Home News Articles Barriers violate founder’s vision

Barriers violate founder’s vision

By | Telegraph-Journal on Sep 13 2017

From News, Articles

It turns out our Fathers of Confederation knew what they were doing. One hundred and fifty years ago, they faced an American administration turning inward and protectionist. The year before, in 1866, President Andrew Johnson had torn up the Reciprocity Treaty, our first free-trade agreement with the United States. They responded by including a provision in the new constitution to guarantee that, even if Canadian farmers, producers and manufacturers might from time to time lose access to foreign markets, they would at least have unfettered access to the whole population of the newly-united country.

Their solution, which remains in force as Section 121 of the Constitution Act, 1867, reads in its entirety: “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.” Succinct, but clear. Canada was to be a single economic unit, not balkanized along internal lines as the former colonies had been.

In the 2016 Comeau case, Judge Ronald LeBlanc used this provision to strike down the law preventing New Brunswickers from bringing beer into the province. Like many of his neighbours, Gérard Comeau had driven to Quebec where alcohol is cheaper. On his way home, he was stopped by the RCMP, who seized his beer and fined him $292.50. While he may not have known his constitutional history, Comeau felt intuitively that there was something wrong. He was right. As Judge LeBlanc explained, their action violated the constitutional guarantee that goods be “admitted free” between the provinces.

This December, the Supreme Court of Canada’s will hear the New Brunswick government’s appeal of Comeau’s victory. Last Friday, the government filed its factum, giving us a preview of their arguments. Their main point is that the negotiation of interprovincial trade should be left up to the provinces and the federal government, working together in what they call –more optimistically than accurately – “cooperative Confederation.”

The problem is that, in this case “cooperative Confederation” has given us the absurd state in which it easier for an Ottawa brewery to sell its products in New York than across the river in Quebec; in which FedEx was charged under Newfoundland law for shipping a case of BC wine to that province; and in which the RCMP conduct sting operations on Canadians looking to save a few dollars on beer.

New Brunswick’s law, which has its counterpart in almost every other province, is a vestige of prohibition-era laws intended to enforce moral restrictions on consumption. The underlying rationale has been abandoned, but the laws and provincial monopolies remain. When pressed, the provinces defend them on the grounds they need to protect their tax base and shield local producers from out-of-province competition.

The tax issue is a red herring. Provinces collect sales taxes on all manner of consumer products from clothing to books to food without legally preventing you from bringing them into the province. The era of state-owned businesses that set prices, limit selection, and deny consumers choice disappeared a generation ago. It’s no more necessary for a province to have a monopoly on the import and sale of alcohol in order to collect taxes on it than it is for provinces to own gas stations or grocery stores.

The second claim is equally weak, but it does illustrate a real problem the Supreme Court could and should solve through this case. As long as all the provinces have protectionist laws to protect their local producers, each individual province will feel justified in maintaining its own barriers. In theory, the federal government could step in, but they aren’t going to intercede on an issue that would pit them against all the provinces at once. The result is a national deadlock.

What does this mean in practical terms? Two recent studies, by economists Trevor Tombe and Lukas Albrecht and by the Senate of Canada, have estimated that all this unnecessary and unconstitutional red tape costs Canada between $50 billion and $130 billion in lost GDP every year. Relying on “cooperative Confederation” to regulate interprovincial trade rather than the wisdom of the Fathers of Confederation as expressed in Section 121 hurts consumers and producers alike and makes us poorer as a country.

An anniversary is a time to look both backwards and forwards. On our country’s 150th birthday, we should look back with regret at how the free-trading country our Constitution envisioned became choked and divided by interprovincial trade barriers, of which alcohol is just the most obvious. Then we should look forward with resolve to tear down these invisible walls holding back our national potential. Perhaps, as New Brunswick suggests, the provinces should have done this themselves. Unfortunately, they remain stuck in a federal stalemate, so it falls to the Supreme Court to enforce the Constitution.

(Image by Dondy Razon under CC 2.0).

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