Don't hold your breath waiting for free trade within Canada
Tuesday, Jul 29, 2014 06:00 am
A call by the three western premiers for the dismantling of internal trade barriers between their provinces is a great idea - one that is long overdue. It would lead to more opportunities for enterprising businesses, lower costs for consumers, and greater economic freedom.
But despite the publicly-stated good intentions by Saskatchewan's Brad Wall, B.C.'s Christie Clark and Alberta's interim leader, Dave Hancock, I remain sceptical. What precisely are they proposing? You see, Canada's constitution already guarantees free-trade between the provinces, yet each successive batch of leaders has "conveniently" forgotten it.
And even though so-called "incrementalism" has been a highly successful policy of Canada's political right for the past 20 years, this is an instance where it should not be applied.
Section 121 of Canada's Constitution Act, 1867, says, "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 constitution is clear - inter-provincial trade is to be unencumbered by taxes, tariffs, and the like. When maintaining existing trade barriers, Canadian governments are thumbing their noses at the constitution.
Liquor laws offer the perfect example of the collusion between the federal and provincial governments to erect trade barriers.
In 1928, at the request of the provincial legislatures, the federal parliament enacted the Importation of Intoxicating Liquors Act - "IILA" for short. This law makes individuals who transport an alcoholic beverage across provincial borders liable to a $200 fine. And repeat delinquent offenders could spend up to 12 months in prison. As Toronto lawyer Ian Blue put it, the IILA is very likely unconstitutional because it is in direct conflict with section 121.
The provincial liquor monopolies that we are all familiar with were created by the IILA. And, like all monopolies, the IILA prevents innovation and drives up prices. In an era where consumers do much of their shopping online, the IILA prohibits producers from selling their products directly to consumers in other provinces. There is no way for a Saskatchewan resident to order a bottle of B.C. wine online, or a B.C. resident to receive an Alberta microbrewery's beer in the mail. According to the IILA, these practices are illegal, finable, and worthy of jail-time.
Making matters worse, provincial governments hide taxes in the retail purchase price. B.C. lawyer Mark Hicken has an online calculator that outlines all the fees and costs associated with the purchase of a bottle of wine in his province. As a result, retail purchasers are unaware that they are paying exorbitant taxes.
But were the IILA repealed or declared unconstitutional, the entire liquor distribution regime in Canada would be jeopardized. And there are some powerful interests that want to see the status quo maintained.
The provincial distribution regimes propped up by the IILA are reliable and lucrative revenue streams for the provinces. In 2013, Alberta's Gaming and Liquor Commission transferred over $728 million to the provincial coffers for liquor sales, while Saskatchewan's received $478 million in 2013 and B.C.’s $911 million in 2012. Governments of all political stripes are equally complicit in maintaining these unconstitutional trade barriers.
Similarly, public sector unions don't want section 121 of the constitution to be taken seriously.
These unions have advanced their self-serving opposition under the ruse of public safety. On its website, the Saskatchewan Government Employees' Union issued a press releasedecrying the opening of two private liquor stores in the province. SGEU president Bob Bymoen said, "Alcohol is not just another consumer product. It is a drug that can and does cause serious problems for families and communities. Because of that, Saskatchewan citizens should have a say in how alcohol is sold in this province." Of course, he fails to mention that the union he represents has a vested interest in maintaining unconstitutional trade barriers.
While I do hope that the coalition of premiers makes strides towards a free trade zone in Western Canada, I am sceptical that much will come from it. After all, the neglected section 121 has guaranteed free trade within Canada since 1867, and by not immediately complying with the constitution, each of these premiers has already shirked from their responsibility to Canadians.
Derek James From is a Calgary-based lawyer practising law with the Canadian Constitution Foundation and a Troy Media columnist.