Removing domestic trade barriers could boost productivity, add $200 billion to economy annually: CFIB

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The removal of interprovincial trade barriers could improve productivity and add as much as $200 billion to Canada’s economy each year, or $5,100 per person, according to a new report by the Canadian Federation of Independent Business (CFIB).

“A lot of our members have even told us it’s easier for them to trade and do business in the States than it is to do business in another part of Canada,” said Keyli Loeppky, director for Alberta and interprovincial affairs at CFIB and one of the authors of the report, The State of Internal Trade: Canada’s Interprovincial Cooperation Report Card. “That really speaks to just how significant these barriers can be in hampering business growth and expansion.”

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Among small businesses surveyed, 88 per cent want to see governments move faster on removing internal trade barriers in the country. The report said the removal of these barriers could provide businesses and consumers with more choice when it comes to consumer goods, help address labour shortages and foster innovation and investment.

Nearly half of those surveyed said they experience productivity declines from being forced to navigate multiple sets of regulations from different provinces, which also adds to the cost of doing business.

Internal trade in Canada represents around 18 per cent of Canada’s gross domestic product (GDP), according to a 2022 report by the Macdonald-Laurier Institute, which also highlighted that the country’s GDP is between 3.3 per cent and 6.8 per cent smaller because of internal trade costs.

In 2017, the provinces came together to sign the Canadian Free Trade Agreement (CFTA) to create a way to solve these trade regulation differences. However, the provinces have been slow to implement the 30 reconciliation items they committed to in the trade agreement. Only 18 have been implemented in the past seven years.

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“That’s not great in my book,” Loeppky said. “Businesses are certainly not feeling it on the ground when it comes to the barriers they’re facing.”

Domestic trade barriers that cause the most challenges to small businesses include restrictions when selling alcohol and food (meat and cheeses), registering with multiple workers’ compensation boards, the recognition of certifications in different jurisdictions, complying with different occupational health and safety standards, and the cost and wait times associated with applying for different provincial licences across the board.

The report graded Manitoba as the best in its efforts to reduce trade barriers, with Alberta following close behind. Quebec was ranked as the worst for its efforts to reduce trade barriers.

Loeppky said that removing these barriers is a low-cost way to spur business investment. One solution is the concept of mutual recognition, which means every province allows any good, service or credential to automatically be considered compliant.

“There are a lot more benefits to removing these barriers than there are harms,” she said. “I think at a time when Canada’s economy is not doing great, and productivity is a big word on everyone’s mind, governments would do well to look into this.”

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