REMOVING TRADE BARRIERS WITHIN CANADA: A PATH TO ECONOMIC PROSPERITY

Interprovincial trade serves as a lifeline to Canada's economy, yielding one-fifth of the country's GDP. Despite the enactment of the Canadian Free Trade Agreement (CFTA) in 2017 aimed at streamlining this economic engine, formidable barriers still deter a complete integration of internal commerce.


An alarming 65.2% of Canadian businesses remain disengaged in such trade activities. As a result, goods crossing Provincial borders are subjected to an unwarranted equivalent of a 6.9% tariff. Consequently, consumers bear the brunt through escalated prices, which add between 7.8% to 14.5% for goods and services purchased.


The 2024 edition of Canada’s Interprovincial Cooperation Report Card paints a somewhat evolving scenario, with a noted decrease in such trade obstacles. However, the scene mandates ample refinement. The silver lining is manifested by the concerted efforts of provinces like Alberta, British Columbia, Saskatchewan, and Manitoba, all of which are beneficiaries of the progressive New West Partnership Trade Agreement (NWPTA), an alternative to the CFTA.


Despite CFTA's existence, the efficient functioning of interprovincial trade continues to be obstructed by several hurdles. In light of this, an investment of $21 million was pledged by the Federal Government in 2021 to help eliminate these barriers. The Canadian Federation of Independent Business (CFIB) underlines the significance of reducing trade barriers and forging strategic alliances that could benefit approximately 215,000 small and medium-sized businesses in Ontario and Quebec.


The CFIB advocates for stronger cooperation between provinces, streamlined regulations, and the adoption of mutual recognition policies for goods and services. They also call for the removal of lingering CFTA exemptions, easier recognition of professional qualifications across provinces, and the loosening of restrictions on interprovincial alcohol trade


The implementation of a 25% tariff by the Trump administration on March 4, 2025, has significantly escalated trade tensions between the United States and Canada. This move potentially risks a substantial portion of Canada's workforce, with an estimated 2.04 million direct and indirect jobs across Canadian provinces tied to U.S. trade.


The impact of these tariffs is particularly pronounced in the manufacturing sector, which accounts for 8.9% of total employment in Canada. Approximately 641,000 jobs in this sector, or 39.4%, are dependent on U.S. demand for Canadian exports. The energy and automotive industries are especially vulnerable, as they represent over 40% of Canada's total exports to the U.S.


In response to these measures, Canada has announced retaliatory tariffs on $30 billion worth of U.S. goods, effective from March 4, 2025. This tit-for-tat approach underscores the potential for significant economic disruption on both sides of the border. An additional $125 billion worth of tariffs on U.S. products will be implemented in 21 days, which would be March 25, 2025


However, by focusing on eliminating internal Provincial trade barriers within Canada, the country could potentially boost its GDP by 3.8% to 7%. This economic growth could particularly benefit provinces such as Ontario, Quebec, and Alberta. Furthermore, such measures could lead to a reduction in consumer prices ranging from 8% to 15%, providing some relief to Canadian consumers amidst the trade tensions.


In conclusion, the complete elimination of interprovincial trade barriers could unlock enormous economic benefits for Canada, stimulating GDP growth, enhancing per capita income, and reducing consumer prices. 

Hence, fostering interprovincial collaboration, harmonizing policies, and knocking down barriers are critical to tapping into this latent potential.

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