How Removing Interprovincial Trade Barriers Could Benefit Indigenous Economies

The current trade dispute between the United States and Canada has left many feeling unsettled. Estimates of the tariffs’ impact forecast harrowing outcomes for the Canadian economy, ranging from sustained inflation to job losses, and even the potential for recession.

This dilemma has prompted many business leaders and politicians to search for solutions. At the provincial and federal level, Canadian leaders have articulated their commitment to tariffs and other restrictions on American imports. In Manitoba, Premier Wab Kinew announced that American alcohol products would be removed from shelves for the indefinite future.

What are Interprovincial Trade Barriers and Could Removing Them Help Spur the Economy?

One topic that has gained traction amidst the current trade dispute is the impact of interprovincial trade barriers and, importantly, how their removal could potentially dampen the impact of American tariffs.

Interprovincial trade barriers are not well-defined and encompass a broad range of regulations and restrictions across different sectors which vary throughout the country. Some examples of interprovincial trade barriers include the different standards with regards to occupational licensing for nurses and other professional workers, trucking regulations which vary from province to province, and alcohol restrictions, among other things.

These barriers hinder labor mobility, limit consumer choice, fragment markets, stifle competition, and lower productivity growth. For instance, a nurse licensed in Ontario may face significant hurdles in getting certified in British Columbia, limiting their ability to work across provinces. Similarly, trucking companies must navigate a patchwork of regulations, increasing operational costs and reducing efficiency.

In 2019, the International Monetary Fund (IMF) published a paper which sought to estimate the effect of interprovincial trade barriers on the Canadian economy. Their findings suggested that these barriers amounted to an average tariff-equivalent of nearly 21%. This means that the cost of trading goods and services across provincial borders is significantly higher than it should be, acting as a hidden tax on interprovincial trade.

The IMF's study also highlighted that the removal of such barriers could increase Canada's GDP by as much as 4% –– roughly $3,000 per person. This potential boost to the economy could help offset some of the negative impacts of external trade disputes and foster greater economic resilience.

How Indigenous Businesses Could Thrive with Barrier Removal

The benefits of removing interprovincial trade barriers extend beyond mere economic growth. For Indigenous communities and businesses, the elimination of these barriers could be transformative. Indigenous entrepreneurs often face unique challenges in accessing markets due to geographic isolation and limited economic opportunities.

Streamlining regulations and reducing trade barriers could open new markets for Indigenous-owned businesses, allowing them to expand their operations and create jobs within their communities. For example, Indigenous artisans could more easily sell their products across provincial borders, and Indigenous-owned construction companies could bid on projects in other provinces without facing prohibitive regulatory hurdles.

Moreover, removing interprovincial trade barriers could enhance labor mobility for Indigenous workers. Many Indigenous communities are located in remote areas with limited job opportunities. Harmonizing occupational licensing and other professional standards, could reduce the barriers Indigenous workers face to find employment in other provinces, improving their economic prospects and contributing to the broader Canadian economy.

The removal of interprovincial trade barriers presents a significant opportunity to strengthen the Canadian economy, particularly in the face of external trade disputes. By reducing regulatory hurdles and fostering greater economic integration, Canada could unlock substantial economic potential, benefiting all Canadians, including Indigenous communities and businesses. As the country navigates the challenges posed by the current trade dispute with the United States, addressing interprovincial trade barriers could be a key strategy to ensure long-term economic prosperity and resilience.