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Reforms That Stick: A Roadmap for Strengthening Canada’s Internal Market featured image

Reforms That Stick: A Roadmap for Strengthening Canada’s Internal Market

Daniel Teeter
Christopher Cotton
by Daniel Teeter, Christopher Cotton October 22, 2025

INTRODUCTION

Canada’s national market is less integrated than those of many peer countries. Goods, services and workers often face greater obstacles moving between provinces than they would crossing the equivalent state lines in the United States or international borders in the European Union. It has often been claimed that it was historically easier for Canadian companies to sell to customers in the United States than elsewhere in Canada.[1] These internal barriers continue to elevate costs, limit scale, and restrict economic growth.

The economic costs of such barriers are substantial. Some studies suggest that removing all internal trade barriers and other sources of friction may increase national income by as much as 8 per cent of GDP, or roughly $200 billion in income annually (Manucha & Tombe, 2022, p. 5). Others estimate that internal trade restrictions increase consumer prices by as much as 14.5 per cent compared to what they would otherwise be (Albrecht & Tombe, 2016). These large numbers capture not only regulatory inefficiencies but also structural and geographic frictions that no policy reform could eliminate. Although such headline figures have been used to advocate for reform, they tell us little about the benefits associated with the ongoing efforts to reduce interprovincial trade barriers: removing exemptions, streamlining regulations and harmonizing licensing requirements.

The potential benefits are likely much smaller than those shown in the headline numbers. One study estimated that these currently targeted restrictions are roughly equivalent to a 7 per cent tariff on goods crossing provincial borders (which is quite different from an 8 per cent impact on GDP) (Bemrose et al., 2017). Other studies indicate these small changes will result in gains measured in the billions, not hundreds of billions.[2] The mutual recognition agreements, harmonized licensing rules and targeted liberalizations — like direct-to-consumer wine shipments — indeed address actual costs and generate benefits for the economy. However, they alone will not produce sufficient increases in economic growth, or counteract major reductions in U.S. trade.

The question is therefore not whether the ongoing reforms are worth pursuing — they are — but how to move beyond piecemeal fixes to achieve more significant impact and ensure that any gains last. Experience shows that, once political momentum fades, new barriers appear and old ones re-emerge. Provinces may face political pressure to create exemptions and protections for local industries. Likewise, they will encounter concentrated political costs from removing protections, while the economic benefits will be spread out, nationwide and delayed. This collective-action problem helps explain why Canada’s internal market has stayed fragmented despite decades of effort (Cotton & Teeter, 2025).

This paper argues that achieving significant, lasting progress requires activating four interconnected policy levers. First, change the defaults so exemptions and delays automatically expire unless renewed. Second, make rules more effective by strengthening regulatory authority and enforcement. Third, provide support and incentives so provinces and firms see real benefits from liberalization. And fourth, think bigger by investing in infrastructure, innovation and talent to expand market size and competitiveness. These levers aim not only to remove current barriers but also to encourage more cross-province economic activity, and build a resilient framework that outlasts the current election cycle.

THE CURRENT STATE OF CANADA’S INTERNAL MARKET

Overview

Canada’s internal market is vital to national prosperity. When goods, services, labour and capital move freely across provincial borders, productivity increases, resilience strengthens and firms achieve the scale and market access needed to compete. However, Canada still operates more like a patchwork of regional economies rather than a unified market. Barriers persist in three primary areas: rules and administrative processes (e.g., licensing and duplicative certifications); infrastructure gaps (e.g., freight corridors and east-west electricity interties); and market-structure frictions (e.g., concentrated sectors and fragmented markets) (Cotton & Teeter, 2025). Consequently, there is uneven integration and missed economies of scale that a true national market would provide.

