Removing Interprovincial Trade Barriers Would Boost Economy by Over $6,000 per Household: Economic Experts

November 17, 2020 Updated: November 18, 2020

Recent studies said the Canadian government can boost Canada’s overall economic productivity and increase the chances of achieving a four-day workweek by removing interprovincial trade barriers.

The essays are part of a policy study series to be published over the coming months by the Fraser Institute, an independent Canadian think tank.

“Canada may be one country, but it is not one economy,” said Trevor Tombe, Associate Professor of Economics at the University of Calgary and a contributing author.

“Thousands of individually modest but collectively significant barriers to investment, trade, and migration create artificial walls between our 13 provincial and territorial economies. And this comes at great cost to our productivity and to our living standards.”

Tombe said that eliminating internal trade barriers on goods could boost Canada’s overall economic productivity by 3.8 percent, which is roughly an aggregated increase of nearly $90 billion per year. This is an increase of over $2,300 per person or over $6,000 per household.

Vincent Geloso, an assistant professor of economics at King’s University College, explained in a separate essay that trade barriers protect firms from competition, making them less dynamic and leading to reduced productivity growth.

“If governments in Canada want to help create more opportunities for entrepreneurs and more pressure on existing firms to remain competitive and responsive to their customers, they should foster more open and competitive markets,” said Geloso.

Tombe said that ways to liberalize trade include harmonizing regulatory rules between provinces or a single province moving on its own to “recognize out-of-province credentials and standards.”

Concrete progress includes the Canadian Free Trade Agreement (CFTA), which was negotiated between federal, provincial, and territorial governments and came into effect in July 2017. Tombe said the CFTA will lead to harmonizing construction codes by 2025, allowing builders and suppliers to work across the country. CFTA can bring economic gains of up to $1 billion by 2028.

“Though it is hard work, our goal should be nothing less than freedom to trade, to invest, to move, and to work. The resulting benefits for Canada’s economy are too great to ignore,” said Tombe.