Tearing Down Interprovincial Barriers: Canada’s One Canadian Economy Act

Canada’s internal trade barriers survived for a century because no crisis made removing them urgent; Donald Trump’s tariffs supplied the crisis. Within weeks of the first US tariff orders in early 2025, premiers who had resisted harmonising truck tyre rules or letting a Nova Scotia winery ship to Ontario found themselves signing agreements they had deferred for years. The federal government went further, passing the One Canadian Economy Act in a single month and removing every federal exception to the Canadian Free Trade Agreement. This article examines what the barriers cost, what Bill C-5 and the provincial laws actually change, how far mutual recognition has advanced, and where the remaining friction lies. It is part of the Canada Company Stories hub.

How much do interprovincial trade barriers really cost Canada?

The honest answer is that nobody knows precisely, but the credible estimates all run into the tens of billions of dollars a year. The federal government’s own figure, repeated in every 2025-2026 announcement, is that eliminating all federal, provincial and territorial barriers could raise GDP by up to C$200 billion over time, about C$5,100 per person. The Macdonald-Laurier Institute puts the range at C$110 billion to C$200 billion annually, or up to 7.9% of GDP. A 2016 Senate committee estimated the cost at up to C$130 billion a year, and a 2019 IMF working paper found that removing barriers could lift GDP per capita by as much as 3.8%. More conservative recent work settles around C$92 billion.

The variation reflects what counts as a barrier. Economists sort them into four categories: natural (distance, geography), prohibitive (outright bans, such as on shipping wine across a border), technical (differing standards for truck weights or electrical equipment) and administrative (duplicate licensing, registration and certification). Only the last three are policy choices. The Canadian Free Trade Agreement of 2017 was supposed to address them but used a “negative list” model with more than 300 exceptions running to some 160 pages, prompting the Canadian Constitution Foundation to say no one should “confuse it with real free trade”.

Whatever the true number, the scale of internal commerce makes even small frictions expensive. More than C$530 billion in goods and services crosses provincial and territorial borders every year, and roughly one in three Canadian businesses bought or sold across a provincial line in the most recent survey year. Business investment per worker has fallen from a peak of about C$19,400 in 2014 to around C$15,000 in 2025, and Canadian workers receive 55 cents of new capital for every dollar invested per US worker. Internal fragmentation is one of the reasons a plant serving Ontario cannot easily be sized for all of Canada.

What was in Bill C-5, the One Canadian Economy Act?

Bill C-5 was introduced by Dominic LeBlanc in early June 2025, passed second reading on 16 June, cleared third reading on 20 June with its two parts voted separately, and received Royal Assent on 26 June 2025, a pace almost unheard of for economic legislation. The speed was the point: the Carney government wanted a visible response to the US tariffs before Parliament rose for the summer.

Part 1, the Free Trade and Labour Mobility in Canada Act, is built on a single principle. A good produced, used or distributed in line with a province’s or territory’s requirements is recognised as meeting comparable federal requirements; the same applies to services and to workers licensed or certified provincially, who may work in a comparable federally regulated occupation. Regulations announced on 17 November 2025 listed exceptions for health, safety and security, notably food regulated under the Safe Food for Canadians Act. The Act and regulations came into force on 1 January 2026, alongside a user guide for businesses.

Part 2, the Building Canada Act, is more controversial. It lets the Governor in Council add projects it deems to be in the national interest to a schedule, after which federal approvals are deemed granted and a designated minister can issue a single conditions document that stands in for the normal authorisations. Each listed project must be reviewed independently every year. The first project designated under it, on 1 October 2026, was the Pacific Link oil pipeline from Alberta to the British Columbia coast, the subject of our article on Alberta, Ottawa and the energy sovereignty debate, and the mechanism is run by the Major Projects Office.

The opposition split along predictable lines. The NDP argued the bill infringed Indigenous rights and lacked free, prior and informed consent; the Bloc Québécois objected to the rushed process and to Part 2 letting proponents bypass federal law; the Greens supported the trade aims but feared weaker provincial standards overriding federal ones. The Conservatives passed amendments adding conflict-of-interest recusal, a national security review and a public project registry, then said the bill still fell short. Miller Thomson and other law firms pointed out the central limit: Part 1 applies only to federally regulated sectors such as rail, telecommunications and banking. A provincially regulated plumber or trucker gains nothing from it.

Why did Ottawa remove all of its CFTA exceptions?

The federal government removed its last 20 exceptions to the Canadian Free Trade Agreement on 30 June 2025, eliminating all 53 federal carve-outs since the agreement began in 2017, chiefly to deny the provinces an excuse. Ottawa had already dropped 17 exceptions in July 2024 and 20 more in February 2025, which it then described as 64% of its total. The June 2025 move finished the job and let the Prime Minister tell premiers at the Saskatoon first ministers’ meeting that month that the federal side of the ledger was clear.