This unevenness is evident in both national trade patterns and provincial linkages, and it helps explain why barriers persist. As the following sections explain, international exports continue to dominate interprovincial exports as a share of total trade; provinces vary significantly in how much of their GDP depends on selling to other Canadians; and interprovincial flows tend to cluster regionally, with Ontario and Quebec serving as dominant hubs. We demonstrate how these patterns reveal the limitations of relying solely on incremental harmonization and emphasize the need for lasting institutional reforms that change incentives and default behaviors.

Trade dynamics and economic resilience

Panel A in Figure 1 shows a relative decline in the share of the domestic market in favour of foreign markets over the past 15 years. Panel B shows why that matters: international trade is far more volatile than trade within Canada. During the 2008 financial crisis, international exports fell sharply while interprovincial trade contracted much less; a similar pattern recurred during the COVID-19 shock. In short, the internal market has acted as a shock absorber when global demand falters.

That stabilizing role is an asset, but it is not guaranteed. As firms orient toward global supply chains, the relative weight of interprovincial trade has stagnated. If domestic linkages atrophy, Canada risks losing some of the scale, reliability and demand stability that a strong internal market provides. Making it easier for firms and workers to operate across provinces, whether by aligning rules, addressing bottlenecks, or reinforcing competition, can help preserve the internal market’s contribution to growth and resilience.

Provincial market integration

A practical gauge of integration is each province’s reliance on interprovincial trade, measured through interprovincial exports as a share of provincial GDP. This indicator captures how much of a province’s economy is directly tied to sales to other Canadians.[3] Figure 2 summarizes both the current landscape and the change since the Canadian Free Trade Agreement’s launch in 2017.

Two contrasts stand out. First, interior and smaller provinces tend to be more reliant on interprovincial sales, while large, port-oriented economies such as Ontario and British Columbia are more globally focused. Second, as indicated in the parentheses of figure 2, there has been notable reorientation since 2017; the North has deepened domestic linkages, commodity provinces have modestly increased reliance on Canadian buyers, and parts of Atlantic Canada have become less integrated. The policy implication is straightforward — barriers disproportionately burden provinces that depend most on the national market, and progress is most valuable where domestic linkages are deepest.

Mapping Canada’s internal trade network

Where do those interprovincial exports actually go? Figure 3 maps bilateral flows as shares of each province’s interprovincial exports. The pattern follows gravity-model basics.[4] Ontario and Quebec are dominant destinations, and regional clusters are pronounced in the West (e.g., British Columbia, Alberta) and the Atlantic. Smaller provinces are particularly dependent on a narrow set of partners, amplifying the cost of any regulatory mismatch or delay.

Research finds that Atlantic provinces face some of the country’s highest interprovincial trade frictions (barriers not fully explained by geography alone), which accounts for the regional isolation seen in the data (Agnosteva et al., 2019; Lapham & Teeter, 2023). For policy development, the recommendation is to pair rule simplification and mutual recognition with both infrastructure that reduces physical frictions and competition policy that keeps dominant networks contestable. Otherwise, regional clustering can harden into fragmentation.

Institutional weaknesses

Canada’s principal instruments for managing the internal market are the Canadian Free Trade Agreement (CFTA) and its Regulatory Reconciliation and Cooperation Table (RCT). On paper, the CFTA’s economy-wide coverage — via a negative-list approach, which liberalizes all sectors except those specifically excluded — and the RCT’s mandate to align rules across governments should deliver steady progress. In practice, results have been slower and less predictable than intended.

Three institutional problems recur.

