Canada’s hidden trade walls: barriers hurting businesses

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By Alison Simpson

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More than 150 years after Confederation, Canada has built a strong and resilient economy, but internal trade barriers continue to create challenges for businesses. A Toronto-based company can ship products to New York with fewer restrictions than to Vancouver simply due to differing provincial regulations.

Provinces craft policies to meet local needs, but this has led to a patchwork of rules that businesses — especially small and medium-sized enterprises (SMEs) — must navigate. Licensing requirements, procurement rules, transportation regulations and tax structures widely vary, creating inefficiencies that add unnecessary costs and hinder growth.

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The Canadian Marketing Association (CMA) is pleased that politicians from across the country agree that interprovincial trade barriers must be eliminated in light of the threat of U.S. tariffs. However, many provincial exceptions remain and any progress will stall without stronger enforcement by the federal government.

Strengthening our internal market is more important than ever. By addressing interprovincial trade barriers, we can give businesses the stability they need to expand, innovate and compete both domestically and globally.

The economic impact

These barriers create inefficiencies that ripple through the entire economy, limiting Canada’s potential. Removing existing barriers could lower prices by up to 15 per cent and add up to $200 billion to the domestic economy, according to Transport and Internal Trade Minister Anita Anand.

The Canadian Free Trade Agreement (CFTA), introduced in 2017, was intended to create a more seamless national market. Yet, hundreds of provincial exceptions remain, meaning businesses must still navigate inconsistent regulations. This fragmented regulatory environment means businesses face more obstacles moving goods within Canada than exporting internationally.

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The impact goes beyond businesses: consumers also pay the price. Inefficiencies drive up costs, reduce competition and limit access to goods and services.

SMEs make up 98 per cent of Canadian businesses, yet they are disproportionately affected by trade barriers because they lack the legal and financial resources to navigate complex provincial regulations. Large corporations can hire legal teams to manage compliance, but SMEs must allocate time and money to operate across provinces.

For example, an Ontario SME aiming to serve Alberta customers might face different tax structures, product labelling requirements and licensing hurdles, making expansion across provinces prohibitively expensive.

This prevents Canadian businesses from scaling nationally and discourages entrepreneurship since new businesses are deterred by unnecessary regulatory obstacles.

Nearly all economists, business groups and industry associations agree that internal trade barriers hurt the economy, but provinces have been reluctant to relinquish regulatory control.

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Many provinces protect local industries through regulatory differences, using red tape as a shield to limit competition from businesses in other provinces.

Recent commitments from provinces signal growing support for reducing internal trade barriers. Ensuring that these commitments translate into concrete action will be key to unlocking economic growth, creating jobs and expanding opportunities for businesses nationwide.

Political inaction has allowed the issue to persist for decades. Recent federal efforts to remove trade restrictions are a step in the right direction, but provinces need to be held accountable for following through.

British Columbia Premier David Eby recently confirmed the provinces are working together on a major push to eliminate barriers, including improving labour mobility for professionals. Ontario Premier Doug Ford echoed this, stating that provinces are aligned on moving forward quickly.

Nova Scotia has introduced legislation to remove red tape for out-of-province goods and simplify licensing for workers, but only for provinces that offer the same level of access in return. This reciprocity approach encourages progress, but it risks creating an uneven playing field if provinces move at different speeds.

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These developments are promising, but a coordinated national approach is needed to ensure equal benefits for businesses and workers across Canada.

The federal government must lead the way

Canada is one country, but it still operates like 13 separate economies when it comes to trade. The result is higher costs, lost business opportunities and a national economy that isn’t reaching its full potential.

The federal government must encourage provinces to harmonize regulations and simplify licensing, enabling businesses to operate without unnecessary restrictions.

One solution is tying federal funding to trade liberalization commitments, ensuring provinces follow through on reform rather than maintaining protectionist policies. If provinces continue to resist meaningful change, Ottawa must use the policy tools at its disposal to encourage compliance.

Eliminating interprovincial trade barriers isn’t about political optics; it’s about unlocking economic potential, boosting productivity and creating a truly national marketplace. The CMA and other business advocates have long called for reform, recognizing that these barriers are not just bad policy, but bad economics.

Every year Canada fails to act is another year that businesses remain shackled by unnecessary restrictions.

Canada can’t afford to wait any longer. The time for action is now.

Alison Simpson is chief executive of the Canadian Marketing Association.

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