What Happened?
Dominic LeBlanc, the Minister of Intergovernmental Affairs and One Canadian Economy, has unveiled Bill C-5, legislation toward the removal of federal barriers to interprovincial trade and labour mobility.
The legislation, also known as the Free Trade and Labour Mobility in Canada Act, would, if passed:
- Align federal and provincial/territorial standards for goods: Any goods or services that meet provincial or territorial requirements would be considered to meet any comparable federal requirements with regard to interprovincial movement or provision. Federal regulatory bodies would determine whether provincial or territorial requirements are similar.
- Align labour mobility regulations: Federal regulatory bodies would be required to recognize provincial and territorial authorizations for labour. The bodies would also be required to issue equivalent federal labour approvals to people who apply if they have comparable provincial or territorial credentials.
Prime Minister Mark Carney outlined at a press conference following the tabling of the bill that the legislation would be a top priority and that he would “do anything to get it passed before the summer.”
The bill is less than 20 pages in total and also takes the first steps by the government to accelerate major infrastructure approvals.
Prime Minister Carney promised in the recent election campaign to eliminate interprovincial trade barriers by Canada Day. This legislation would not achieve this. But government officials emphasized today that 20 key federal exemptions to nationwide free trade were lifted by the government before the election and that any remaining ones can be handled without further legislation.
Indeed, the government also pledged today that, in addition to Bill C-5, the government will “remove further federal exceptions in the Canadian Free Trade Agreement (CFTA) by July 2025.”
Please see the attached backgrounder for additional information on the issue of interprovincial trade barriers, including how much they impact the national economy and what has been done by governments across Canada in recent months.
What is Interprovincial Trade?
Interprovincial trade barriers are a longstanding feature, not a bug, of Canada’s Confederation. In 1867, Canada was formed in response to the threat of U.S. annexation and the 1866 abrogation of the Reciprocity Treaty. While the four founding provinces and those that later became part of Canada formed an economic union, they still protected their right to prioritize their production over that of other provinces (and territories) where they thought it appropriate. Canadian courts have generally been supportive when discriminatory measures are deemed to have a reasonable public policy purpose.
The most significant barrier to interprovincial trade is geography. The country is big; the second biggest in the world. This is why recent calls to eliminate interprovincial trade barriers have been paired with calls to build east-west ties – including transportation networks such as highways, rail corridors, pipelines, interprovincial power grids, and ports. All would boost interprovincial trade specifically and also, in many cases, increase international trade to the United States and, especially, beyond.
Such significant steps are deemed more necessary now, given the changing nature of North American politics. In 1981, interprovincial exports were valued at just under 30 percent of Canadian GDP, essentially the same as international trade. Today, interprovincial trade represents 18 percent of GDP, while international trade is 34 percent. (About 75 percent of exports go to the United States now, as was the case four decades ago when free trade was negotiated.)
However, the kind of east-west orientation now being posited and proposed would require decades and hundreds of billions of dollars. Interprovincial trade barriers are comparative low-hanging fruit – something that can be done quickly with political will. Indeed, provincial and territorial leaders have vowed recently to finally grapple with the issue effectively. Prime Minister Mark Carney promises to eliminate all federal barriers to internal trade through legislation by July 1, 2025.
It is inaccurate to suggest, as is common now, that Canada is in the ridiculous position of having had free trade with the United States (at least until recently) but not within Canada. Free trade did eliminate tariffs between Canada and the United States with just a few sensitive exceptions, such as supply-managed dairy and poultry imports. But Canada doesn’t have tariff barriers internally, and pretty much never has.
Our internal trade barriers are non-tariff in nature and take the form of uneven regulations, fees, labour requirements, certification requirements, locally preferred goods, and locally preferred ownership and labour practices, all under the guise of non-trade-related public policy. Such non-tariff barriers hold back both north-south trade and east-west trade.
In Canada, these generally include outright prohibitions, such as cross-border beer and wine sales, as well as other technical and administrative barriers, including licensing and packaging requirements that reduce the incentive for companies to expand shipments or even production to other provinces. (The impact of such measures on Canada-U.S. trade is even greater than on interprovincial trade.)
