Canada's economy has a hidden opportunity, one that could unlock a significant boost in real GDP. The International Monetary Fund (IMF) has revealed that by removing internal trade barriers between its provinces and territories, Canada could experience a remarkable growth of nearly 7%, equivalent to a whopping $210 billion. But here's where it gets controversial: these barriers are akin to a 9% tariff on a national scale, according to the IMF report.
The report, co-authored by IMF researchers Federico J. Diez and Yuanchen Yang, along with economist Trevor Tombe, highlights how these barriers disproportionately affect smaller provinces and the northern territories. They face higher costs compared to larger provinces with more diversified economies, creating a fragmented economic landscape.
"The result is a patchwork economy where geography and regulation jointly shape opportunity, and where the advantages of scale are muted," the report states.
And this is the part most people miss: the impact of these barriers extends beyond just goods. Services, which make up the majority of internal trade costs, were largely left out of the recent agreement to drop trade barriers. Sectors like finance, telecom, transportation, and professional services, which have a far-reaching impact on the economy, continue to face significant barriers.
"Internal barriers remain large, economically costly, and increasingly out of sync with the needs of a modern, service-intensive economy," the authors emphasize.
So, what does this mean for Canada? Removing these barriers offers a powerful opportunity to boost productivity, strengthen resilience, and support inclusive growth, all without significant fiscal costs.
The Atlantic provinces, especially Prince Edward Island, stand to benefit the most from this change, with potential savings of nearly 40% in real GDP per worker.
The movement to remove internal trade barriers gained momentum last year when U.S. President Donald Trump imposed tariffs on Canada, forcing a shift in focus towards domestic trade opportunities.
While some progress has been made with bilateral agreements between provinces like Ontario and Manitoba, and a national agreement to drop trade barriers on most goods, there's still a long way to go, especially in the service sector.
The question remains: will Canada fully embrace this opportunity to unlock its economic potential? The answer could shape the country's economic future for years to come. What do you think? Share your thoughts in the comments below!
