Canada could raise real GDP about 7% by removing internal trade barriers

The IMF says fully eliminating Canada's internal trade barriers could boost real GDP by roughly 7% (about $210 billion) over the long run, with most gains coming from liberalizing services, which account for the bulk of interprovincial trade.

The International Monetary Fund released a report saying that if Canada removed remaining barriers to trade, goods, services and workers could move more easily across provincial and territorial lines and boost long-run output. The analysis estimates a roughly 7% increase in real GDP, or about $210 billion, if internal frictions were fully eliminated. The IMF highlights that most costs are concentrated in services and that barriers are uneven across provinces. The report also notes recent steps by governments to liberalize goods trade while many services remain excluded. Key findings: - The IMF estimates full removal of interprovincial trade barriers could raise real GDP by about 7%, or roughly $210 billion, in the long run. - Remaining frictions are estimated as equivalent to about a 9% tariff nationally, with some sectors such as health care and education facing barriers near 40%. - Services make up the majority of interprovincial trade and are projected to account for roughly four-fifths of the total GDP gains from liberalization. - Smaller provinces would see larger percentage gains; the report cites Prince Edward Island as facing nearly a 40 percentage point change in GDP per worker in the scenario modeled. - Provinces, territories and the federal government signed a November agreement (effective December) to allow freer trade in tens of thousands of goods, but most services were excluded. Summary: The IMF frames greater internal market integration as a source of national productivity gains and notes that impacts would differ by jurisdiction, with smaller provinces generally seeing larger percentage gains. The report says implementation and co-ordination present challenges and that changes would take time. Undetermined at this time.