  • Costly, uncertain enforcement. For many firms, especially small and medium enterprises (SMEs), the CFTA’s dispute process is challenging to use. Legal costs are high, timelines are uncertain, and even successful cases typically result in penalties paid into general revenues rather than compensation for the harmed party (Manucha, 2020, pp. 8-13). This weakens private incentives to pursue cases and dulls the agreement’s bite.
  • Persistent carve-outs and exemptions. Although the federal government and some provinces have reduced their lists of exceptions, a patchwork of exemptions remains. These carve-outs limit the reach of a negative-list agreement and invite new barriers when political attention wanes.
  • A reconciliation engine that lacks bite. The RCT’s process (identify an issue, negotiate a reconciliation agreement, implement across governments[5]) has struggled under thin capacity and rotating leadership. The Internal Trade Secretariat, which supports the RCT, remains small for a G7 economy (Pittman et al., 2019, pp. 5, 7),[6] and public work plans have been hard to navigate. Progress has therefore been uneven; by mid-2020s counts, three years after the CFTA came into force, less than a quarter of the identified reconciliation items had been fully implemented by all jurisdictions (Yoo & Whidden, 2025, p. 7).

Behind these operational challenges lies a familiar political economy: the costs of dismantling protections that apply to specific sectors are concentrated and immediate, while the benefits of an open internal market are diffuse, national and realized over time. Voluntary co-operation and consensus processes can therefore stall, especially when there are multiple veto points and few automatic deadlines. And jurisdictions that support reform in one period may stop enforcing it, or actively seek exemptions, in the next. This means that reforms tend to be episodic and reversible: they move forward when political momentum peaks and slow or move backward when it fades.

This diagnosis necessitates the policy approach advanced in the next section. To convert sporadic progress into durable gains, Canada needs: 1) default-changing rules that shift the burden of proof onto maintaining barriers; 2) credible enforcement that lowers access costs and clarifies remedies; 3) aligned incentives that reward verified barrier removal and penalize backsliding; and 4) big-lift investments in infrastructure, innovation, and talent that expand the payoff to integration. The empirical patterns in figures 1 to 3 show why such a policy approach is needed; the institutional experience with the CFTA and RCT indicates why that approach must be designed to endure.

FOUR LEVERS FOR SUBSTANTIAL, LASTING CHANGE

Canada can unlock far more value from its internal market — more than incremental harmonization alone will deliver. The strategy for reform should entail removing rules-driven frictions which slow firms and workers as they cross provincial borders, alongside executing big-lift investments and reforms that both enable nationwide economic growth and ensure gains are maintained across political cycles.

This section organizes the recommendations under four mutually reinforcing levers: 1) change the defaults and status quo; 2) increase regulator power; 3) provide support and incentives; and 4) think bigger with infrastructure and market-deepening investments.

Lever 1: Change the defaults and status quo

Sunset every exemption

Special interest exceptions undermine the effectiveness of any trade agreement (Robertson et al., 2025, p. 5). Sunset rules, if implemented, make expiry the default for all exceptions. They can be set so that the trade agreement exemptions granted to industries, companies, or markets lapse after a fixed period of time (e.g., three years) unless they are explicitly renewed. This makes continued protectionism a deliberate decision rather than a default, and forces periodic, public justification which can increase the political cost of maintaining unjustified carve-outs.

Other jurisdictions show this can work. Australia’s automatic mutual recognition system ensures that a worker licensed in one state is also deemed licensed in others, unless an exemption is specifically justified. The EU’s “country of origin” principle applies a similar logic to goods and services. Both examples show that defaults can be structured to minimize regulatory arbitrage while still allowing narrow, transparent carve-outs.

Legislate mutual recognition with a clock

The desire for reform on credential recognition is nearly unanimous, with 90 per cent of businesses supporting reform (Loeppky et al., 2024, p. 20). Almost half of all firms that hire across provinces report challenges with certification (Yoo & Whidden, 2025, p. 2). To address this, governments can legislate a “deemed recognized” standard where an out-of-province credential would be automatically approved if a regulator fails to process an application within a set time frame.

This mirrors Australia’s proven approach, where workers gain deemed registration after notification to local authorities, with regulators having just 30 days to object and provide written justification for any rejections. Within two years of implementation, over 15,000 Australians successfully used this system to work across state boundaries (Manucha, 2025b). This approach would build on positive momentum from provinces like Nova Scotia, Alberta, and Ontario, which are already advancing new legislation to lower barriers to labour mobility (Robertson et al., 2025, p. 8). This reform shifts the default from inaction to approval, and establishes an enforceable standard whose compliance can be tracked on a public dashboard, ensuring transparency and holding regulators accountable.