The provincial side is less tidy. Of the 296 exceptions in place across all governments on 1 January 2025, 94 had been removed by mid-2026, about 30%, and 39 of those were federal. That leaves 202 provincial and territorial exceptions outstanding. Most of the federal exceptions concerned procurement, which Ryan Greer of Canadian Manufacturers and Exporters notes addresses only a small share of the real barriers. His assessment is that “the real heavy lifting is to be done at the provincial level”.

That is where Ottawa’s leverage runs out. The constitution gives provinces jurisdiction over property and civil rights, which covers most licensing, consumer protection and professional regulation. The federal government can lead by example, fund the Statistics Canada Internal Trade Data and Information Hub to identify barriers, and chair the Committee on Internal Trade, but it cannot compel Alberta to accept Quebec’s winter tyre rule or vice versa.

What does the Canadian Mutual Recognition Agreement cover?

The Canadian Mutual Recognition Agreement on the Sale of Goods, approved at the Committee on Internal Trade meeting in Yellowknife on 19 November 2025, is the most significant provincial step so far. It provides that a good lawfully sold in one jurisdiction can be sold in any other without additional testing, certification or approval unless it appears on a listed exception. It covers appliances, industrial machinery, vehicles, electronics, furniture, clothing and household goods. It was signed by the federal government, all ten provinces and the Northwest Territories, with Nunavut and Yukon joining later.

The exclusions are the problem. Food, beverages including alcohol, tobacco, cannabis, plants and live animals are all left out. Michelle Wasylyshen of Ontario Craft Wineries called the exclusions a limit on consumer choice, and food is precisely the category where small producers most want national reach. In March 2026 the Committee committed to extend mutual recognition to services by the end of 2026, and on 27 August 2026 ministers ratified CFTA amendments that set a 30-day service standard for labour mobility applications and targeted an agreement in principle on model legislation for the autumn.

Provinces are now writing the agreement into their own law, and the pattern varies. Ontario’s Protect Ontario Through Free Trade Within Canada Act took effect on 1 January 2026, covering more than 50 regulatory authorities and roughly 300 certifications with a target of letting workers start within 10 days. British Columbia’s Bill 5, the Trade Recognition Act, received Royal Assent on 12 March 2026; it makes permanent the time-limited Economic Stabilization (Tariff Response) Act, allows goods and services lawfully sold anywhere in Canada to be sold in BC, and goes beyond the CMRA in scope, but its substantive provisions still await proclamation. Nova Scotia moved first in early 2025 with a reciprocal mobility law, and BC has bilateral cooperation arrangements with Ontario, Manitoba and Yukon.

Has alcohol finally been freed to move across provinces?

Partly, and later than promised. Alcohol is the barrier Canadians notice most because provincial liquor monopolies have for decades prevented a consumer in Ontario from ordering a case directly from a British Columbia winery. The Supreme Court’s 2018 decision in R v Comeau, upholding a New Brunswick fine for bringing beer across from Quebec, confirmed that the constitution’s free-trade clause does not override provincial liquor control.

In July 2025 every jurisdiction except Newfoundland and Labrador and Yukon signed a memorandum of understanding on direct-to-consumer sales, targeting operating agreements by May 2026. The target slipped. On 21 July 2026 nine provinces signed a direct-to-consumer operating agreement; eight are implementing it, British Columbia has committed to a full system by February 2027, and Quebec and Yukon helped design the framework without signing. The agreement covers personal orders from wineries, breweries and distilleries. Restaurants and retailers still have to buy through provincial liquor boards, a gap Corinne Pohlmann of the Canadian Federation of Independent Business has highlighted.

The alcohol file has an unexpected US dimension. When provinces pulled American bourbon and wine from shelves in March 2025 in response to the tariffs, the provincial liquor monopolies became a trade weapon, and the US Trade Representative later cited the bans as one reason for the July 2026 Section 338 tariffs. Carney has asked premiers to consider restoring US products as a gesture toward restarting talks. The irony is that the same monopoly power that blocks a Nova Scotia cider from Ontario is now a bargaining chip in the CUSMA review.

Why is trucking the hardest barrier to harmonise?

Trucking is hard because the rules are technical, embedded in provincial safety regimes and defended by each province’s engineers. Weight limits, axle configurations, tyre requirements, oversize-load flagging, permit systems and Quebec’s winter tyre mandate all differ. A carrier running Halifax to Vancouver may need to adjust loads or paperwork at several borders. Matt Poirier of the Retail Council of Canada says unevenly applied trucking rules raise costs for every retailer, and Greer calls trucking the clearest example of how slowly harmonisation has moved.

