PUBLISHED February 28, 2026
According to “Canada Can Grow Faster by Unlocking Its Own Market” published by the International Monetary Fund, Canada could significantly boost long-term economic growth by reducing barriers that still fragment trade within its own borders.
The IMF argues that despite Canada’s strong global trade integration, its domestic market remains surprisingly divided by provincial regulations and policy differences. These internal frictions continue to limit productivity, competition and business scale across the country.
Internal Barriers Equivalent to a 9% Tariff
The Fund estimates that non-geographic internal trade barriers in Canada are equivalent to about a 9% tariff nationally, based on standard trade analysis methods.
The burden is particularly heavy in services, which account for the majority of interprovincial trade. In some areas — including education and healthcare services — the IMF says regulatory barriers can exceed the equivalent of a 40% tariff.
This creates what the report describes as a “patchwork economy,” where differing provincial rules reduce the normal advantages of scale in a large country
GDP Could Rise by Nearly 7%
The potential payoff from reform is substantial. IMF model simulations suggest that fully eliminating non-geographic internal trade barriers could raise Canada’s real GDP by nearly 7% over the long run, equivalent to roughly C$210 billion in today’s terms.
Importantly, the Fund stresses that these gains would come primarily from higher productivity — not short-term stimulus effects. More efficient allocation of labour and capital, stronger competition and improved firm scale would drive the uplift.
In the IMF’s words, the reforms would be “a gift that would keep on giving.”
The benefits would not be evenly distributed. The IMF finds that smaller and more remote provinces would see the largest percentage gains, as firms and workers gain access to larger domestic markets.
Atlantic Canada and the northern territories could experience particularly strong productivity improvements. However, larger provinces would still capture substantial absolute gains because of their central role in national supply chains.
The Fund emphasises that deeper internal integration would not be zero-sum but would generate a national productivity dividend.
The benefits would not be evenly distributed. The IMF finds that smaller and more remote provinces would see the largest percentage gains, as firms and workers gain access to larger domestic markets.
Atlantic Canada and the northern territories could experience particularly strong productivity improvements. However, larger provinces would still capture substantial absolute gains because of their central role in national supply chains.
The Fund emphasises that deeper internal integration would not be zero-sum but would generate a national productivity dividend.
One of the report’s strongest messages is that services liberalisation would deliver the bulk of the economic upside. Roughly four-fifths of total GDP gains would come from reducing barriers in service sectors.
This reflects the growing weight of services in the Canadian economy and their role as critical inputs for most businesses. Barriers in finance, telecommunications, transportation and professional services ripple through the wider economy by raising costs across multiple industries.
Because of this multiplier effect, the IMF highlights these sectors as top priorities for reform.
Beyond headline growth, the IMF frames internal integration as a strategic resilience issue. Reducing domestic barriers would make it easier to start and expand businesses, improve labour mobility and support investment in high-productivity activities.
Stronger internal integration would also help Canada better absorb external shocks — an increasingly important consideration in a more fragmented global trade environment.
The IMF’s assessment delivers a clear message: Canada’s next wave of growth may depend less on external trade and more on fixing inefficiencies at home.
The country already has the scale and institutional capacity needed for stronger performance. The challenge now lies in aligning provincial rules and reducing regulatory fragmentation that continues to hold back productivity.
Bottom line: The IMF estimates Canada could boost long-term GDP by nearly 7% by removing internal trade barriers. The opportunity is large, the gains would be productivity-driven — and much of the potential growth lies within Canada’s own market.
One of the report’s strongest messages is that services liberalisation would deliver the bulk of the economic upside. Roughly four-fifths of total GDP gains would come from reducing barriers in service sectors.
This reflects the growing weight of services in the Canadian economy and their role as critical inputs for most businesses. Barriers in finance, telecommunications, transportation and professional services ripple through the wider economy by raising costs across multiple industries.
Because of this multiplier effect, the IMF highlights these sectors as top priorities for reform.
Beyond headline growth, the IMF frames internal integration as a strategic resilience issue. Reducing domestic barriers would make it easier to start and expand businesses, improve labour mobility and support investment in high-productivity activities.
Stronger internal integration would also help Canada better absorb external shocks — an increasingly important consideration in a more fragmented global trade environment.
The IMF’s assessment delivers a clear message: Canada’s next wave of growth may depend less on external trade and more on fixing inefficiencies at home.
The country already has the scale and institutional capacity needed for stronger performance. The challenge now lies in aligning provincial rules and reducing regulatory fragmentation that continues to hold back productivity.
Bottom line: The IMF estimates Canada could boost long-term GDP by nearly 7% by removing internal trade barriers. The opportunity is large, the gains would be productivity-driven — and much of the potential growth lies within Canada’s own market.
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