Explore the potential for a national procurement platform

A nationwide procurement platform that all federal, provincial and local governments could use by default would increase standardization in purchasing. It could reduce fixed selling costs for SMEs, broaden the bidder pool for procurement contracts, and potentially lower costs to taxpayers (Cotton & Teeter, 2025, p. 5; Loeppky et al., 2024, p. 7). The system could be built on the federal procurement system in consultation with the provinces. While such a system promises benefits in theory, its feasibility and likely buy-in would need to be established before undertaking the investment.

Lever 2: Increase regulator power (make rules bite)

Fix dispute resolution under the CFTA

CFTA’s dispute resolution system is fundamentally flawed: its government-centric design and high costs make it largely inaccessible to the firms harmed by trade barriers (Robertson et al., 2025, p. 27). Under the CFTA’s rules, a private business cannot always unilaterally initiate a dispute. In many cases, it must first ask either its own provincial or federal government to initiate or approve proceedings, or may be required to post security (i.e., an upfront payment) to cover potential operational costs of the dispute panel (The Governments of Canada, Ontario, Quebec, et al., 2025, pp. 116, 162). The inaccessibility of this process is stark: in the eight years since the agreement’s inception, only one case has been initiated by a private party, and it was summarily dismissed before its merits were considered (Internal Trade Secretariat, 2025).

A potential solution lies in re-engineering this process to be genuinely accessible to private actors by removing the financial disincentives that currently push disputes into the political realm. This can be achieved through proven reforms such as adopting a “loser-pays” principle for cost allocation and ensuring private parties can directly enforce monetary awards (Manucha, 2020, pp. 10-15). These changes would create a viable, non-political path for businesses, transforming disputes from political standoffs into straightforward fiscal calculations, while increasing incentives for compliance.

Establish an Internal Market Commission (IMC) with binding implementation

Canada must establish a credible, arm’s-length Internal Market Commission (IMC) that not only identifies barriers but ensures they get addressed through binding reform. The federal government should create this body through dedicated legislation with joint federal-provincial-territorial governance: federal funding for operational independence, but shared board appointments to ensure legitimacy across jurisdictions (Pittman et al., 2019, p. 7).

The IMC would anchor a comprehensive accountability pipeline, spanning from analysis to implementation. Its core mandate would be to conduct systematic barrier research, provide independent economic impact analysis, and publish an authoritative annual State of the Internal Market report that ranks barriers by economic significance. These priority recommendations would then inform the Reconciliation and Cooperation Table process, creating an evidence-based agenda for negotiations rather than ad hoc discussions.

To ensure negotiated solutions get implemented, any consensus items emerging from RCT discussions of IMC-identified barriers should automatically become binding CFTA annexes with predetermined effective dates. This “auto-annexation” mechanism resets the default from optional co-operation to automatic implementation, while stalled negotiations escalate annually to First Ministers on an “adopt or explain” basis (Manucha, 2025a, pp. 8-9).

The accountability loop closes with the IMC monitoring compliance against these new annexes and existing CFTA obligations. The cabinet-level Committee on Internal Trade would face a legal requirement to publicly respond to the IMC’s annual compliance findings using the same “comply or explain” framework — either committing to concrete remedial action or justifying continued noncompliance. This creates a continuous cycle where the most economically significant barriers are identified, negotiated, implemented and monitored through a single integrated system, making it politically unsustainable to ignore internal trade commitments.

