Today, the Alberta Court of Appeal (ABCA) decided that two expired beer policies of the Alberta government violated Canada’s so-called “free trade” guarantee contained in section 121 of the Constitution Act, 1867. In so doing, the Court has upheld the constitutional rights of all Canadians.
Section 121 reads:
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.
The Canadian Constitution Foundation (CCF) intervened on this appeal because the issue at the heart of the case—interprovincial free trade as guaranteed by the Constitution—is of national importance. Today’s is the first appellate court ruling in Canada interpreting the 2018 Comeau decision of the Supreme Court of Canada. The CCF believed it was important to present arguments at the ABCA regarding section 121 to guide the Court in giving the provision a liberal construction, in keeping with the original constitutional vision.
Prior to October 28, 2015, Alberta imposed a common graduated mark-up on the beer of all small brewers, without regard to the brewer’s location within Canada.
Then, on October 28, 2015, the provincial government raised the mark-up on the beer of small brewers located outside of British Columbia, Alberta, and Saskatchewan to $1.25 per litre. The reason the government gave was that they wanted to protect the local brewing industry by shielding it from competition from the rest of Canada. This policy violated the Constitution’s so-called “free trade” clause and long-established case law from the Supreme Court of Canada that no province is permitted to erect a tariff barrier—a fee assessed by weight, volume, or a percentage of value—with the purpose of inhibiting interprovincial trade.
After the CCF informed the government by letter that this policy was unconstitutional, and Ontario brewer Steam Whistle sought and received injunctive relief from the Alberta Court of Queen’s Bench, the province devised a second policy to achieve its anti-trade objectives.
On August 5, 2016, Alberta began applying a mark-up of $1.25 per litre to all beer while paying Alberta small breweries a new subsidy on the sale of their beer in Alberta. The two elements of the August 2016 policy put small Alberta brewers in the same advantageous economic position vis-à-vis out-of-province small brewers that the October 2015 policy had done.
Just like the first policy, the intent of the second was to shield the Alberta craft brewing industry from competition by inflating the cost of selling beer brewed elsewhere in Canada.
In today’s decision, the ABCA rejected many of the provincial government’s arguments on appeal in deciding that both the 2015 and 2016 measures violated section 121.
There is no real doubt that the primary purpose of the 2015 Mark-up is to protect local industry, and that it does so by imposed a tariff-like burden [emphasis in original] on extra-provincial producers.
In short, the primary purpose of the 2016 Mark-up and grant program is to protect local industry, a purpose traditionally served by tariffs, and achieved this purpose by imposing a greater cost on the sale of craft beer produced extra-provincially than is imposed on the sale of craft beer produced in Alberta.
Even though the ABCA ruled that both the 2015 and 2016 policies violated section 121, the Court was measured and circumspect in its reasoning being careful to point out that not all grant programs to local industry will necessarily violate section 121.
This judgment should not be understood as holding that a grant program instituted for the primary purpose of promoting the local beer industry violates s. 121. Promoting local industry may be a constitutionally permissible purpose in some circumstances but not when it is implemented by tariff-like measures on goods produced outside the province.
CCF staff lawyer, Derek From, said of today’s decision:
Today’s decision is the first of its type in Canada interpreting the Supreme Court of Canada’s Comeau ruling. The CCF is extremely pleased that the Alberta Court of Appeal saw through the Government of Alberta’s arguments and recognized that both the 2015 and 2016 beer policies violated the rights of all Canadians, including Albertans, to exchange goods across provincial borders free from the economic burden of tariffs and tariff-like measures. At Confederation, Canada was intended to be a single economic unit, not Balkanized with internal trade protectionism. The CCF has great hopes that the Comeau ruling will continue to be used to dismantle other interprovincial trade barriers as they come before our courts.
Why is interprovincial trade important?
A study by economists Trevor Tombe and Lukas Albrecht of the University of Calgary estimated the annual benefits of free markets for the movement of goods and labour among the provinces at between $50 billion and $130 billion, or $7,500 per Canadian household per year. A study by the Senate of Canada reached the same conclusion.
Vast Majority of Canadians Support Interprovincial Free Trade
According to a recent Ipsos poll commissioned by the CCF, Canadians overwhelmingly believe in free trade across our country. The polling results included:
94% of Canadians support a constitutional right to transport legally-purchased goods between provinces.
95% of Canadians support a constitutional right for businesses to sell their products directly to people in any province.
96% of Canadians support a constitutional right for people with professional qualifications in one province to work in all provinces.
The CCF recently released a study, authored by Mark Milke in collaboration with Peter St. Onge, examining the barriers to interprovincial trade. You can read that study here.
For more information on the challenges of interprovincial trade, please go to www.OneCountryOneMarket.ca
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