In detail:
- Estimates of the impact of interprovincial trade barriers vary: An IMF (2019) study found that the removal of all trade barriers on goods would result in a 3.8 percent increase in GDP. It estimated that existing non-tariff barriers were the equivalent of a 21 percent tariff. But a 2020 Statistics Canada study found that the boost would be only one-third as big. Meanwhile, a Bank of Canada (2017) study found that GDP would be boosted by 0.2 percent annually from just a 10 percent cut in barriers.
- Interprovincial non-tariff barriers can be defensible, but outright tariffs are not: Protectionism to reduce or eliminate trade between provinces is unconstitutional, especially tariffs. But provinces and territories can impose barriers provided they achieve a legitimate policy objective and do so in a measured and proportionate way. So, while Canada was built on a premise of free trade, provinces have significant authority to favour themselves.
- The Canada Free Trade Agreement has made only limited progress: Signed in 2017, the Canada Free Trade Agreement (CFTA) is an updated version of a similarly disappointing agreement that dates back to the 1990s: the Agreement on International Trade (AIT). The CFTA made it easier to challenge what were deemed unfair barriers, but it still includes hundreds of pages of exceptions negotiated or imposed outright by provinces and territories. Such exceptions, or exemptions, generally are defined by industry or sector area and likely make up the majority of Canada’s internal trade barriers. Additionally, there have been regional and bilateral efforts aimed at making progress. The New West Partnership Trade Agreement (NWPTA) among British Columbia, Alberta, Saskatchewan, and later Manitoba has increased cooperation, particularly regarding labour mobility.
- Impacts vary hugely by industry: A study by Alvarez, Krznar, and Tombe done for the IMF found that utilities, education and health, and telecommunications were impacted most.
| Industry | Tariff-Equivalent Impact of Non-Geographic Trade Barriers in 2015 (%) |
| Utilities | 91.0 |
| Education and Health | 74.1 |
| Post and Telecommunications | 65.7 |
| Hotels and Restaurants | 54.2 |
| Business Services | 47.8 |
| Wholesale and Retail Trade | 38.7 |
| Transportation and Warehousing | 35.2 |
| Metals | 31.2 |
| Other Manufacturing | 30.3 |
| Food | 27.4 |
| Machinery and Equipment | 22.4 |
| Agriculture | 20.8 |
| Wood and Paper | 13.2 |
| Mining | 12.6 |
| Textile | 9.3 |
| Petroleum and Chemicals | 7.3 |
| Total/Average | 34.8 |
- Where’s the biggest possible GDP boost?: The same IMF study included data as approximated in this table:
| Industry | Approximated real GDP gains from a 10 percent reduction in industry trade barriers (%) |
| Financial and business services | 0.250 |
| Retail | 0.075 |
| Transportation | 0.051 |
| Food | 0.050 |
| Mining | 0.040 |
| Hotels and restaurants | 0.040 |
| Telecom | 0.030 |
| Machinery and equipment | 0.025 |
| Petroleum and chemicals | 0.023 |
| Education and health | 0.020 |
| Metals | 0.015 |
| Agriculture | 0.010 |
| Wood and paper | 0.010 |
| Other manufacturing | 0.008 |
| Utilities | 0.002 |
| Textile | 0.001 |
- Industries most protected under the CFTA: A review of CFTA party-specific exceptions shows that protectionism is strongest in energy, alcoholic beverages, cannabis, forestry and fisheries.
- Some exceptions go well beyond the private sector and may well be politically sacrosanct: These can include residence requirements for boards of directors but also, for example, a popular land acquisition preference for PEI residents.
- Limited research on industries with full free trade: There remains limited research on the impacts of the CFTA (and the AIT before it) because of the inherent complexity. However, no major industry is likely to be entirely free of internal trade barriers.
Removal actions
In addition to the federal legislation introduced today, recent efforts to bring down barriers have included:
- Feb 21, 2025 – The Government of Canada removes more than half of federal exceptions in the CFTA
- Feb 25, 2025 – Nova Scotia introduces Free Trade and Mobility within Canada Act legislation, which includes a commitment to not apply any party-specific exceptions with reciprocating jurisdictions. It has explicit exceptions for those working in regulated health professions.
