On 27 January 2026 an IMF Country Focus looked at opportunities for Canada to increase growth by removing internal barriers to trade. The Country Focus with the title Canada Can Grow Faster by Unlocking Its Own Market, written by F Diez and Y. Yang, discussed the obstacles faced by goods, services and workers when they are moving across provincial or territorial boundaries. This fragmentation in the internal market within Canada affects productivity, competitiveness, and overall resilience.
Under the federal system, the provinces exercise authority over various trade policies including licensing, standards, procurement and service regulation. The authors note that there have been increasing regulatory differences and administrative mismatches that form a barrier to competition and mobility, especially in trade in services. The internal market in Canada needs to be further integrated to boost economic growth.
The authors estimate that non-geographic, policy-related barriers within Canada amount to the equivalent of a 9% tariff nationally. Most of the costs affect trade in services, which are the majority of interprovincial trade. In some sectors, such as educational and healthcare services, the barriers are estimated to exceed the equivalent of a 40% tariff. Although the large provinces with diversified economies have relatively low internal trade costs, smaller provinces and northern territories face much higher costs, especially in services such as the retail trade, health, education and professional services.
Greater internal integration could raise Canada’s real GDP by nearly 7% in the long term. The gains would be driven by higher productivity as a result of more efficient allocation of capital and labour, and stronger competition. The smaller and more remote provinces would gain the most in percentage terms, because their companies and workers would gain more access to larger markets. Larger provinces would also benefit substantially, as they have a central role in national supply chains.
Around four-fifths of the total GDP gains would be a result of the liberalisation of the services sectors. Their role in the economy is growing, as they provide inputs into most other activities. If there are barriers in finance, telecommunications, transportation and professional services, these reduce growth because those services affect the whole economy.
The authors consider that the sectors with the greatest economic influence should be given priority when measures are taken to remove internal trade barriers. These are sectors such as finance, transport, and telecommunications, which support trade across provinces and enable increases in efficiency, innovation, and competition. Removal of trade barriers would also strengthen Canada’s capacity to absorb external economic shocks.
The authors conclude that Canada needs to implement and coordinate reforms to make cooperative federalism more effective. Benchmarking and public reporting of internal trade barriers can increase transparency and accountability. There is also a role for incentives in spurring the reforms. Removal of barriers to the internal market would offer a chance to raise productivity, strengthen resilience and support economic growth.
