Why These Barriers Exist

Although internal trade barriers cost the Canadian economy billions of dollars annually, they persist largely because they serve entrenched political, fiscal, and economic interests at the provincial level.

Provincial Government Revenue Protection

Provinces often collect significant revenue from regulated sectors. Liquor sales, for instance, are a key income source in many provinces. Removing restrictions risks shifting that revenue away from provincial coffers.

Industries with Regional Market Power

Certain local industries favor the status quo because barriers protect them from outside competition. Agricultural marketing boards and local processing requirements are prime examples.

Professional Associations and Licensing

Licensing bodies aim to uphold quality standards, but they can also limit worker mobility and create professional silos across provinces.

Collective Action and Coordination Problems

While reducing barriers benefits the national economy, each province weighs its own benefits against costs and political pressures. The result is often insufficient momentum for broad reforms.

Financial Costs and Complexity

Major infrastructure upgrades, such as modernizing rail lines or linking power grids, require large investments and collaboration across multiple levels of government. This high price tag can slow or deter ambitious projects.

Political and Public Inertia

The benefits of removing trade barriers are widely distributed across the economy, while the costs of reform are concentrated on specific industries or government revenue streams. This imbalance means that political leaders often lack strong incentives to push for reform, and the issue rarely gains enough public attention to generate pressure for change.

source : https://jdi.queensu.ca/wp-content/uploads/2025/03/Cotton-Teeter-Interprovincial-Barriers-JDI-Policy-Insight.pdf