Tangled in Red Tape: How Canada Can Free Its Internal Trade Market

April 1, 2025 – Interprovincial trade barriers continue to constrain Canada’s economic potential, and stronger regulatory cooperation is needed to spur growth, according to a new report from the C.D. Howe Institute.

In “Eyes on the Prize: A Game Plan to Speed Up Removal of Internal Trade Barriers in Canada,” Ryan Manucha highlights that interprovincial regulatory discrepancies — from electrical codes to occupational licensing, agricultural regulations, and technical safety standards — worsen issues that Canadians care about such as housing affordability, supply chain resilience, real wage growth, consumer choice, labour mobility, and industrial competitiveness.

The study shows how collaboration among federal, provincial, and territorial governments through the Regulatory Reconciliation and Cooperation Table (RCT) of the Canadian Free Trade Agreement (CFTA) can remove vexatious obstacles to commerce, opening more opportunities for Canadians across the country, strengthening Canada’s economic resilience.

“With global uncertainty and the ongoing trade crisis, now is the time to remove barriers to east–west commerce,” says Manucha, a lawyer and Institute Research Fellow. “The RCT has the potential to continue to unlock significant gains for the Canadian economy, but governments need to address capacity constraints, strengthen political engagement, and accelerate the reconciliation of divergent regulations.”

The CFTA replaced the 1995 Agreement on Internal Trade eight years ago in 2017, instituting the RCT as a venue to resolve regulatory differences between provinces and territories. While several successes have been achieved — such as reconciling standards for upholstered goods, certain vehicle weight restrictions, and construction codes — progress has often been slow. Some negotiations have stalled indefinitely. The report emphasizes that improvements to the RCT’s mandate and structure could accelerate progress and expand the scope of regulatory alignment.

Based on interviews with RCT and CFTA stakeholders from across the country, the report makes several recommendations, including stronger federal engagement to fund research, provide logistical support for negotiations, and subsidize in-person meetings for RCT representatives. It also calls for appointing senior-level officials with regulatory expertise as RCT representatives and tightening reporting requirements to ensure more transparent tracking of each province’s implementation of reconciliation agreements.

“We have seen a model for success with the reconciliation of construction codes, projected to bring up to $1 billion in savings by 2028,” explains Manucha. “If we scale that level of collaboration across other areas, we could generate even larger gains for businesses, workers, and consumers nationwide.”

The report also emphasizes the need for effective industry engagement to identify the most urgent and costly barriers. By hosting an annual business symposium and clearly articulating the economic benefits of resolving each regulatory misalignment, the RCT could foster greater accountability and sustained political will.

“At a time when the competitiveness of Canadian businesses is threatened by protectionist measures abroad, we cannot afford to let fragmented regulations at home undermine our economic potential,” says Manucha.

Read the Full Report

For more information, contact: Ryan Manucha, Research Fellow, C.D. Howe Institute; Percy Sherwood, Associate Editor and Communications Officer, C.D. Howe Institute, 416-407-4798, psherwood@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.