Lever 3: Provide support and incentives

Establish an Internal Trade Liberalization Fund

To overcome the core collective action problem that stalls internal trade reform, the federal government should establish a dedicated Internal Trade Liberalization Fund that transforms provincial incentives from zero-sum competition to collaborative gain-sharing. The costs of the fund may be offset by increased revenue from economic growth associated with trade liberalization.[7]

The fund’s effectiveness depends on rigorous, independent verification to prevent capture by special interests, or the rewarding of superficial changes. The Department of Finance could administer the Fund’s disbursements, but eligibility and certification should rest exclusively with the IMC, ensuring that Ottawa cannot politicize which provinces qualify. Only barriers identified on the IMC’s annual priority list would qualify for funding, and payments would be triggered solely by the IMC’s formal certification that a province has verifiably and sustainably eliminated a high-impact trade barrier. The Commission assessment would have real financial consequences, making its findings impossible for provinces to ignore.

To ensure accountability and value for money, the fund should operate under a published payment schedule with transparent criteria, include an equity floor to ensure smaller provinces can meaningfully participate, and feature automatic clawbacks if eliminated barriers re-emerge within five years (Cotton & Teeter, 2025, p. 7). The result would be a powerful financial incentive for provinces to tackle their most economically damaging trade barriers while ensuring that reforms are genuine, sustained and nationally beneficial.

Set up portable credential bridging programs

Portable credential bridging programs help internationally or interprovincially trained professionals meet Canadian licensing or workplace standards through targeted training, mentoring, and workplace preparation. They speed entry into shortage fields such as health care, skilled trades and technology, without requiring new degrees or full regional certifications. They increase the speed at which skilled workers gain access to local labour markets, reducing time delays and training costs, making them a strong complement to recognition reforms.

Lever 4: Think bigger with infrastructure, innovation and talent

Harmonizing rules and standards can deliver modest improvements, but lasting and transformative gains depend on strengthening the foundations of Canada’s economy. This means investing in infrastructure that lowers costs and increases reliability, fostering an innovation system that translates ideas into commercial success, increasing competition within markets, and ensuring that Canada remains an attractive place for top firms and talent to grow.

Improve infrastructure for a seamless economy

East-west electricity interties would allow Quebec and Manitoba hydro to flow into Ontario and the Prairies, expanding access to cheaper, cleaner and more reliable power. At present, nearly half of Quebec hydro exports are directed to U.S. markets, even as neighbouring provinces rely on higher-cost, higher-emission generation. Redirecting more of this clean, dispatchable power across provincial borders would lower wholesale price volatility, reduce overall emissions and improve the reliability of supply. Just as importantly, a more integrated electricity market would strengthen Canada’s investment case; firms in energy-intensive industries often choose jurisdictions based on long-term access to affordable, low-carbon power. By addressing one of the country’s most visible infrastructure gaps, interties would advance climate goals while anchoring new industrial activity and jobs at home (Cotton, 2025).

Additionally, there are substantial economic gains to be had from improving transportation infrastructure to ensure access to international markets and reduce the costs and delays of domestic trade. This requires identifying and eliminating transportation choke points, such as single-track rail through the Rockies, port and terminal congestion, and limited Prairie grain corridor capacity. Infrastructure investments to improve transportation capacity will lead to time savings, cost reduction and increased trade volumes, yielding productivity gains on a scale far beyond marginal harmonizations (Cotton, 2025). Investments in digital infrastructure can also generate substantial returns by ensuring access to markets and facilitating the growth of Canada’s digital economy.

Ensure innovation that scales

Investments in research and innovation can drive broad economic growth by creating high-paying jobs, reducing costs for firms, enhancing public services and improving competitiveness (Adamowicz et al., 2025). To achieve sustained productivity growth, Canada needs to move beyond piecemeal innovation initiatives and build a co-ordinated, national system. This requires clear roles and deliberate action across levels of government, research institutions, and the private sector.

