertainty for project proponents by focusing on executable projects and providing clear early signals to build investor confidence. This “One Project, One Review” policy aims to improve efficiency between federal and provincial governments.
Immediate Milestones
The First Ministers’ Meeting held in Saskatoon on June 2, 2025, resulted in several key commitments:
– Completion of a comprehensive mutual recognition agreement by December 2025
– Implementation of a 30-day service standard for credential recognition across provinces
– Expansion of trucking pilot programs across Canada
– Adoption of “One Project, One Review” policies for major infrastructure
Implementation Challenges
Despite the political momentum, significant challenges remain. The Canada Day deadline set by Prime Minister Carney primarily addresses federal barriers, while the majority of interprovincial trade barriers exist at the provincial level. Expert analysis suggests that while the deadline creates urgency, sustained attention beyond July 1 will be crucial for meaningful reform.
Additionally, some provinces maintain specific exceptions that could limit the scope of liberalization. Quebec’s legislation preserves government authority to regulate the extent of barrier removal, while several provinces maintain explicit exceptions for regulated health and legal professions.
The Wrap up
Canada’s current push to eliminate interprovincial trade barriers represents an unprecedented opportunity to strengthen the domestic economy in the face of external trade uncertainties. The combination of federal legislation, provincial initiatives, and bilateral agreements has created momentum not seen in decades of previous attempts at internal trade liberalization.
The success of this initiative will depend on sustained political commitment beyond symbolic deadlines, meaningful coordination between federal and provincial governments, and the ability to balance legitimate regulatory concerns with the economic benefits of a truly integrated Canadian market. With an estimated $200 billion in annual economic gains at stake, the stakes could not be higher for Canada’s economic future.