- Apr 11, 2025 – Prince Edward Island Introduces the Interprovincial Trade and Mobility Act, which has explicit exceptions for health, legal, and other professions the government deems necessary.
- Apr 24, 2025 – Newfoundland and Labrador and New Brunswick sign MOU to improve trade and labour mobility
- Mar 06, 2025 – Canada and provinces agree to remove internal trade barriers on booze
- Mar 06, 2025 – Premiers commit to reduce interprovincial trade barriers on certified professionals.
- Mar 21, 2025 – Prime Minister Mark Carney commits to a national trade and economic corridor with Premiers, which includes:
- Create a First Mile Fund to build transportation networks to connect energy extraction sites to rail lines and roads.
- Create a One-Window approval process for large-scale national interest infrastructure projects.
- Table legislation by July 1, 2025, to eliminate all federal barriers to interprovincial trade and labour mobility and to remove all federal exemptions under the CFTA.
- Apr 16, 2025 – Ontario Premier Doug Ford introduces legislation to remove internal trade barriers and labour mobility, establishing mutual recognition rules with reciprocating jurisdictions. While there is no mention of industry-specific exceptions, the government maintains control over requirements under various labour standards.
- Ontario also signs trade MOUs with NS and NB on bilateral removal of trade barriers.
- May 14, 2025 – Ontario and Manitoba sign MOU with promise for alcohol sales deal by end of June.
- May 22, 2025 – Manitoba tables Fair Trade in Canada Act, which recognizes goods and services from reciprocating jurisdictions. Clear exceptions apply to Crown Corporations, certain regulated professions, and occupations relevant to the Labour Mobility Act and give the government power to exempt any goods, services, careers, or occupations it deems necessary.
- May 30, 2025 – Quebec tables bill to begin removing interprovincial trade barriers in goods and labour, but the text gives the Quebec government authority to regulate the extent to which barriers can be imposed on goods and labour.
- Jun 01, 2025 – Ontario signs agreement with Alberta and Prince Edward Island to unlock trade
All ten provinces have indicated a willingness to remove provincial trade barriers. Ontario and Nova Scotia have introduced legislation that eliminates all CFTA exceptions and establishes Mutual Recognition Enabling (MRE) legislation.
Barriers likely to remain
The CFTA has a series of “General Exceptions” that act as exemptions for all parties and are likely to remain untouched.
- Measures on Aboriginal Peoples
- National Security measures, as considered by the Government of Canada
- Most measures related to taxation or taxation compliance
- Water in its natural state and as a natural resource
- Social services, including welfare and health policies
- Tobacco control measures
- Language and culture
- Gambling
- Collective marketing arrangements for agricultural goods, including supply managed dairy and poultry products
- Passenger transportation services
Ontario’s initiative
Ontario has introduced the Protect Ontario through Free Trade within Canada Act. It would commit Ontario to remove barriers in the CFTA in instances where there is an equivalent commitment by other jurisdictions. As of today, Ontario has zero exceptions in the CFTA because of this legislation. Affected sectors could include:
- Real estate services
- Motor vehicle dealerships
- Travel agents and travel wholesalers
- Marriage licensing
- Collections agencies
- Forestry
- Wild rice harvesting
- Driving schools
- Livestock medicine
- Trapping licensing
- Hunting instruction and guide licenses
- Government procurement
- Electricity and natural gas infrastructure and market energy
- Energy-related sub-sectors
- Grapes in wine production
- Liquor board wholesale rights and agreements
- Wine, spirits, and beer
- Cannabis licenses and retail stores
Quebec’s initiative
Quebec has the most interprovincial trade barriers in Canada and has indicated an interest in reducing interprovincial trade barriers on:
- All consumer goods except food, beverages and tobacco
- Alcohol
- Trucking sector alignment with Ontario
- Labour mobility, although with considerations to protect the French language
