Terence Corcoran: It’s not just beer. Any goods could get snared under court’s protectionist ruling
Across the clouded canvas of the Canadian federation, the national pipeline crisis has shrouded federal-provincial relations, spreading gloom and conflict unbefitting a nation based on the glorious principles of national unity built around economic freedom. Instead, we have warring provinces, a conflicted federal government, natives pitted against natives and the threat of national energy paralysis.
You want it darker? Enter the Supreme Court of Canada with a decision that eviscerates any real hope that Canada will ever have what real nations such as Australia and the United States enjoy — legal protection of internal free trade.
The case before the court, widely and all-too glibly covered as a “free our beer” border conflict between New Brunswick and Quebec, has always been about the much larger issue of whether Canada’s Constitution Act, formerly the British North America Act, in any way guarantees free trade between the provinces.
Canada’s provinces already impose thousands of protectionist measures. Now nothing can stop them. As the Supreme Court unanimously decided Thursday, existing constitutional references to free trade within Canada are meaningless words with narrow application, so narrow that they might as well not exist.
The case began when the RCMP arrested Gerard Comeau, now a 64-year-old New Brunswicker, for transporting beer illegally from Quebec into his home province. To fight the case, Comeau was joined by financial backers and a top Toronto lawyer, Ian Blue, who has long argued that Canadians have been living under a legal regime that ignores a constitutional guarantee of internal free trade.
The words in the Constitution may seem clear to mere mortals. The 1867 BNA Act, Section 121, says: “All articles of the growth, produce, or manufacture of any of the provinces shall, from and after the union, be admitted free into each of the other provinces.”
But the Supreme Court of Canada, observing through the prism of legal, political and judicial protectionist complexity rather than the eyes of mere mortals, says the words “admitted free” are “ambiguous” or “arguably ambiguous.” They do not mean, said the court, that Canadians can go to another province and buy beer under the assumption that the beer can be “admitted free” back to their home province.
The provinces, said the court, have the authority under another part of the BNA Act, Section 92, to impose regulations within their jurisdictions — even when those restrictions are a breach of the “admitted free” rule. Admitted free, said the court, means a province cannot impose a tariff or a “tariff-like” measure, but it can impose tariff-like measures if the objective is to achieve some social or other policy objectives.
In the New Brunswick beer case, said the court, the alleged policy objective of the “scheme” is not to restrict trade across a provincial boundary, “but to enable public supervision of the production, movement, sale and use of alcohol within New Brunswick.” The New Brunswick law, it added, acts “like a tariff” contrary to the BNA Act’s free trade clause, but the tariff is justified because it is a social policy and is not intended to impede trade.
The Supreme Court of Canada, observing through the prism of legal, political and judicial protectionist complexity rather than the eyes of mere mortals, says the words “admitted free” in Canada’s constitution are “ambiguous” or “arguably ambiguous.”
With all due respect, this is economic baloney. In current circumstances, the only real reason to restrict beer and liquor imports and arrest people who break the law is to protect the monopoly revenues of the New Brunswick Liquor Corporation. Even the court acknowledges that the objective is to “more generally prevent defined quantities of non-Corporation liquor from entering the liquor supply within New Brunswick’s borders.”
That’s raw trade protectionism. In 2016, N.B. Liquor reported revenues of $410 million, of which 40 per cent or $160 million was paid to the government as a monopoly profit. Across Canada, the combined government monopoly plunder of alcohol consumers exceeds $10 billion. In Ontario, the LCBO reported 2016-17 revenue of $5.8 billion, with 34 per cent or nearly $2 billion going to the province.
The N.B. alcohol import restrictions, along with similar impositions by provinces across Canada, are straight trade protectionist measures aimed at maintaining the provincial liquor monopoly and its revenues. How can the justices of the Supreme Court of Canada claim otherwise with unanimous straight faces?
Thursday’s decision is more than a beer story. In fact, beer is a distraction. Of the 17,000 words of text in the decision, beer appears only twice and liquor only 10 times. The majority of the decision, 12,000 words, is directed at the core arguments raised by Comeau’s legal team and other interveners. The court’s objective was clearly to demolish any lingering thought that the free trade reference in Section 121 of the BNA Act should continue to have any meaning.
Especially targeted by the court were the arguments raised by Ian Blue of Gardiner Roberts LLP in Toronto. In a 2011 paper for the MacDonald Laurier Institute, Blue summarized his legal case for Free Trade within Canada.
Blue’s argument is that the obliteration of Section 121 came about in large part as a result of a flawed and erroneous Supreme Court decision in 1921. That case, known as Gold Seal, involved legal moves by Ottawa and the provinces to impose temperance on Canada. The 2018 court bulldozed through these arguments and chose instead to vigorously enforce the status quo: interprovincial trade barriers are good and desirable regardless of the Constitution.
In an interview Thursday, Blue said the Comeau decision effectively means that “any provincial program that interferes with interprovincial trade is OK if it is part of a broader provincial program.” Obviously, adds Blue, “you can see that there is no provincial trade barrier that cannot be dressed up in the clothes of a broader provincial program.”
Malcolm Lavoie, at the University of Alberta law faculty, said half-jokingly that the Comeau decision, taken to its logical conclusion, suggests that “if you had a tariff that was rationally connected to some other objective, it would satisfy their (the Court’s) own test.”
In other words, Canada’s interprovincial trade barrier regime — estimated by Statistics Canada to be equivalent to tariffs of almost seven per cent on goods and services traded within Canada — has now been legally entrenched by the Supreme Court. Another study estimated that Canada could gain between $50 billion and $130 billion in GDP by removing such barriers.
With the Comeau decision, balkanizing trends already dominating Canadian politics will continue, even escalate. With Section 121 out of the way, the provinces have less reason to push for free trade within Canada. Block that pipeline, stop that oil shipment, seize that beer.
• Email: tcorcoran@nationalpost.com | Twitter: terencecorcoran