Sisi Chan

Canada could increase real GDP by 7% if it drops all internal trade barriers: IMF

The elimination of internal trade barriers in Canada could potentially result in an upsurge in real GDP. An IMF report asserts that this move might yield a $210 billion GDP boost. These barriers bear economic significance as they impede the free movement of goods, services, and workers across provincial and territorial lines.

Trade barriers impose costs and significant impact, most profound in the service sector. Barriers in sectors like health-care services and education can pose tariffs of up to 40%. It’s noted that smaller provinces bear more significant burdens in sectors such as health, retail trade, and professional services due to these unequal barriers.

Trade barriers have shaped a ‘patchwork economy’, influenced by geography and regulation. Smaller provinces stand to benefit most from the elimination of these trade barriers, deriving larger market access. This could lead to a noticeable increase in productivity.

The effects of a recent internal trade agreement and the liberalisation of service sectors signed by provinces, territories, and the federal government were highlighted. Despite the agreement promising liberalisation for tens of thousands of goods, services – which constitute the most significant percentage of GDP gains – were primarily excluded from it. Approximately four-fifths of total GDP gains would stem from a more open service sector. Barriers in specific sectors have far-reaching effects, raising costs throughout the economy.