The federal government could lead on fiscal tools, making the Scientific Research and Experimental Development (SR&ED) tax credit fully refundable for young firms, and simplifying access to federal innovation programs so that startups can deploy capital when they need it most. Innovation, Science and Economic Development Canada (ISED) can be tasked with consolidating existing programs into a coherent framework and publishing a transparent strategy that prioritizes sectors where Canada has comparative advantages. Provinces and territories could align their R&D grant and commercialization supports with this national framework to avoid duplication and provide predictability. A federal-provincial forum, chaired by Finance Canada and ISED, could review program overlap annually and agree on common eligibility rules and evaluation metrics.

At the same time, universities and research hospitals should be funded through competitive grants to scale up world-class labs while industry consortia can be incentivized (e.g., via matching funds or procurement commitments) to co-invest in applied research. Crown corporations such as the National Research Council, and organizations like Innovation Superclusters can serve as conveners, ensuring that discoveries made in Canadian labs are translated into Canadian companies, jobs and exports, rather than being lost abroad.

Together, these actions would channel resources toward the most promising firms and research, while curbing the tendency for support programs to scatter funds across low-impact projects. By making commercialization and growth the default outcome, and by anchoring responsibility in federal Finance and ISED leadership, working with provincial counterparts, Canada would move closer to a truly national innovation ecosystem capable of driving trade and economic growth.

Attract and retain businesses and talent

Innovation and long-term growth depend not only on ideas and capital but also on people. Canada can strengthen its domestic talent pipeline by investing in education systems, training and world-class research opportunities, while also attracting and retaining mobile talent and foreign investment. When skilled Canadians or entrepreneurs leave to build businesses elsewhere (or when global innovators choose competing markets), Canada loses both the investment made in developing that talent and the future jobs, firms, and tax revenues those individuals could have created at home.

A competitive tax environment, affordable housing, low crime rates and high-quality public amenities — health care, education, infrastructure, etc. — are thus not only social goals but also economic necessities (Adamowicz et al., 2025). These factors shape Canada’s appeal to global firms and workers, while also influencing whether domestic talent chooses to remain and contribute to local innovation. By pairing strong innovation supports with a compelling quality of life and clear pathways for skill development, governments can foster a cycle in which talent and capital stay, ideas scale, and the benefits of growth are broadly shared. In this sense, talent policy is inseparable from competitiveness, anchoring Canada’s innovation ecosystem with both homegrown and international contributors.

Achieve durability through scale and investment

Attracting and anchoring more growth-oriented firms in Canada not only raises investment and productivity but also strengthens the durability of internal market reforms. Companies that operate across provinces have a direct stake in there being seamless national rules; they become powerful advocates against the reintroduction of barriers. In this way, a more fully integrated market and a stronger investment climate reinforce one another. Access to a Canada-wide market makes the country more attractive to mobile capital, and the presence of national-scale firms creates constituencies that help prevent backsliding. Building an economy where firms can grow across provinces is thus both an economic and institutional strategy, aligning private incentives with the public goal of sustaining openness.

CONCLUSION

Canada’s history of internal trade reform is marked by cycles: bursts of political attention followed by periods of drift. This stop-start pattern has yielded incremental progress but has stopped short of developing a low-friction, integrated national market. The convergence of federal and provincial attention on internal trade in 2025 creates a rare opportunity for lasting reform. For too long, Canada’s internal market has been managed through cycles of temporary focus and drift, producing incremental gains that prove reversible once political will fades. This time can be different if reforms are anchored in stronger defaults, enforceable rules, credible incentives and forward-looking investments.

The four levers outlined in this paper provide a roadmap. Changing the defaults (through sunset clauses and automatic recognition clocks) shifts the burden of proof onto those who want to keep or re-create barriers. Strengthening regulator power (by fixing dispute resolution and establishing an Internal Market Commission) ensures that the rules already on the books have real bite. Providing support and incentives (including an Internal Trade Liberalization Fund and targeted credential bridging) aligns political and fiscal payoffs with national gains. And thinking bigger (with investments in transportation, power, innovation, and talent) can grow the economy and attract investment, making progress both more valuable and more challenging to reverse.


