New “Canadian Free Trade Agreement” Ignores The Constitution

If you loosen a prisoner’s shackles, he may thank you for giving him more room to move, but it doesn’t make him free.

Bear this in mind when you read industry groups praising the “historic” new Canadian Free Trade Agreement (CFTA) announced on Friday by the Federal Government and the Provinces, which will come into force in time for Canada’s 150th birthday on July 1st.

Even if the CFTA ends up being marginally better than the Agreement on Internal Trade (AIT) it replaces, no one should confuse it with real free trade. The most important improvement is that, while the AIT only applied to specified sectors of the economy, the CFTA by default covers the entire national economy, with provinces having to carve out exceptions for sectors they want to keep shielded from competition.

The devil, of course, lurks in the details of those exceptions.

The biggest sectoral carve-out is free trade in alcohol. Wine, beer, and spirits will continue to be regulated under prohibition-era provincial monopolies. It may be 2017 in the rest of the Canadian economy, but when it comes to alcohol, it’s still 1928, the year the federal government passed the Importation of Intoxicating Liquors Act.

July 1 will come and go and the LCBO in Ontario will continue dispensing alcohol under its Soviet-era model and Alberta will continue its discriminatory tax treatment of out-of-province craft beer.

To find out what else is exempted from the agreement requires poring over 160 pages of schedules submitted by each province setting out the vital interests that they believe simply must be shielded from neighbourly competition.

These exceptions are not limited to major industries like agriculture, forestry, energy, and mining (thought they include all of those). They also include niche interests ranging from a requirement that fishing guides in Newfoundland and Labrador be locally licensed to providing that “only a Quebec race horse, as defined in the Rules respecting the breeding of Quebec Standardbred race horses, can be entitled to a privilege or advantage.”

Even the much-awaited opening of provincial procurement to national competition contains 24 pages devoted to the new rules, before giving way to 25 pages of provincial exceptions.

150 years ago, the Fathers of Confederation had a very different vision of free trade for Canada. George Brown predicted that “[the] union of all provinces would break down all trade barriers between us, and throw open at once … a combined market of four million people” and Alexander Galt believed that one of “the chief benefits expected to flow from Confederation [would be] the free interchange of the products of the labour of each province.” Protectionism was to have no place in the new country.

This founding promise was captured in Section 121 of the Constitution Act, 1867, which promised that “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.”

Comparing those 29 clear words with the CFTA’s 329 pettifogging pages shows how far we have fallen from a generous vision of shared prosperity into jealous parochialism. Statesmen may inspire the dreams of a nation with a few words, but mere politicians can crush them with statute books.

Hope, however, may be on the way.

Last April, a New Brunswick judge threw out a fine against Gerard Comeau for buying beer in Quebec and driving it back to his home in New Brunswick and struck down the province’s restrictions on importing alcohol as contrary to Section 121.

The province has now asked the Supreme Court of Canada to hear the case.

If the Court does, and if it joins the lower court in upholding the plain language and expansive vision of that 150-year old constitutional provision, now that would be a real birthday present for Canada.