February 28, 2025
The federal government will remove more than half of its exceptions from the Canadian Free Trade Agreement (CFTA) while provinces are vowing to do more to liberalize domestic trade.
The agreement, signed by the federal, provincial and territorial governments in 2017, aims to eliminate and reduce trade barriers within Canada, but it gives the governments flexibility to name exceptions.
Ottawa said it will be reducing federal exceptions to 19 from the current 39, most of which pertain to procurement. That’s in addition to the 17 federal exceptions it removed last June.
Aside from procurement, the exceptions that will be lifted affect a number of industries subject to federal regulation. For example, Ottawa is lifting an exception that stipulates Canada Post has the “sole and exclusive privilege of collecting, transmitting and delivering letters.”
Internal Trade Minister Anita Anand announced the move on Friday during an informal meeting of the Committee on Internal Trade (CIT), made up of federal and provincial officials who supervise the implementation of the CFTA.
U.S. President Donald Trump’s threats of steep tariffs have pushed economic growth to the top of the national agenda in Canada, as policy makers look to diversify away from the United States and increase domestic trade. Federal and provincial governments are zeroing in on regulatory and administrative differences between jurisdictions that stifle the movement of goods and workers within the country.
To resolve interprovincial differences, business groups and researchers have advocated for governments to recognize each other’s regulatory standards by default.
Randall Zalazar, director of government relations at the Canadian Chamber of Commerce, called the removal of federal exceptions “encouraging news,” but said exceptions aren’t the only barriers to internal trade.
“Now is the time for provinces to push forward on broad mutual recognition, streamlining the regulations and standards that make the cross-country flow of workers and goods needlessly difficult,” Mr. Zalazar said in a statement.
With a federal election looming and Parliament prorogued, premiers have taken a larger role in responding to the threat of U.S. tariffs and proposing ways to strengthen the Canadian economy.
“I hope it’s reassuring to Canadians that even though there’s upheaval at the federal level, that the premiers of the provinces and territories are providing leadership,” Manitoba Premier Wab Kinew told The Globe and Mail in an interview.
On Thursday, Nova Scotia Premier Tim Houston announced that his government will introduce legislation that would ease trade with other provinces and labour mobility, so long as they do the same.
Ontario Progressive Conservative Leader Doug Ford promised to look at similar legislation if his party is re-elected. Mr. Ford also pledged to remove all of Ontario’s exceptions in the CFTA.
A formal CIT meeting is scheduled for next Friday in Toronto, which will serve as a check-in on progress made on dismantling internal trade barriers. The CIT held an emergency meeting late last month and was tasked with presenting recommendations to premiers and the Prime Minister on reducing the number of exceptions in the CFTA and having provinces mutually recognize more regulations.
Diana Gibson, Minister of Jobs, Economic Development and Innovation in British Columbia, said in an interview that her government will be proposing to reduce its exceptions in the CFTA as well. Asked whether B.C. would bring in legislation similar to Nova Scotia’s proposal, Ms. Gibson said “all options are on the table” to reduce red tape.
Meanwhile, Mr. Kinew said he wants to see alcohol sales liberalized so that breweries and wineries can sell their products across the country.
“Somebody in Winnipeg could order a wine from Niagara online. But the reverse is not necessarily true to other parts of the country,” he said.
Bank of Canada Governor Tiff Macklem applauded federal and provincial efforts to improve productivity and strengthen the economy during an event in Mississauga on Friday. Mr. Macklem said the only way to offset potential economic damage from U.S. tariffs is make structural changes to the economy, including lifting internal trade barriers.
“If it becomes more difficult to trade with the United States, why not make it easier to trade within our great country?” Mr. Macklem said.
Research suggests removing internal trade barriers would result in a substantial boost to economic growth. A frequently cited report published by the International Monetary Fund in 2019 suggests that Canada’s real gross domestic product per capita would be 4 per cent higher if all barriers – excluding ones related to the country’s geography – were removed.
However, a report by the Canadian Centre for Policy Alternatives questions the extent to which internal trade barriers are hindering the economy. The report, published Friday, argues that the assumptions underpinning the IMF study, which measured internal barriers indirectly, overestimated how much trade would increase if barriers were removed.
Marc Lee, a senior economist at the think tank and author of the report, also raises concerns about the push to make provinces and territories accept each other’s regulatory standards.
“The attempts to remove so-called interprovincial trade barriers is mostly a push for ‘mutual recognition’ of regulations – a process by which all provinces could be forced to accept the least stringent regulations for safety, environmental protection and consumer protection,” the report said.
