The federal government of Canada made significant strides toward improving interprovincial trade by announcing the removal of more than half of its exceptions under the Canadian Free Trade Agreement (CFTA). This move, revealed on Friday, aims to eliminate barriers and streamline trade between provinces, enhancing economic interactions among the nation's regions.
Originally signed by the federal government and the provinces and territories in 2017, the CFTA was intended to modernize the Agreement on Internal Trade established back in 1995. Its mission is straightforward: facilitate the flow of goods, services, and labor across provincial borders and encourage regulatory cooperation within Canada. Despite its good intentions, critics argue there are still numerous exceptions within the agreement, limiting its effectiveness.
The federal government began with 56 exceptions under the CFTA and made meaningful progress last July by eliminating 17 of those exceptions, primarily focused on procurement. With the latest announcement, the total number of federal exemptions has dropped to 19—a significant reduction recognized by trade advocates.
“We are all hands on deck to promote freer trade here at home,” stated Anita Anand, Canada’s internal trade minister. This development is viewed as another step toward reducing costs for Canadian businesses, amplifying productivity, and potentially drawing foreign investment—adding billions to the Canadian economy.
Some provinces are echoing this urgency. For example, Nova Scotia Premier Tim Houston has expressed his commitment to improving interprovincial trade. He recently announced his plans to introduce legislation aimed at reducing trade barriers with other provinces, contingent on reciprocal agreements. If all regions can come together, it could mark a turning point for improving internal trade dynamics.
Trade minister Anand is preparing to meet with the committee on internal trade next week, signaling her intent to receive updates from provincial counterparts on their efforts to reduce interprovincial barriers. Her statement stresses the collaborative nature of this initiative, stating, “The removal of these federal exceptions from the CFTA is yet another step toward eliminating barriers to internal trade.”
The exceptions still remaining primarily protect various sectors which include forestry, agriculture, real estate, and alcohol. A notable case is the exemption for alcohol, which allows the Government of Nova Scotia to maintain control over the monopoly of liquor sales through strict regulations concerning movement, purchase, and sale within the province.
Recent geopolitical events, particularly trade threats from U.S. President Donald Trump, have intensified Canada’s focus on fortifying its internal economy. With Trump’s looming tariffs on Canadian products, there’s added motivation for the federal government to act swiftly. The time for change is now, as internal trade already makes up nearly 18% of Canada’s GDP, and failure to adapt could have dire consequences.
Research indicates significant economic potential lost due to current internal trade costs. A 2022 study from the Macdonald-Laurier Institute, conducted by University of Calgary economist Trevor Tombe, highlights how these costs could render Canada’s GDP between 3.2% and 7.3% smaller—a stark indicator of improvement opportunities lost.
Voices from the business community add urgency to the narrative. Randall Zalazar, the director of government relations at the Canadian Chamber of Commerce, supported the recent decision but called for more action from provinces. “Now is the time for provinces to push forward on broad mutual recognition, streamlining the regulations and standards…” he emphasized, underlining the important connection between internal trade optimization and economic resilience.
The potential economic impact is staggering; estimates suggest the removal of internal trade barriers could add as much as $200 billion annually to the Canadian economy. Anand pointed out how significant savings on costs could be achieved through these adjustments, allowing Canadian businesses to compete more effectively.
Conversations around internal trade are already gaining traction across various provinces. For example, British Columbia’s economic development minister, Diana Gibson, noted the federal changes are likely to inspire other jurisdictions to follow suit and remove their own trade barriers. “It's really great to see the federal government coming to the table with such substantive movement,” she remarked, praising the government’s proactive approach.
This cumulative movement is thought to be just the beginning of increased cooperation across provincial boundaries. Anand is advocating for not only mutual recognition of rules but also streamlining regulations, especially for industries like trucking, where differing rules across provinces can create obstacles and inefficiencies.
Looking forward, the Committee on Internal Trade will hold formal discussions next week to evaluate the federal modifications and expand on provincial initiatives aimed at enhancing internal trade. The challenges of the global trade environment—namely tariffs and disruptions—make this internal collaboration more important than ever.
With proactive measures now being discussed and implemented, Canada appears poised to engage more effectively with its regional economies, ensuring smoother trade flows and potentially substantial economic gains for years to come.