Notes

[1] Such claims are consistent with the observation that U.S. sales are higher than out-of-province sales for the average Canadian business (Cotton & Teeter, 2025).

[2] The GDP gains from eliminating trucking barriers have been estimated at $1.6 billion each year, while analysis of the New West Partnership Trade Agreement found average plant-level productivity gains of 1.97 per cent for member provinces (Manucha & Tombe, 2024; Teeter, 2024).

[3] It abstracts from firm size, sector mix and price effects but remains a useful proxy for market engagement.

[4] In trade economics, gravity patterns reflect the pull of economic size and the frictions of distance. Here, they show up as large provinces attracting outsized shares of trade, and neighbouring provinces transacting heavily with one another.

[5] In practice, detailed work is delegated to federal-provincial working groups; timetables vary and are often opaque to stakeholders.

[6] A 2022 federal action plan promised “enhanced funding,” but the public-facing team remains limited (Canadian Free Trade Agreement, 2025; Government of Canada, 2025).

[7] Perrault and Haley (2022, pp. 1, 6) estimate that removing internal trade barriers can increase annual federal tax revenues by an estimated $15 billion.


REFERENCES

Adamowicz, W. L., Boadway, R., Breznitz, D., Cotton, C. S., Elgie, S., Forget, E., Gold, R., Jones, E., Lang, F., de Marcellis-Warin, N., McCabe, C., Peacock, S., & Tedds, L. (2025). Renewing the social contract and fostering innovation to build a stronger post-covid economy. In C. Cotton (Ed.), Lasting disruption: Health, economic, and social impacts of covid-19 in Canada (chap. 14). McGill-Queen’s University Press.

Agnosteva, D. E., Anderson, J. E., & Yotov, Y. V. (2019). Intra-national trade costs: Assaying regional frictions. European Economic Review, 112, 32-50.

Albrecht, L., & Tombe, T. (2016). Internal trade, productivity and interconnected industries:
A quantitative analysis. Canadian Journal of Economics, 49(1), 237-263.

Bemrose, R. K., Brown, M. W., & Tweedle, J. (2017). Going the distance: Estimating the effect of provincial borders on trade when geography matters. Statistics Canada.

Canadian Free Trade Agreement. (2025). Internal Trade Secretariat.
https://www.cfta-alec.ca/contact-us/internal-trade-secretariat/

Cotton, C. (2025, June 9). Despite the hype, transforming the Canadian economy requires more than modest reform. The Hill Times.

Cotton, C. S., & Teeter, D. (2025). Breaking down Canada’s internal trade barriers. JDI Policy Insight No. 25-0301.

Government of Canada. (2025). Timeline of federal actions and investments. Retrieved ­from
https://www.canada.ca/en/intergovernmental-affairs/services/internal-trade/timeline-federal-leadership-advancing-internal-trade-2017-2024.html

Internal Trade Secretariat. (2025). Dispute resolution.
https://www.cfta-alec.ca/dispute-resolution/

Lapham, B., & Teeter, D. (2023). A gravity analysis of inter-provincial trade. Queen’s Economics Department Working Paper No. 1507. Queen’s University.

Loeppky, K., Robertson, D., Yunis, J., & Whidden, B. (2024). The state of internal trade: Canada’s interprovincial cooperation report card, 2024 edition. Canadian Federation of Independent Business.

Manucha, R. (2020). Internal trade in focus: Ten ways to improve the Canadian Free Trade Agreement (Commentary No. 573). C. D. Howe Institute.

Manucha, R. (2025a). Eyes on the prize: A game plan to speed up removal of internal trade barriers in Canada [E-Brief]. C. D. Howe Institute.

Manucha, R. (2025b). Unlocking Canada’s economy: Why mutual recognition is the key to supercharging internal trade. Macdonald-Laurier Institute.

