Trade has dominated the conversation in Canada since Donald Trump won the U.S. election and threatened to slap a 25 per cent tariff on all imported goods.
Now with his inauguration just days away, it’s a good time to reflect on the trade barriers within our own country, said Stéfane Marion, chief economist of National Bank of Canada.
Marion in his note cites a 2019 study by the International Monetary Fund — “regarded as the most comprehensive analysis of internal trade barriers” — that found in many cases foreign companies are getting better access to Canada’s market than Canadian companies themselves.
This country has entered into trade agreements with more than 40 nations since its first free trade agreement in 1989 with the United States, said the IMF. But “compared to an ambitious and successful international trade strategy, progress in reducing internal trade barriers across Canada has not kept pace.”
These barriers are the result of what provinces control and the varying regulations they set to control them — whether it’s quotas, trucking requirements, business registrations or professional licensing.
All told, non-geographic internal trade barriers in Canada add up to a tariff equivalent of 21 per cent, the IMF estimates.
As Marion’s chart below shows that is a much stiffer hit than the 3 per cent that these same barriers impose on the United States.
The IMF says the benefits of removing these internal trade barriers would be huge. It estimates that if trade in goods was fully liberalized, real gross domestic product per capita would increase by 4 per cent nationally, with internal trade volumes rising to the level of Canada’s international trade.
Labour mobility would increase, boosting employment in the Atlantic
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