However, Quebec has agreed to scrap relatively few of its 36 CFTA exemptions. The proposed removal exemptions include:
- Red tape on funeral directors
- Real estate broker location requirements
- Racehorse registration requirements
- Board membership of Quebec ferry authorities’ location requirements
Outside of these, Quebec’s current exemptions in the CFTA include:
- Direct or indirect acquisition of farmland by non-residents of Quebec
- Compliance related to permits or certificates for debt collection, consumer protection, civil protection, and private security
- Business services
- Transport conditions for heavy-vehicle operators
- Road construction, repair, and maintenance work permitting
- Non-profit requirements for brokerage permits
- Cooperatives
- Preparation and canning of sea products
- Conservation and raising wildlife
- Forestry
- Chemical products
- Social services
- Electric power
- Travel agency licences
A matrix setting out interprovincial trade agreements and barriers
| ON* | QC* | NB | NS* | NL | PEI* | BC | AB | MB* | SK | NWT | YK | NT | |
| ON* | FFT(1) | MOU | FFT (8) | MOU | FFT, MOU (8) | LFT | MOU, MOU | MOU, FFT (8) | LFT (3) | LFT | LFT | LFT | |
| QC* | PFT (1) | FFT (1, 8) | PFT (1) | FFT (1, 8) | PFT (1) | PFT (1) | FFT (1, 8) | LFT | LFT | LFT | LFT | ||
| NB | PFT (2) | MOU | LFT (4) | LFT | LFT | PFT | LFT | LFT | LFT | LFT | |||
| NS* | LFT | FFT (8) | LFT | LFT | FFT (8) | LFT | LFT | LFT | LFT | ||||
| NL | LFT (4) | LFT | LFT | LFT | LFT | LFT | LFT | LFT | |||||
| PEI* | LFT | LFT | FFT (8) | LFT | LFT | LFT | LFT | ||||||
| BC | FFT (6) | FFT (6) | FFT (6) | LFT | LFT | LFT | |||||||
| AB | FFT (6) | FFT (6) | LFT | LFT | LFT | ||||||||
| MB* | FFT (6) | LFT | LFT | LFT | |||||||||
| SK | LFT | LFT | LFT | ||||||||||
| NWT | FFT (7) | FFT (7) | |||||||||||
| YK | FFT (7) | ||||||||||||
| NT |
FFT = Full Free Trade committed | MOU = Memorandum of Understanding to remove barriers | PFT = Partial Free Trade committed | LFT = Limited Free Trade with no agreements or commitments in place
* refers to the province or territory tabling legislation or regulations pursuing free trade with agreeing provinces. Some of these provinces have outlined various limitations in their free trade agreements.
Notes:
- Quebec has stated an interest in protecting Food, beverage, and Tobacco exceptions.
- Nova Scotia and New Brunswick reportedly signed an agreement with Ontario on a framework for direct-to-consumer alcohol sales.
- Ontario and Saskatchewan signed an MOU in 2018 agreeing to boost trade ties, but the outcome of that agreement is unclear.
- Atlantic Premiers signed an agreement in 2023 to help facilitate trade and labour flows among them.
- Alberta and British Columbia set up an agreement on reducing wine trade barriers.
- BC, Alberta, Saskatchewan, and Manitoba are part of the New West Partnership Trade Agreement (NWPTA).
- Based on a proposed “Territorial Trade Zone.”
- Nova Scotia, PEI, and Manitoba have established explicit exceptions in their free trade legislation for those working in regulated health professions and other industries, along with provincial authority to establish barriers instead of removing exceptions under the CFTA. Manitoba similarly establishes Crown Corporations as exceptions along with control over exceptions in labour.
Comparing Canada and the U.S.
Little literature compares the U.S. and Canadian interstate/interprovincial trade regimes.
However, like Canada, interstate trade is encouraged through various policies, including the U.S. Constitution’s Commerce Clause, which ensures that the United States maintains internal free trade. Import taxes at the state level are illegal, leaving administrative barriers and other restrictions. A study in 1987 found that trade barriers existed in agriculture, banking, insurance, labour and state government purchases and that these impeded efficient trade between states.
Canada and the United States differ with regard to the relative federal and provincial/state powers to regulate commerce. Canada gives provinces more room to pursue non-tariff barriers if there are legitimate policy objectives. In contrast, the U.S. Supreme Court has invalidated many like-minded state policies.
