The 'free the beer' court case shows Canada isn't a true economic union
 

The ‘free the beer’ case shows Canada isn’t a true economic union

Opinion: Canada is more focussed than ever on international free trade. So why doesn’t the country even have free trade within its own borders?


 

Howard Anglin is the executive director of the Canadian Constitution Foundation, which supported Gérard Comeau’s case at the Supreme Court of Canada. He was previously chief of staff to Canada’s then-immigration minister, Jason Kenney, and deputy chief of staff to prime minister Stephen Harper.

The obvious reason why Gérard Comeau was in the Supreme Court of Canada on Dec. 6 and 7 is that in 2012, he bought beer in Quebec and drove it home to New Brunswick. As he crossed the provincial border, he was stopped by an RCMP sting operation that confiscated his beer and fined him almost $300. He fought the charge, and now a case that started as a beer run has landed in the country’s highest court.

But the reason that this is a legal issue at all is that regional politics and federal timidity have so conspired that, almost a century after Prohibition officially ended, we are still governed by the antique restrictions of that era—restrictions that affect all Canadians, and not just beer drinkers.

The law at the heart of what is often referred to as the “Free the Beer” case is the Importation of Intoxicating Liquors Act—a title that rings with the prim disapproval of a dowager aunt. That is the federal statute that, since 1928, has given provincial governments the exclusive authority to “import” alcohol into their territory. Every province has similar restrictions; a few provide very limited allowances for personal consumption, while in the rest, the legal limit is zero. If you’ve ever brought a bottle of wine back to Toronto from a winery in Kelowna, B.C., or shuttled beer from Ottawa to a party across the river in Gatineau, Que., you have broken the law, just like Comeau.

The problem with these laws is that they are inconsistent with Canada’s founding document. Section 121 of the Constitution Act, 1867 says 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.” That sounds clear enough—goods should move freely between provinces—but 96 years ago, in a case called Gold Seal, a majority of the Supreme Court of Canada held that while the words “admitted free” sound broad, all they mean is that the provinces cannot impose customs duties at their borders. Other “non-tariff” barriers, which may have the effect (and even the intent) of keeping out products from other provinces are, according to the Gold Seal decision, permissible.

There is plenty of textual and external evidence that this is the exact opposite of what the Fathers of Confederation and the drafters of the Constitution intended. They were hardly naïfs when it came to trade: the British Empire was the largest trading block in history and trade barriers of all kinds were as familiar to imperial politicians as they are to diplomats and CEOs today. In Comeau’s case, the trial judge accepted this evidence and ruled that the Gold Seal case had been wrongly decided: “free” meant free, and New Brunswick’s law was distinctly unfree.

MORE: Conservatives say free the beer, not the milk

Now it is the Supreme Court of Canada’s turn to decide whether provincial restrictions on the importation of alcohol—and potentially many other legal products, including potatoes, cheese, maple syrup, and soon cannabis—can be squared with the language of Section 121. To see why it can’t, consider that there is no amount of alcohol that an individual can legally bring into Ontario. For the Court to rule that this absolute prohibition is consistent with Section 121, it would have to conclude that the Constitution’s insistence that goods be “admitted free” into a province can be interpreted so broadly that it includes the opposite meaning: “not admitted at all.”

This may sound like legal arcana, but if the Supreme Court approves that paradox, it would have significant real-world consequences for Canada’s economy. A StatsCan study this year found that the regulatory barriers to moving goods between provinces is equivalent to a 7-per-cent tax at the provincial borders. But unlike a tax, which at least provides revenue for government services, GDP lost to interprovincial red tape is simply that: lost. Lost revenue, lost savings, lost opportunity.

And what a lost opportunity. A 2015 study by the Senate of Canada found that full, free movement of goods, services, and licensed professionals within Canada would add between $50 billion and $130 billion to our GDP every year. By comparison, a free-trade agreement with China has been projected to increase GDP by $7.8 billion by 2030.

So why, at the Comeau hearing last week, did some Supreme Court justices seem so hesitant to bring our laws into the 21st-century? While some of the justices’ concerns reflected an understandable reluctance to be seen as setting economic policy from the bench, others exhibited a quintessentially Canadian myopia. One justice, for example, wondered: what would be the consequences if a restaurant in one province could order directly from a winery in another province? Who would regulate it?

Only in Canada could these still be questions in 2017. Why should wine be treated differently than the juice, salt, flour or even the cutlery and tablecloths used in the restaurant? The wine’s storage and sale would still be regulated under provincial health and safety laws. All that Section 121 requires is that there be no restrictions on where within Canada the restaurant could look for the best Canadian products to provide its customers.

