Andrei Sulzenko was the federal chief negotiator for the 1994 Agreement on Internal Trade and is currently an Executive Fellow at the School of Public Policy at the University of Calgary.
The Supreme Court of Canada (SCC) in recent years has toed a fine line between strictly interpreting the law of the land and making law through judicial activism. In its April 19 decision on whether New Brunswick’s restrictions on the importation of beer into the province (R. v. Comeau) were unconstitutional, it did the latter in the name of the former. In other words, it rewrote the interpretation of the Constitution’s trade and commerce powers based on a narrow read of the case brought before the court.
Flash back 25 years when the federal, provincial and territorial governments launched formal negotiations toward an Agreement on Internal Trade. Prominent on the list of elements as priorities for negotiation were provincial restrictions on the importation and sale of alcoholic beverages.
Of course, provinces never had any real intention of negotiating away these restrictions along with many other archaic practices, but they openly acknowledged before and during the negotiations that these restrictions were put in place to protect local industry from out-of-province competition. Otherwise, they would have argued that the restrictions were legitimate for various public-health and safety reasons and should not even be subject to negotiation.
As it turned out, the 1994 Agreement on Internal Trade left essentially blank the chapter on alcoholic beverages, leaving it to future negotiation, that is punting the issue into never-never land. This chapter, without accompanying substance, implicitly constituted an acknowledgement by all parties that the restrictions, including those in place by New Brunswick, were illegitimate barriers to trade.
In the particular case of New Brunswick, there is still a large brewery in Saint John that benefits from the protections afforded by the provincial regime.
Perhaps the pro-liberalization arguments before the courts through the various stages did not go into the real underlying policy rationale for the New Brunswick restrictions. No doubt those arguing the other side persuaded the SCC that they were put in place, as the court said, “not to restrict trade across a provincial boundary, but to enable public supervision of the production, movement, sale, and use of alcohol in New Brunswick,” with the negative effects on trade being incidental to that avowed purpose.
It appears in the above quote from its decision that the SCC bought that argument at face value. In comparison, the decision does not discuss at all the possibility of the underlying rationale as plain old protectionism, plain to any one that has spent time on the issue.
In trade-policy parlance, this is known as a “disguised barrier to trade.” Modern trade agreements include language designed to provide redress against these kinds of practices, including, ironically, the 1994 Agreement on Internal Trade. This reinforces the argument that if alcoholic-beverage restrictions were not disguised barriers to trade, there would not have been any need for a chapter (even an empty one) devoted to the subject.
Paradoxically, the SCC’s endorsement of the status quo constitutes a form of judicial activism in further tilting the playing field in the economic union toward provincial and territorial ability to restrict legitimate trade in the name of some higher calling.
This means, for example, that Ontario consumers will still not be able to place orders directly with British Columbia wineries. Indeed, Ontario does not really bother to put forward a public-policy rationale other than protecting its wine industry. Questions also come to mind immediately about the potential Balkanization of cannabis production and sale in Canada.
Based on the SCC decision, there will no doubt be much wishful thinking from here on by provincial governments about what mischief they can perpetrate on the oxymoronic economic union by using some high-sounding, overriding public-policy objective. Does environmental protection come topically to mind?
In hindsight, it would have been better if Mr. Comeau had just paid the fine for bringing cheaper beer in from Quebec and had not challenged New Brunswick’s protectionism – a small price to pay for avoiding a Pandora’s box outcome.