The Case for Inter-Provincial Free Trade

For months, Donald Trump’s tariff threats have loomed over Canada, threatening to push the country into recession. If anything good has emerged from the threats, however, it’s the renewed urgency Canadians feel to strengthen our economy from within by removing the countless barriers to the flow of people, goods and economic activity between provinces. Dismantling those internal trade barriers could boost the country’s GDP by up to $200 billion, mitigating the damaging effects of any potential tariffs. 

But getting rid of them is not a matter of waving them away. Jean Philippe Fournier worked inside Quebec’s finance ministry for more than four years, serving as an adviser between 2020 and 2022. He has an insider’s view of how deeply entrenched trade barriers are, and how difficult they’ll be to remove. Doing so will mean making tough choices—and not being afraid to take on some sacred cows. 

We’ve heard a lot in the past few weeks about internal trade barriers—but what that means is probably still very vague for a lot of people. What are we talking about?

Okay—say you wanted to sell some $100 washing machines, made in Quebec, to customers in Ontario. But the trailer truck you’re using to transport them isn’t the right size for Ontario’s highway regulations, so at the border you have to get it out of the trailer truck and put it on another one. Maybe you have to change your trucking provider, too. Time is money, so the delay will raise the price. And maybe your other provider has different pricing. So hypothetically, maybe the price of your $100 washing machine becomes $115 in Ontario. This has the same impact as a tariff, by another means.

There are lots of examples like this, where doing business between provinces is thwarted by these kinds of rules. When I was in government, we couldn’t sell car seats made in Ontario, because the rules for the stuffing inside them were different. Or another example: any wood that’s cultivated from public lands in Quebec needs to be turned into lumber in Quebec. So even if you’re right on the border with Ontario and you’re cutting trees partly on land in both provinces, you have to “transform” the wood in Quebec. 

And these are more difficult to address than tariffs, which are easy to see and easy to remove. The barriers we have in Canada are regulatory barriers, the result of each province and territory setting their own independent regulations and over time diverging more and more from one another. They’re not intended to make it difficult to do business, but that’s the effect. The regulators who enforce them think they’re doing a great thing. But it’s put each provincial economy in its own box; the logical end of every province fending for themselves, doing their own little thing in their own corner. 

This also makes it more difficult for Canadians to move between and work in different provinces, correct?

Yes, though this doesn’t have the same concrete business cost. It has more of a GDP impact. So, when you’re a tradesperson in one province and you want to work in another, you might have to do additional training to meet that province’s different standards—and that’s even if you’re accredited and have been working for 20 years. Many people just won’t do it. 

So labour markets can’t respond to supply and demand at a national scale?

Yes—any given province might have a smaller number of plumbers available than it should, for example, and plumbers from elsewhere can’t respond to that. A smaller number means less competition, and anyone who’s opened an economics textbook will tell you it has an impact on prices. 

Doctors and nurses are another example. If they had an easier time going from one province to the other, maybe our health system would do a little bit better. If there was ever a surplus of doctors or nurses in one province, they could shift easily to another. 

Yet you recently posted on X saying that allowing medical professionals to move between provinces would end up creating a “nuclear public affairs war.”

Doctors want to protect their standards of training, so they say, “We need to make sure we put everything in place so that our standards of care are as high as possible,” and use that as an excuse to keep doctors from other provinces out. It doesn’t matter whether it’s Ontario talking about Alberta doctors, or Alberta talking about Saskatchewan. The implication is, “If you let these other guys in, they’re not as good as us.” But all it’s doing is creating scarcity. 

Opposition also comes from industries who have adapted to the rules. If you change those rules, it could completely change their business models. There will be benefits in the long term, but a business might have to spend millions of dollars in the short term—to change all their trailer trucks, for example. So politicians say, “Let’s not even look at it, because I’m not ready to be yelled at. I’m not ready to get 1,000 calls. I’m not ready to get an email campaign. I’m not ready as an MP to have people angrily pulling up to my office, to tell me they have to spend a gazillion dollars to change this machine.”

So governments have pulled back from these kinds of discussions because they’re too afraid. It’s sad to think that in the EU, there are 27 countries working within a supernational body, trying to mishmash centuries of independent internal markets and regulations and make that work together—and they have. But we can’t here.

How does a trading bloc like the EU hold lessons for Canada?

The EU has imposed minimum standard regulations between member countries, so if the regulations in one country meet the minimum EU threshold, they’re fine. We could do something like that. Canada’s constitution gives the federal government the power to impose legislation and regulation on provinces. It is used sparingly, for obvious reasons: we might create a national unity crisis, whether it’s from Quebec or Alberta, or even other provinces. But this kind of approach, harmonizing rules across provinces, would be one way to do it. 

But it does infringe on provincial autonomy, and that will lead to opposition. Provinces are going to have to accept, if not a stronger federal government, then at least the idea of ceding autonomy among themselves, between all the provinces—mutualizing autonomy among themselves. When provinces moan about federal encroachment, it’s always province versus federal. But what we’re asking now is for the provinces to share autonomy among each other, horizontally rather than vertically.

To play devil’s advocate, are there any industries that do need protection? Are there risks that removing barriers will hurt local economies? 

Well, that’s kind of the argument that Trump uses, right? That free trade hurts America by harming American industry. But are we a free-trade country or not? Canada has the largest number of free-trade agreements in the world. As a country, we think the benefits outweigh the costs. That should be the case within our own country. One of the very few places that it makes sense is the utility side of energy. So for example, Hydro-Québec, to maintain its monopoly, prevents the utility companies of other provinces or private companies to come and generate electricity here. In those cases where we want to keep the utility public, there’s an overwhelming case of public interest. 

So what are our chances of getting rid of these barriers?

I think that getting rid of interprovincial trade barriers is as difficult or as complicated, and poses as many risks, as reopening the Constitution. It’s on that level of difficulty. I really think it would take a total war effort. Like knife between the teeth, let’s tie on the bandana and go to work. 

It will also take time. The really big risk now is that the government gets rid of a few of the most ridiculous, low-hanging barriers, because everyone’s saying they’re on board now. I worry that the government will do just enough so that people stop going crazy over it, but not enough to actually fix the problem, let alone permanently.

Why is it worth doing anyway?

We know that free trade has way more benefits than costs. We’re talking about hundreds of billions of dollars in GDP. Some of our business lobbyists are really strong, and some of them have the ear of the public. Who knows if the public perception would change if there were actual efforts to remove interprovincial trade barriers? There would be some growing pains. But 41 million Canadians are always more important than a much smaller number of business owners who may be affected in any given industry—even though it’s a harsh thing to say.