Federal investments to improve internal trade

Leading economists have highlighted increasing internal trade as one of the most important ways in which Canada can ensure its economy continues to grow, remain globally competitive, and recover from the Covid-19 pandemic.

Since the Canadian Free Trade Agreement (CFTA) came into force in 2017, Canada’s federal, provincial, and territorial governments have significantly increased internal trade by reducing regulatory barriers in many sectors — namely in agri-food, transportation, and occupational health and safety.

What is a barrier to internal trade?

Barriers to internal trade can be divided into four broad categories:

• Natural: Geographical barriers such as distance and configuration of borders.
• Prohibitive: Provincial and territorial laws or requirements that unintentionally prohibit internal trade, notably restrictions on cross-border purchases of alcohol.
• Technical: Sector-specific regulations that differ across provinces/territories such as vehicle weight standards.
• Administrative: Provincial/territorial permits/licensing/other paperwork requirements imposed on businesses that operate in multiple jurisdictions.

Federal, provincial and territorial governments do not impose tariffs on goods and services that cross internal borders, but there are a several subtle barriers that limit the ability to buy, sell, and transport goods and services across the country or work in other provinces.

To accelerate the reduction of barriers to internal trade, the Government of Canada has made several key investments.

Budget 2021

In Budget 2021, the Government of Canada announced a commitment of $21 million to strengthen internal trade by identifying and removing barriers to trade and ensuring a stronger domestic economy that will help to create jobs, expand access to Canadian goods and services, and build a more prosperous economy.

Specifically, the Budget included the commitments to:

• work with provincial and territorial partners to enhance the capacity of the Internal Trade Secretariat, which supports the Canadian Free Trade Agreement, to assist in reducing trade barriers within Canada.
• advance work with willing partners to create a repository of open and accessible pan-Canadian internal trade data to identify barriers, including licensing and professional certification requirements, so we can work together to reduce them.
• pursue internal trade objectives through new or renewed discretionary federal transfers to provinces and territories.

Budget 2022

Budget 2022 reiterated that, over the coming year, the government would continue to evaluate and, where appropriate, remove federal exceptions to the CFTA, as well as take action to conclude outstanding internal trade negotiations.

The Government of Canada also announced additional investments that support internal trade. In Budget 2022, the Government of Canada:

• introduced the new Labour Mobility Tax Deduction, which provides tax recognition up to $4,000 per year on eligible travel and temporary relocation expenses to eligible tradespersons and apprentices.
• announced $26.2 million in additional funding to increase loan forgiveness for family doctors and nurses in rural and remote communities under the Canada Student Financial Assistance Program.
• expanded the Foreign Credential Recognition Program to help 11,000 internationally trained health care professionals per year get their credentials recognized in Canada and find work in their field. The Government of Canada will provide the administrators of this program with $115 million over five years, with $30 million ongoing.
• renewed the Canadian Agricultural Partnership. This comprehensive suite of supports offered by the federal, provincial and territorial governments will provide Canadian farmers and researchers with $600 million per year, starting in 2023, to support agricultural innovation, sustainability, competitiveness, and market development.
• provided $603.2 million over five years, starting in 2022–23, to ease the movement of goods in Canada’s transportation networks through new infrastructure funding, supply chains digitization, and actions to reduce the regulatory burden on industry. These actions align with the National Supply Chain Task Force’s recommendations outlined in their 2022 report.

Budget 2023

Budget 2023 re-emphasized the Government of Canada’s ambition to strengthen internal trade through new commitments. The Government of Canada announced that the Minister of Intergovernmental Affairs will lead and advance federal, provincial, and territorial efforts on the mutual recognition of regulatory standards to ensure goods and services move more freely.

Specifically, the Budget includes the commitments to:

• developing a Federal Framework on Mutual Recognition, which will set out the Government of Canada’s coordinated policy approach towards mutual recognition, including its engagement with provincial and territorial partners.
• discussing the critical steps of the framework to strengthen internal trade at federal, provincial, and territorial meetings in 2023 to establish a clear roadmap to reach a timely agreement with quantifiable and verifiable targets.

