The Push to Drop Trade Barriers Between Provinces, Explained

As politicians deal with the threat of punishing U.S. tariffs, there’s one idea that those from both the left and the right are keen to push: improving the free flow of goods and services within Canada.

It’s an effort that B.C. Premier David Eby has focused on in multiple press conferences, touting his NDP government’s efforts to break down barriers to trade with Alberta.

“We are deepening our partnerships across Canada,” Eby said during a Jan. 16 press conference. “We’re currently working with the province of Alberta to remove internal trade barriers, first around wine, but also around electricity and energy.”

Federal Conservative Leader Pierre Poilievre has also made tearing down interprovincial trade barriers a central theme of his response to the tariff threat. His team crafted a video for social media that teased the idea: “Canada must also look to sell to other countries, and I found just the one,” he says. “It’s a peaceful democracy, with lots of resources and famously nice people.”

This is not a new idea: business groups have been advocating to reduce trade barriers between provinces for decades, an effort that has recently been paying off, according to Laura Jones, president and CEO of the Business Council of BC.

“We did make some fairly serious progress in 2017 with something called the Canadian Free Trade Agreement, and that actually fixed a lot of problems,” Jones said.

“We're not terrible at walking the walk, but now we need to run. We've never really crossed the finish line on interprovincial trade.”

So what’s left to do? And how much would this really help Canada’s economy in the face of hostility from our largest trading partner? Let’s take a closer look.

Canada is one country, so why are there trade barriers at all?

Canadian provinces don’t prevent trade through the use of tariffs. But when it comes to health and safety regulations and transportation rules, many provinces have different requirements.

“If you're working in multiple provinces, sometimes if you were following the letter of the law you'd be changing your work boots when you cross provincial lines,” Jones said. “What about the safety goggles in different provinces — we’ve got different rules for that.

“If you're a truck with a ‘wide load’ sign, there are different rules for what the sign looks like. In theory, you have to stop at the provincial border and change your ‘wide load’ sign.”

There are also frustrations with differences in regulations and requirements for professions between provinces, Jones said.

In 1995, the provinces had a first try at breaking down some of these barriers with the adoption of the Agreement on Internal Trade. But that agreement largely failed, Jones said, because it applied only to products that were specifically listed.

When the Canadian Free Trade Agreement was adopted in 2017, policymakers tried a different method, listing products that were specifically exempted from the agreement.

But that agreement didn’t include the regulatory differences between provinces. A group that regularly meets has been tackling regulations — but the process is agonizingly slow, and the Canadian Free Trade Agreement table has been dealing with the regulatory hurdles one at a time.

Last week, according to the business news site the Logic, Internal Trade Minister Anita Anand announced premiers had agreed “to move quickly on mutual recognition, which means if goods and services meet regulatory requirements in one province or territory, they would also clear the others.”

The premiers “also agreed to improve labour mobility and shorten the list of exceptions to the 2017 Canadian Free Trade Agreement,” reported the Logic.

Kevin Milligan, a professor of economics at the University of British Columbia, said there may be good reasons for regulations to be different in one province compared with another.

“The commercial trucking regulations in B.C. are very specific about when you have to put chains on your truck and what months... and that's all good, because we have mountains here,” he said.

“We want to have trade between provinces, that's good — but we also want to understand that local regulation is not always and everywhere a bad thing.”

But Jones said regulations throughout Canada should be more consistent, and there’s a process at the Canadian Free Trade Agreement table to raise concerns about whether one province’s regulations are too lax or not appropriate for all regions.

Why is there so much focus on alcohol when people talk about trade barriers in Canada?

In Canada, provincial governments control the bulk of liquor sales, and those sales are an important part of government revenue. That can lead to a lot of barriers when it comes to what consumers see in liquor stores or are allowed to order online.

For instance, earlier in January, B.C. announced it had made an agreement with Alberta to allow sales of B.C. wine directly to consumers. Alberta had previously halted the sale of B.C. wine in Alberta liquor stores from producers who were selling directly to consumers — but the new agreement included a requirement that wineries that sell directly to consumers have to pay fees, GST and recycling costs to the Alberta government.

The B.C.-Alberta agreement applies only to wine sales; Manitoba is currently the only province that allows wine, craft beer and spirits from other provinces to be shipped to consumers.

How much will this boost our economy?

Jones said economic modelling by University of Calgary economist Trevor Tombe shows that removing interprovincial trade barriers could boost the Canadian economy by 4.4 to 7.9 per cent.

“I'm not sure it's that high... but even if it wasn’t quite that much, that's a pretty big lift,” said Jones. “It’s not chump change.”

With a one-month reprieve from U.S. President Donald Trump’s tariff threat, Milligan said it’s time to get all the ideas on the table when it comes to diversifying and strengthening Canada’s economy.

“So people are shooting around ideas on interprovincial trade — that's fantastic,” he said.

“But getting rid of differential regulations on baby seats or first-aid kits is no replacement for the massive exports we do to the United States.

“It's just many orders of magnitude different.”