IMF Says Canada Could Boost GDP by 7% Through Removing Internal Trade Barriers

Canada could see its real GDP rise by around 7 per cent over the long term if it fully eliminated internal barriers to trade between provinces and territories, according to a new report from the International Monetary Fund (IMF). Such an increase would translate to roughly $210 billion in additional economic output, highlighting the large economic cost of regulatory and administrative frictions that persist inside the country’s domestic market.

The IMF report explains that goods, services and labour still face significant obstacles when moving across provincial borders — a situation analysts describe as the equivalent of a nine per cent tariff on internal trade. These barriers stem from regulatory differences in licensing, standards, certification and other administrative requirements across jurisdictions, as well as legacy rules that limit the movement of workers and businesses within Canada.

Officials and economists say these internal frictions reduce productivity and hinder competitiveness, particularly in key sectors such as services, healthcare and education, where some barriers have tariff-equivalent costs above 40 per cent, according to the report. The effects are felt unevenly, with smaller provinces and territories often facing higher relative costs when their goods and services attempt to enter larger markets.

Reducing or removing these obstacles would improve the efficiency and resilience of Canada’s economy, supporting faster overall growth, enhancing competitiveness at home and abroad, and better positioning the country to withstand global economic shocks. The IMF suggests that reforms could include greater mutual recognition of regulations and credentials across provinces, simplifying domestic market access for businesses and workers alike.

While complete elimination of trade barriers will require coordinated action among federal, provincial and territorial governments — due to Canada’s federal structure — the potential payoff outlined by the IMF underscores why internal economic integration is increasingly seen as a priority for policymakers aiming to boost long-term economic performance.