The Government of Canada also announced additional investments that support internal trade. In Budget 2023, the Government of Canada committed:

• $45.9 million, starting in 2024–25, with $11.7 million ongoing to the loan forgiveness for family doctors and nurses in rural and remote communities under the Canada Student Financial Assistance Program to expand eligibility to more rural communities.
• $52.2 million over five years, starting in 2023–24, to strengthen Canada’s trade corridors through establishing a Transportation Supply Chain Office and developing better supply chain data. These actions, which align with the National Supply Chain Task Force’s recommendations, will help reduce supply chain congestion, increase Canada’s supply chain capacity, efficiency, and reliability, and inform future infrastructure planning.
• $10 million to top up the Local Food Infrastructure Fund to strengthen food security in Northern, rural and Indigenous communities across Canada.

Fall Economic Statement 2023

In the 2023 Fall Economic Statement (FES), the Government of Canada stressed the importance of breaking down internal trade and labour mobility barriers to Canada’s economy and identifying ongoing federal actions to ease the movement of workers across interprovincial and territorial borders.

Specifically, the Government of Canada committed to:

• working with provinces and territories towards full labour mobility for construction and health care workers to meet labour market needs;
• Expanding on the success of the Red Seal Program to improve mobility of tradespeople and eliminate further barriers, such as duplicative credential recognition; and,
• Ensuring provinces and territories welcome health care professionals from anywhere in Canada by leveraging the nearly $200 billion federal health care funding deal announced in February 2023.

Budget 2024

Budget 2024 announced key milestones of the Federal Action Plan to Strengthen Internal Trade and underscored the Government of Canada’s continued commitment to advance mutual recognition and full labour mobility with the provinces and territories.

Specifically, the Government of Canada announced:

• The removal and narrowing of one third of all federal exceptions in the Canadian Free Trade Agreement. This includes removal of 14 exceptions primarily related to procurement that will provide Canadian businesses more opportunities to compete to deliver government goods and services.
  • The federal government committed to publicly releasing the rationales for all remaining exceptions and encouraged provinces and territories to do the same.
• The launch of the Canadian Internal Trade Data and Information Hub, an open and accessible data platform that will provide governments, businesses and workers with timely, free information to help them make choices about where to invest and where to work.
• The launch of the first-ever Canadian Survey on Interprovincial Trade in June 2024, to engage thousands of Canadian businesses on the challenges they face when buying, selling and investing across provincial and territorial borders. The survey’s insights will help identify top interprovincial barriers so that they can be eliminated.

The Government of Canada committed to making further progress on ensuring goods, services and workers move seamlessly across the country by advancing mutual recognition of regulatory standards and eliminating red tape for full labour mobility in construction, health and childcare sectors.

Budget 2024 also announced additional investments and commitments that support internal trade and labour mobility. Specifically, the federal government announced:

• $6 billion over 10 years, starting in 2024-25, to launch the new Canada Housing Infrastructure Fund to accelerate construction and upgrading of housing-enabling water, wastewater, stormwater, and solid waste infrastructure to support new housing supply and densification;
  • $5 billion of this new funding will be for agreements with provinces and territories who commit to long-term priorities, including adopting forthcoming changes to the National Building Code to support more accessible, affordable, and climate-friendly housing options. The Government of Canada continues to provide $13.5 million per year to make the National Building Codes free to access and to modernize codes, including by aligning building codes across the country.
• $50 million over two years, starting in 2024-25, for the Foreign Credential Recognition Program to streamline the recognition of foreign credentials with a focus on construction and health sectors; and
• $77.1 million over four years, starting in 2025-26, to more effectively integrate internationally educated health care professionals into Canada’s health workforce by creating 120 specific training positions, increasing assessment capacity and processing support to navigate credential recognition systems.