By Trevor Tombe
February 27, 2025
PDF of paper
Executive Summary
Canada’s economy is tightly interconnected across provinces, but significant barriers to internal trade and limited worker mobility are holding back productivity, investment, and wage growth. These obstacles create major challenges for businesses looking to expand and for workers seeking new opportunities in other provinces.
Instead of waiting for a national solution, provinces have the power to take bold, independent action to tackle these obstacles head-on. Specifically, even without a national agreement provinces can:
• recognize regulations in other provinces as valid substitutes for their own.
• drop inspections of vehicles, equipment, agricultural commodities, and other goods when those items are already fit for use elsewhere.
• improve labour mobility by recognizing the job certifications of other provinces. (Ontario’s “As-of-Right” exemption for regulated professions provides one narrow example of this approach to enhancing labour mobility).
• follow Alberta’s recent example and unilaterally remove exemptions under the Canadian Free Trade Agreement (CFTA).
The provinces can take these and other specific steps independently to liberalize trade and labour mobility. In doing so, they will capture the bulk of the benefits from broader national reforms.
Taking unilateral trade action will not only boost provincial economies, but can have broad, positive effects on Canada’s overall economic performance. Smaller provinces stand to gain disproportionately, thereby reducing regional economic disparities. Moreover, by strengthening internal trade, Canada can reduce its vulnerability to volatile international trade relationships and enhance its resilience against external shocks like tariffs.
While there are a lot of potential economic gains that come from implementing unilateral reforms, some sectors are more likely to benefit than others. If provinces are not ready to implement economy-wide reforms, we explain which sectors would benefit most from liberalized trade.
National reforms are important, and a coordinated nationwide effort would offer the most gains. However, the slow pace of change under existing frameworks like the Canadian Free Trade Agreement (CFTA) highlights that provinces can and should act on their own. When provinces take action, even unilaterally, they can unlock considerable economic benefits – boosting opportunities for businesses and workers while setting a powerful example for others. By unilaterally adopting trade liberalizing policies, provinces can accelerate growth and create a more integrated, resilient national economy.
The urgency for provincial action is even more pressing given Canada’s current economic challenges, including declining real GDP per capita and the looming threat of a 25 per cent tariff on Canadian exports to the US. Reducing internal trade barriers and improving labour mobility represent a major opportunity to strengthen Canada’s economy from within by improving productivity, real incomes, and giving the country resilience against external shocks. The opportunity to act independently is one the provinces cannot afford to miss – and could have a lasting impact on Canada’s economic future.
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