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Internal Trade in Canada: Case for Liberalization

Author

Listed:
  • Mr. Jorge A Alvarez
  • Mr. Ivo Krznar
  • Trevor Tombe

Abstract

This paper assesses the costs of internal trade barriers and proposes policies to improve internal trade. Estimates suggest that complete liberalization of internal trade in goods can increase GDP per capita by about 4 percent and reallocate employment towards provinces that experience large productivity gains from trade. The positive impact highlights the need for federal, provincial and territorial governments to work together to reduce internal trade barriers. There is significant scope to build on the new Canadian Free Trade Agreement to more explicitly identify key trade restrictions, resolve differences, and agree on cooperative solutions.

Suggested Citation

  • Mr. Jorge A Alvarez & Mr. Ivo Krznar & Trevor Tombe, 2019. "Internal Trade in Canada: Case for Liberalization," IMF Working Papers 2019/158, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/158
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    References listed on IDEAS

    as
    1. Macmillan, Kathleen & Grady, Patrick, 2007. "Interprovincial Barriers to Internal Trade in Goods, Services and Flows of Capital: Policy, Knowledge Gaps and Research Issues," MPRA Paper 8709, University Library of Munich, Germany.
    2. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    3. Grady, Patrick & Macmillan, Kathleen, 2007. "Interprovincial Barriers to Labour Mobility in Canada:Policy, Knowledge Gaps and Research Issues," MPRA Paper 2988, University Library of Munich, Germany.
    4. Delina E. Agnosteva & James E. Anderson & Yoto V. Yotov, 2014. "Intra-national Trade Costs: Measurement and Aggregation," NBER Working Papers 19872, National Bureau of Economic Research, Inc.
    5. Lukas Albrecht & Trevor Tombe, 2016. "Internal trade, productivity and interconnected industries: A quantitative analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 237-263, February.
    6. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    7. Dennis Novy, 2013. "Gravity Redux: Measuring International Trade Costs With Panel Data," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 101-121, January.
    8. Productivity Commission, 2009. "Review of Mutual Recognition Schemes," Research Reports, Productivity Commission, Government of Australia, number 32, January.
    9. Tweedle, Jesse & Brown, Mark & Bemrose, Robby, 2017. "Going the Distance: Estimating the Effect of Provincial Borders on Trade when Geography Matters," Analytical Studies Branch Research Paper Series 2017394e, Statistics Canada, Analytical Studies Branch.
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    Citations

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    Cited by:

    1. Carlos Llano-Verduras & Santiago Pérez-Balsalobre & Ana Rincón-Aznar, 2021. "Market fragmentation and the rise of sub-national regulation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(3), pages 765-797, December.
    2. Beverly Lapham & Daniel Teeter, 2023. "A Gravity Analysis of Inter-Provincial Trade," Working Paper 1507, Economics Department, Queen's University.
    3. Christopher Cotton & Daniel Teeter, 2025. "Breaking Down Canada’s Internal Trade Barriers," Working Paper 1529, Economics Department, Queen's University.
    4. Carlos Rosell & Kaleigh Dowsett & Nelson Paterson, 2023. "A Critical Juncture: Assessing Canada's Productivity Performance and Future Prospects," International Productivity Monitor, Centre for the Study of Living Standards, vol. 45, pages 61-92, Fall.
    5. Jared Carlberg, 2021. "Interprovincial Trade Barriers in Canada: Options for Moving Forward," SPP Briefing Papers, The School of Public Policy, University of Calgary, vol. 14(23), October.

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