Canada Makes Trade Between Its Provinces Easier to Reduce Reliance on US

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(Bloomberg) — Canada and its 13 provinces and territories agreed to knock down more hurdles to trading internally, as the country tries to reduce its reliance on the US amid a punishing trade war.

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The Canadian Mutual Recognition Agreement signed Wednesday applies to all goods except food, and will take effect in December, according to a statement from the province of British Columbia.

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If merchandise “is good for you in your province, well, it should be good for all of us in other provinces,” Vic Fedeli, Ontario’s Minister of Economic Development, said in a video interview from the sidelines of a trade meeting in Yellowknife, Northwest Territories. “While we recognize that your product is slightly different, we acknowledge that it’s equivalent.”

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He gave the example of safety vests for a construction company working across provincial boundaries. “Yours might have an X on the back, and ours might have a cross on the back,” he said. Ontario would now allow the out-of-province vests, saving a construction firm from buying extra gear.

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Canada continues to estimate a potential benefit of C$200 billion ($142 billion), or about 6% of the country’s gross domestic product in the second quarter, from its broader effort to remove internal barriers. Past analysis from economists, however, peg the uplift more modestly, with a 2019 paper suggesting the maximum boost is 4%.

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Prime Minister Mark Carney has repeatedly said there should be “one Canadian economy, not 13.”

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Fedeli said Ontario’s share of the benefit will be about C$23 billion, because it already has quite a lot of interprovincial trade.

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Earlier this year, most provinces and territories committed to allow cross-border alcohol sales directly to consumers — seen as delivering an immediate benefit to ordinary Canadians — by May 2026.

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The Canadian Federation for Independent Business applauded Wednesday’s agreement, calling it “a major step forward” in a statement. But the group pressed officials to further expand the deal to include services, food and alcohol.

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As commerce has increased between Canada, the US and Mexico in the wake of North American economic integration, trade within Canada has fallen as a proportion of total trade, down to 35.2% in 2023 compared to 51.9% in 1983, according to Statistics Canada.

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In April, Ontario was the first province to withdraw all of its exceptions under a country-wide free trade agreement that’s been in effect since 2017. On Monday, Canada’s government said it will soon publish more details about how it plans to remove barriers.

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—With assistance from Thomas Seal.

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