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Home News Articles Reducing trade barriers at home is best left to the courts

Reducing trade barriers at home is best left to the courts

By | National Post on Feb 09 2016

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Photo Courtesy of Marc Lostracci under CC 2.0

When it comes to free trade, Canada has done a fairly good job of signing agreements with other countries. Yet when it comes to trade between the provinces, we have a shameful record of protectionism. But now, there’s a ray of hope.

“The Liberals have been quick to jettison a number of the Harper government’s policies but they seem destined to claim the glory for a Conservative initiative that may soon come to fruition,” wrote John Ivison here in the Post, “a modernized agreement on internal trade.”

This is certainly better news than the alternative. We are better off with some agreement on internal trade than none, but the question is whether the new agreement will have any teeth. The current Agreement on Internal Trade (AIT) has been in place for more than 20 years, yet Canada is still beset by protectionist provincial trade restrictions that drive up costs and prevent consumers from gaining access to goods from other provinces.

This is the moment when I can’t resist making a point that I, and many others, have already made a few times before: reaching an agreement between every province and the federal government that truly eliminates provincial coddling of local industries and politically powerful unions and interest groups is unlikely.

If the current federal government can perform the miracle, more power to it. History shows that doing so is a near-impossible feat. Reaching such an agreement is not the only way to clear our internal trade barriers, though. Our Constitution already states 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.”

It is also true that the courts have interpreted this provision very narrowly and counterintuitively, reading “admitted free” to mean that provinces can’t impose customs duties on goods from other provinces … but that simply banning the goods, or imposing other non-tariff barriers, is perfectly OK. This is thanks to the 1921 Supreme Court of Canada decision in the Gold Seal case.

Against the Gold Seal precedent, we must consider several points, all of which lawyer Ian Blue has made in legal scholarship, and all of which both him and his colleague Arne Schwisberg have been making in the current New Brunswick case of Gerard Comeau, who was charged for going on a beer run to Quebec and bringing home his purchases. (Full disclosure: the organization I run, the Canadian Constitution Foundation, is sponsoring Comeau’s case.)

Gold Seal failed to take into account the clear historical context of the “admitted free” language in the Constitution, which shows the phrase to be an attempt to protect against all trade barriers, tariff or otherwise. The Gold Seal decision was also, we now know, compromised, with two of the Supreme Court justices hearing the case being summoned to a meeting with the federal minister of justice before rendering their decision.

So there is the free internal trade picture in a nutshell: Canada’s Constitution already guarantees us a single market, free of the very sort of trade barriers the federal government is proposing to negotiate away through a new AIT. Of course, neither option for truly achieving free trade within the Canadian federation — getting the premiers to abandon the self-interested policies that please their powerful political constituents, or overturning Supreme Court precedent — would be is easy. But if I had to put money on which is more likely to succeed, I’d choose the legal route.

That is, among other things, what courts are designed to do: safeguard constitutionally enshrined rights that politicians would never have the incentive to protect given the unpopular implications for the majority of those casting ballots in an election. In creating a useful AIT, the federal government will be asking provincial premiers to look beyond the next election campaign to the long-term net benefits of a policy. That’s not something politics does very well.

The salient point may be that although it’s better to have a federal government that understands the benefits of free internal trade than one that doesn’t, we already have a constitutional trump card that makes all this messing about with internal trade negotiations unnecessary. Why beg, plead, flatter and cajole provincial leaders when the Constitution already says free internal trade is non-negotiable? Why not just make good on the founders’ intentions?

John Ivison talks about the previous federal government and the provinces “working for over a year to bulldoze internal trade barriers.” In this case, the stroke of a judge’s pen may be more powerful than even the most heavy-duty of construction equipment.

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