Fortunately, outside the Supreme Court, Canadians don’t share this skepticism. A poll last month by the Montreal Economic Institute found that we overwhelmingly embrace the founding vision of an economic union. Eighty-nine per cent of Canadians agreed that we should be able to transport or ship legal goods from one part of the country to another. Seventy-two per cent “strongly agreed.”

This reflects a common sense that goes beyond the legal arguments in the Supreme Court. The benefits for consumers, producers, and the national economy are simply too great to ignore. At a time when our governments are desperate for new sources of revenue, we cannot afford to continue to leave as much as tens of billions of dollars on the table each year.

Regardless of how the Supreme Court rules, it is time for our leaders to step up and dismantle protectionist provincial barriers. They could do it tomorrow. All it would take is a patriotic vision and bold leadership. And therein lies the real irony of the Comeau case: when it comes to free trade within Canada, the Fathers of Confederation—those stiff Victorian gentlemen in sepia portraits—were more imaginative and forward-thinking than our leaders today.


 

The ‘free the beer’ case shows Canada isn’t a true economic union

  1. Quelle surprise

  2. I am a Liberal, we are hard to find in Alberta, and I must confess that this story rings so very true. We need our leaders to step up to the political plate, even before the supreme court makes it ruling and take care of this business. Free trade with the USA, Mexico, Europe, China etc. How about in our own country among/between provinces. Our economy is screaming to have this happen. MMM; maybe it will even allow for the movement of petroleum goods across this great country. Gee does this sound like a pipeline?

  3. It’s pure stupidity! When it comes to many goods and services, we constantly face the ‘Canadian ripoff factor’ which is generally explained away as being a consequence of limited market size. However, it goes well beyond that as codes and standards are provincial, divisive and (sometimes intentional) barriers to free trade. In contrast we have the example of the EC where many countries both within and affiliated with the EU are able to manage a regime where standards are held in common precisely so that this is not a barrier to trade and also to ensure that all goods in the common market have sufficient quality and safety. Globally, many countries are deferring to compliance regimes (i.e. harmonized standards akin to the EU regime) where standards are produced by international agencies such as ISO (International Standards Organization), IEC (International Electrotechnical Commision), WHO, etc.; first, because economy of scale and utilization of global expertise produces the best result; second, because this works against interference from special interests, politics and parochialism; third, because it best prepares domestic industry for global markets. In Canada, the laugh is that the federal government and even some provincial governments put a lot of effort into developing international trade while actively maintaining isolated provincial markets including, though not restricted to, structural barriers. Somehow, what is lost in all this is that competition and competitiveness is key to economic strength.
    I must confess to having purchased several pints of beer in Quebec and subsequently crossing the border into Ontario; if I had been stopped by the RCMP, I would gladly have relieved myself of that liquid :).

  4. It’s pure stupidity! When it comes to many goods and services, we constantly face the ‘Canadian ripoff factor’ which is generally explained away as being a consequence of limited market size. However, it goes well beyond that as codes and standards are provincial, divisive and (sometimes intentional) barriers to free trade. In contrast we have the example of the EC where many countries both within and affiliated with the EU are able to manage a regime where standards are held in common precisely so that this is not a barrier to trade and also to ensure that all goods in the common market have sufficient quality and safety. Globally, many countries are deferring to compliance regimes (i.e. harmonized standards akin to the EU regime) where standards are produced by international agencies such as ISO (International Standards Organization), IEC (International Electrotechnical Commision), WHO, etc.; first, because economy of scale and utilization of global expertise produces the best result; second, because this works against interference from special interests, politics and parochialism; third, because it best prepares domestic industry for global markets. In Canada, the laugh is that the federal government and even some provincial governments put a lot of effort into developing international trade while actively maintaining isolated provincial markets including, though not restricted to, structural barriers. Somehow, what is lost in all this is that competition and competitiveness is key to economic strength.
    I must confess to having purchased several pints of beer in Quebec and subsequently crossing the border into Ontario; if I had been stopped by the RCMP, I would gladly have given in to pressure relieved myself of that liquid :).

  5. Can’t buy Nova Scotia wine in Ontario. Hardly any BC wine. But I can get wine from any other country. This is beyond stupid. The fact is, the federal government has ALWAYS had the authority to completely overrule provincial trade barriers and inflict harsh penalties on any provincial government that tries to interfere with the free interprovincial movement of goods, services and people. But they won’t do it for fear of offending Quebec and handing the separatists an issue to run on.

    I’m not blaming just Quebec – ALL provinces are guilty. But offending the others isn’t such a risk for Ottawa.