Manucha, R., & Tombe, T. (2022). Liberalizing internal trade through mutual recognition: A legal and economic analysis. Macdonald-Laurier Institute.

Manucha, R., & Tombe, T. (2024, May). Roadblocks ahead: Internal barriers to trade in Canada’s truck transportation sector. Macdonald-Laurier Institute.

Perrault, J.-F., & Haley, J. (2022). Picking up the twenties: A simple proposal to reduce interprovincial trade barriers. Scotiabank.

Pittman, S., Dade, C., & Hall Findlay, M. (2019). Toilet seats, trucking and other trade
tie-ups: A new solution to the old problem of Canadian internal trade.
Canada West Foundation.

Robertson, D., Yoo, S., Whidden, B., & Basta, F. (2025). The state of internal trade: Canada’s interprovincial cooperation report card, 2025 edition. Canadian Federation of Independent Business.

Teeter, D. (2024). The impact of internal trade liberalizations on plant productivity and markups. Queen’s Economics Department Working Paper No. 1522. Queen’s University.

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Yoo, S., & Whidden, B. (2025). Stuck at the border: How paperwork hinders labour mobility for small businesses. Canadian Federation of Independent Business.

The essay by Daniel Teeter (PhD, economics) and Christopher Cotton (PhD, economics) explores four policy levers for sustainably improving interprovincial trade in Canada. The authors argue that without these levers, the federation will be stuck with short-lived reforms and our internal trade patterns will not change in any meaningful or lasting way. To implement effective and permanent reforms, the authors propose a four-step roadmap: 1) change the default settings so that exemptions and deadlines expire automatically if they are not renewed; 2) make the rules more effective by strengthening regulatory authority and enforcement; 3) provide support and incentives so that provinces and businesses see the real benefits of liberalization; and 4) invest in infrastructure, innovation and talent to increase market size and competitiveness. These steps are a prerequisite for any significant and lasting progress in interprovincial trade.

This essay was published as part of the series Barriers and Bridges: Rethinking Trade Within the Federation published under the direction of Valérie Lapointe by the Centre of Excellence on the Canadian Federation. Editorial co-ordination was done by Étienne Tremblay, proofreading by Zofia Laubitz, production and layout by Chantal Létourneau and Anne Tremblay.

A French version of this essay is available on the Centre’s website under the title Pour des réformes durables : une feuille de route pour renforcer le marché intérieur canadien.

Daniel Teeter is an economist at Global Affairs Canada specializing in trade policy. He holds a PhD in Economics from Queen’s University, where his dissertation focused extensively on interprovincial trade barriers and their economic effects. His doctoral research examined how internal trade agreements influence firm-level productivity across Canadian provinces and measured the scale of internal trade barriers and their impact on trade flows between provinces.

Christopher Cotton, PhD, is a Professor of Economics at Queen’s University, where he holds the Jarislowsky-Deutsch Chair in Economic & Financial Policy and serves as Director of the John Deutsch Institute for the Study of Economic Policy. He is a senior adviser at Limestone Analytics and regularly partners with public and private sector organizations to study the economic, financial, and social impacts of policy.

Daniel Teeter is grateful for research support from the John Deutsch Institute for the Study of Economic Policy, and Christopher Cotton is grateful for support from his position as the Jarislowsky-Deutsch Chair in Economic and Financial Policy at Queen’s University.

To cite this document:

Teeter, D. & Cotton, C. (2025). Reforms that stick: A roadmap for strengthening Canada’s internal market. Institute for Research on Public Policy.


The opinions expressed in this essay are those of the authors and do not necessarily reflect the views of the IRPP or its Board of Directors.

They also do not necessarily represent those of Daniel Teeter’s employer, Global Affairs Canada.

If you have questions about our publications, please contact irpp@irpp.org. If you would like to subscribe to our newsletter, IRPP News, please go to our website at irpp.org.

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Barriers to interprovincial trade are falling. What comes next might be even more important

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