They've been trying to for years. They launched Kijiji in 2005, which caught on in Canada but not in the U.S., and was later rebranded (except in Canada) to "eBay Classifieds". I believe they had some kind of local-listings attempt that preceded that as well. They've also (with more success) been specifically targeting the used-car-sales portion of the local market with eBay Motors.
Kijiji not only caught on in Canada, it's dominant here. I don't even bother listing things for sale on Craigslist any more; the buyers are simply only checking Kijiji.
I found my (Waterloo) apartment sublet listing more successful in attracting customers on Craigslist than Kijiji. Maybe different items are more successful on one space than the other.
I believe Kijiji is popular only in French speaking Quebec
Absolutely not true, I live in Alberta and my experience is the same as joedrew. I also lived in Saskatchewan for a year and found that it was the same: Kijiji is by far the dominant online classifieds site.