Structural productivity deficit isolates Quebec and Canada
Publication of Productivity and Prosperity in Quebec – Overview 2025 Edition
May 26, 2025
Faced with the renewed surge of American protectionism, the Centre for Productivity and Prosperity – Walter J. Somers Foundation (CPP) published Productivity and Prosperity in Quebec – Overview 2025 Edition on May 22 this year. The main finding is categorical: Quebec’s structural productivity deficit is drastically limiting its room to manoeuvre in efforts to counter American tariffs.
“Because they were unable to make corrections 15 years ago, when the warning signs were flashing, Quebec and all of Canada are now exposed to mounting American protectionism, since their sizeable structural productivity deficit limits their opportunities to develop new markets, both internationally and domestically,” says Robert Gagné, CPP Director and co-author of the study. “And regardless of what we hear, tearing down barriers to interprovincial trade will not be enough to offset the impact of threatened US tariffs.”
Distance, the true barrier to interprovincial trade
Since the US tariffs were announced, widespread media reports have suggested that interprovincial trade barriers are equivalent to an estimated 25% tariff or a loss of $5,100 in Canadians’ per capita standard of living. According to HEC Montréal’s research team, however, these estimates are probably exaggerated.
“Even if all regulatory obstacles in the country could be eliminated, it would be unrealistic to hope for a 6.9% increase in the standard of living in Canada,” explains Jonathan Deslauriers, CPP Executive Director and co-author of the study. “Because essentially, the true barriers to interprovincial trade are structural in nature. They have to do with the distances between regional markets and businesses’ inability to overcome them, owing to their poor productivity.”
Improving the resilience of the domestic market
To solve this dilemma, Canada as a whole will have to stimulate private investment and open up the domestic market in order to spur competition. Rather than dithering over a problem that should have been corrected thirty years ago by implementing the principle of mutual recognition to ensure the free movement of products despite the lack of harmonization of standards, the provinces will have to get to the root of the country’s endemic productivity lag to improve the resilience of the domestic market and thus enable Canadian companies to cross the borders of their local market.
“In such a context, it becomes essential to strengthen trade routes from east to west by investing massively in transportation infrastructure,” adds Robert Gagné. “The announcement of an HSR between Quebec City and Toronto is a step in the right direction. However, concrete efforts must be made and electoral promises fulfilled quickly.”
Find out more
Productivity and Prosperity in Quebec – Overview 2025 Edition (PDF) [only in French]