First ministers agreed in Saskatoon in June 2025 to reduce the differences, and the Committee on Internal Trade endorsed an interprovincial trucking memorandum in November 2025. The memorandum itself, signed on 12 June 2026, covers 14 areas, each of which must now be implemented jurisdiction by jurisdiction. Pohlmann’s reading is that provinces are working to align truck weights, tyres and flag requirements, but Poirier expects full harmonisation to take years. He also makes a structural point: Canada’s road network was built to carry goods north-south to the US, not east-west, so even perfect rule alignment leaves an infrastructure gap.

There are signs the tariff shock is changing flows regardless. Ontario Premier Doug Ford reported in January 2026 that Ontario exports moving through Port Saint John in New Brunswick had risen 153% in a year, more than two and a half times 2024 volumes, as shippers rerouted away from US ports. The railways profiled in our story on CN and CPKC are the other beneficiaries of an east-west reorientation.

What does mutual recognition mean for labour mobility?

For workers, mutual recognition means a certificate earned in one province should be accepted in another quickly, and the main change so far is a deadline. Pohlmann notes that provincial certification bodies have historically taken six months to a year to process an out-of-province application, during which a tradesperson often cannot work in their trade. The CFTA amendments ratified on 27 August 2026 set a 30-day service standard for labour mobility applications and committed governments to a digital verification solution for tradespeople.

The Forum of Labour Market Ministers endorsed an action plan in June 2025 to build faster recognition tools and to review the 13 occupations that retain “legitimate objective” exemptions, confirming whether each is still needed for public protection. Ontario already lets newcomers start work while certification is pending. British Columbia’s Labour Mobility Act provides mutual recognition for certified occupations, which is why its Trade Recognition Act carves those out.

The federal Act’s reach is narrower than the headlines suggest. It applies to federally regulated workplaces such as banks, railways, airlines and telecoms, which means a provincially certified electrician can now work on a federal rail project without re-certifying, but the same electrician still faces provincial rules on a hospital site. The construction sector, which supplies the workforce for housing initiatives described in our article on the housing crisis and Build Canada Homes, has the most to gain from faster provincial recognition.

Which businesses benefit most, and which still wait?

The clearest winners so far are manufacturers of standardised goods, which can now sell appliances, machinery, electronics and furniture nationally on the strength of one province’s approval, and tradespeople who move between provinces. The Greater Vancouver Board of Trade estimates that reducing barriers could add C$7.6 billion to British Columbia’s GDP and C$1.7 billion to provincial revenue. National retailers such as Canadian Tire and Dollarama gain from uniform product rules and trucking standards, since they run the same logistics network across every province.

The businesses still waiting are the ones the agreements exclude. Food processors remain subject to the Safe Food for Canadians Act and provincial inspection regimes; craft brewers, distillers and wineries have direct-to-consumer access in nine provinces for individuals only; cannabis producers are excluded entirely. Financial services were given a separate CFTA chapter with an agreement in principle in November 2025 and entry into force expected by May 2026. Professional services, from engineering to accounting, await the services mutual recognition agreement due at the end of 2026.

A further group is composed of firms that hoped the federal Act would help in provincial markets and found it did not. Concordia economist Moshe Lander’s judgement in January 2026 was that there is more urgency but no major breakthrough, and that established supply chains will take time to change even where rules allow it. The Hill Times reported in August 2026 that experts still saw “a lot left to do” more than a year after Ottawa dropped its barriers.

What can founders and investors learn from the One Canadian Economy agenda?

The central lesson is that external shocks can unlock domestic reforms that decades of reports could not, but the reforms arrive in the order of political ease, not economic value. Three further lessons apply.

First, read the jurisdiction before the headline. Bill C-5 was marketed as creating “one Canadian economy instead of thirteen”, yet its trade provisions bind only Ottawa. The real value for most businesses lies in Ontario’s and British Columbia’s statutes and in the Committee on Internal Trade’s agreements, which are where the exceptions are actually being removed. Investors assessing a Canadian company’s addressable market should count provinces with enacted mutual recognition, not signatories.

Second, exclusions reveal the political map. Food, alcohol and cannabis are excluded because they are where provincial revenue and local producers are most protected. A business in an excluded category should expect progress to be slow and should lobby provincially, as the Ontario craft wineries have done, rather than federally.

Third, internal and external trade policy are now a single system. The provincial liquor bans that hurt US producers became a Section 338 justification; the Building Canada Act created for pipelines is also the vehicle for the ports and rail links that shift trade east-west. Firms that follow the trade war with the United States should track the Committee on Internal Trade with the same attention, because the two files are being negotiated by the same ministers in the same months. Other federations face similar problems; readers may compare the Australian experience of harmonising state regulation.

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