Tearing Down Internal Trade Barriers in Canada: It’s Harder than You Think

In the lead up to, and at the outset of the 2025 federal election, much has been said about removing and reducing interprovincial trade barriers in response to the threat of U.S. tariffs. Both Mark Carney of the Liberal Party of Canada, and Pierre Poilievre of the Conservative Party of Canada made commitments to swiftly reduce as many internal trade barriers as possible.  

In 2022, economist Trevor Tombe estimated that eliminating all interprovincial trade barriers would boost Canada’s economy by as much as 7.9 per cent and generate an economic boost of $200 billion per year, or $5,100 per person. 

This latest push to eliminate internal trade barriers began after Premier Tim Houston of Nova Scotia introduced a Bill in late February 2025, which sought to “eviscerate” interprovincial trade barriers with provinces that agreed to do the same. Since then, the Council of the Federation has agreed to reducing internal trade barriers, with other provinces introducing similar legislation to that of Nova Scotia already.  

As politicians and bureaucrats consider ways to facilitate interprovincial trade, the promises of dropping barriers may be easier said than done. Here are four important hurdles that cannot be overlooked: 

1. Political and Constitutional Realities

At its core, Canada was not built as a unitary country but as a federation of provinces and territories with specific areas of responsibilities and sovereign parliaments. Attachment to this principle varies across the country, with Quebec and Alberta remaining strong defenders of provincial jurisdictions. This is unlikely to change in the foreseeable future. These two provinces (and others) will actively resist encroachments on their areas of jurisdiction such as energy or natural resources, even in the name of interprovincial trade.  

2. Geography

It is no secret that our nation is rather large and spread out. The CN Tower in Toronto is closer by land to the Empire State Building in New York (760 km) than to the provincial legislatures in Quebec City (799 km) and Winnipeg (1,975 km). 

Free trade with the United States and the geographical proximity to Uncle Sam means that Canadian goods and services can often reach the U.S. market far faster and more ably than they can get to other Canadian jurisdictions. While provinces and territories may reduce their limitations to trade with the rest of their Confederation partners, it may only make economic sense for certain goods and services to travel so far, and under certain circumstances.  

A few examples may be beneficial to illustrate the point.  

• Many Canadians are aware of Atlantic Canada’s prowess in providing high quality seafood to the country and the world. In 2021, New Brunswick’s fishery exported $2.2 billion worth of seafood around the world. $1.9 billion of that was to the United States and $51 million to China. No amount of internal trade barrier reduction will mitigate the impact of these two nations’ trade actions. Families in Saskatoon are not about to make New Brunswick lobster, sardines, eel, or cockles a staple at the family dinner table.  

• Forest products in Canada make up $17.1 billion in net trade annually. While the reduction of internal trade barriers in the country is helpful overall, it cannot make up for the reduction in exports to the U.S. market. Softwood from British Columbia or Quebec is not going to be able to rely on an increased demand from the market in Newfoundland and Labrador – thousands of kilometers away.  

• The removal of interprovincial trade barriers will enable further alcohol sales for smaller Canadian producers. Though, it is not reasonable to expect that local distilleries in the Prairies are about to explode in popularity in the clubs of Vancouver or the pubs of George Street.  

3. Workforce Migration Issues

While the yearning to reduce internal trade barriers has grown, with the Premier of New Brunswick, Susan Holt suggesting a ‘free trade zone’ amongst Atlantic provinces, it comes with rising concerns on how the elimination of trade barriers could impact local workforces.  

For example, unions warn in Newfoundland and Labrador that interprovincial beer sales could cripple local breweries. Premier Furey also expressed concerns that lowered trade barriers could eliminate fish processing jobs in the province that have long been protected.  

One would be remiss not to warn of the impacts of credential recognition for regulated workers across jurisdictions that may disproportionately impact smaller provinces and territories. With every jurisdiction struggling to grow their healthcare workforce and in need of skilled labour, heightened mobility for those workers may lead to further interprovincial migration of in-demand, high-skilled workers.  

4. Language Laws and the Rest of Canada

While national unity is on the rise in the face of Trump and international trade actions, the risk of a national unity crisis remains omnipresent. In Quebec’s case, French language laws and restrictions may be perceived as overly prohibitive for businesses from English Canada to expand into and access the market. However, language considerations also exist when trading with European or Asian countries where Canadian exporters are nevertheless very successful.  

Quebec led the country in 2023 with 35 exceptions to the Canada Free Trade Agreement (CFTA).  

Language related exceptions are very likely to remain with little or no modifications, as the political penalty for moving in that direction would be extremely high for the government of Quebec, irrespective of the governing party. Other types of modifications (on regional development or alcohol for instance) are far more likely to succeed through negotiations with Quebec.  

The dimensions highlighted in this piece remind us that, while the pursuit of interprovincial trade is a necessary effort, governments must proceed with caution.