Every once in a while, a Supreme Court decision has wide-ranging implications for Canada’s economic future.
Thursday’s very disappointing ruling in the Comeau case has unfortunately all but closed the legal avenue for solving one of our country’s most nefarious economic problems, that of inter-provincial trade barriers.
Gerard Comeau, a New Brunswick resident, was stopped five years ago for having “imported” too much alcohol from Quebec. Fined by the police, he contested the charge on the basis that the New Brunswick liquor law contradicts section 121 of the Constitution, which states that all products of a province must be “admitted free into each of the other provinces.”
Although the Court recognized that the New Brunswick law does have the effect of limiting inter-provincial trade, it nonetheless considers it a valid law because that is not its primary purpose, but rather an incidental effect.
My institute acted as intervener in this case, and I followed it closely. With all due respect to the judges, it seems to me that they showed a certain naivete in the way they came about their decision.
The traditional interpretation of section 121 has been that it prevents the imposition of tariffs to limit trade between provinces, or, as stated in the ruling, other measures “with purposes traditionally served by tariffs, such as exploiting the passage of goods across a border solely as a way to collect funds.” The Court believes, however, that the province’s main purpose is not to raise money, but rather “to enable public supervision of the production, movement, sale, and use of alcohol within New Brunswick.”
And yet, it seems clear to me that the New Brunswick government’s attorney implicitly admitted during the hearings that one of the main justifications was to maintain the fiscal revenue of the province stemming from the sale of alcohol. He backtracked from that statement later under questioning from one of the judges.
But a century after Prohibition, when we’ve seen decades of liberalization, it should be obvious that there’s no other compelling reason for such controls.
It is perfectly possible to “supervise” the sale of alcohol with appropriate regulation without having to manage a liquor monopoly or fine a peaceful citizen crossing the border with too many beers in his car.
The decision is all the more disappointing given that it could also have opened the door to contesting other provincial trade barriers. These obstacles represent the equivalent of a tax, costing the Canadian economy over $50 billion a year. In addition to raising the prices of many goods and services, they impede the growth of firms trying to do business in several provinces.
Although the legal avenue is no longer realistic in the short term, there is still a strong economic case to be made for removing these barriers. And furthermore, polls show that Canadians overwhelmingly want this.
It is an outrage that while Canada is signing free trade agreements with countries all over the world, we don’t even have a unified market within our own country.
Wasn’t this the whole purpose of uniting the colonies in 1867?
The ball is now back in the politicians’ court. They’ve been negotiating the lowering of these barriers for decades, without much success.
Is it too much to expect them to focus on protecting the economic interests of all Canadians, rather than protecting their governments’ sources of income?
Michel Kelly-Gagnon est président et directeur général de l’Institut économique de Montréal. Il signe ce texte à titre personnel.