Opinion: The great interprovincial trade barrier mirage

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Charles Napier Sturt – I want you to remember this name. Sturt was a British military officer who made a great contribution to the Australian Ministry of Home Affairs map. He and other members of the official expedition in 1844 risked their lives to try to find the deep freshwater inland sea in the Australian desert area. Surely the sturt of the ocean survival, the expedition consists of a ship and some sailors to sail it (!). Of course, this idea is a fantasy.

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Sturt’s story has a useful course for Canada in 2025. Although we have browsed the turbulent regional and global trade landscapes in the southern border, Canada must also avoid the guidance of the guide to the illusion of ease or comforting phantom guidance.

That’s why I feel like I have to respect the chorus of Canadian economists, elected officials, think tanks, experts, and other choirs that have been hyping up a specific response to the U.S. tariff threat: They claim to lower Canada’s “provincial trade barriers” to Canada, which they claim will add as much as $200 billion to our domestic economy. If true, the amount would be greater than the expected impact of Trump’s tariffs.

What are these obstacles? A recent report by Royal Bank of Canada (RBC) defines it as “many factors that prevent a business or another provincial worker from entering the provincial market.” According to the RBC, this includes “regulatory and administrative differences such as licensing identification, security certification and changes in technical standards.”

The potential $200 billion in annual economic growth sounds too good to pass. But this is where the hype started to disappear after a closer inspection. The $200 billion figure is an estimate in itself. As the economic team at CIBC recently commented on the question: “Remember that economists are not actually able to measure each obstacle and study it at once. So, they naturally look for some circular way to estimate the (cost) barriers.”

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“Essentially, these (estimates) revolve around trying to explain the trade flow, looking at the size of the market and its distance, then looking at what is not explained, and essentially assigning it to trade barriers.”

So the “estimation” behind this $200 billion figure is actually a prediction of what may (or may not) be achieved after removing a particular obstacle.

In other words, it is probably the theoretical significance of the ideal situation of Canadian internal trade.

It’s kind of like Charles Sturt’s persistent insistence that there should be a freshwater inland lake somewhere in central Australia.

There is another very reasonable reason to question the urge to put inter-provincial trade barriers on the Canadian economy’s “to-do list”. We should also immediately focus on other opportunities in improving our economic resilience, and objectively higher potential. It is worth noting that they all involve diversifying our products, not just the market.

For example, to increase our current trade gap, we need more high profits, products made in Canada and value-added exports from natural resources we sell in more markets. We must also reform our tax laws to support the creation of entrepreneur-led companies in the innovation economy and develop strategies to help new companies scale up, increase inventory of our valuable intellectual property, and maintain control over important data.

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The zombie chase problem keeps us from focusing on where our public policies and public discourse need to go. Specifically, how do we build a resilient, monarch, higher value-added economy that reflects our human and natural potential?

This economy begins with sovereign digital and communication infrastructure, value-added energy and critical mineral solutions, and savvy import substitution, which is the basis for transparent spillover analysis of all public sector investments. So why don’t we talk about these goals with the same vitality?

Are there a lot of potential internal economic vitality that can be unlocked? Yes. Should we try to unlock it with smart policy changes? really. At present, chasing new shiny items is a luxury we can’t afford while we need to drastically shift how Canada manages its economy.

Knock down inter-provincial trade barriers, trace back to the Federation and survived the previous wave of reform attempts – we will reach those in due time. Today, our most pressing task is to position a small open economy like Canada as a success in a highly competitive global market, which means going beyond our relatively small internal markets and focusing on where the greatest growth potential lies.

This is a time to achieve big goals – establish big rather than small goals.

John Ruffolo is the founder and managing partner of Maverix Private Equity, a private equity firm focused on technology-enabled technology growth and disrupting investment strategies and co-founder and vice-chair of the Canadian Council of Innovators.

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