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Report On Business Magazine So many loopholes, so little wine. A strong trade deal could have prevented the Alberta-B.C. spat

Alberta Premier Rachel Notley knows a lot of people in her province love wine from British Columbia. In fact, she’s one of them. But shortly after B.C. tried to block the Trans Mountain pipeline expansion in January, she announced Alberta would boycott B.C. wine imports in retaliation. She asked residents to drink Alberta craft beer instead. You don’t mess with Wild Rose Country—and if Okanagan Valley vintners become collateral damage, so be it.

It didn’t have to be this way. Although Alberta and B.C. have now called a truce, their trade war could have been avoided entirely if the Canadian Free Trade Agreement, which took effect last July, had real teeth. It was supposed to ensure the free movement of goods, services and labour within Canada by removing the internal trade barriers that have plagued this country since Confederation. Ostensibly, the deal was also meant to keep the provinces from retaliating against one another, too.

When the deal was signed, there was big talk of increased co-operation among the provinces. But the Alberta-B.C. trade skirmish has exposed serious problems with the agreement. It’s so full of loopholes and exemptions, they shouldn’t have bothered to sign it at all.

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The fine print makes it clear the provinces and territories never really intended to change their protectionist ways. Not only does the deal protect their right to create and expand government monopolies, but a number of industries are excluded from the agreement altogether, including alcohol, water, cultural industries and tobacco. (The provinces will continue to ponder how to liberalize trade in alcohol, financial services and food production.)

It’s true that thanks to the agreement, the energy sector and energy utilities are now subject to open procurement rules for the first time. But there are a slew of other exemptions relating to the oil and gas industry. All told, the agreement contains more than 100 pages of exceptions. And the loopholes don’t stop there.

Any province or territory can walk away from the agreement with 12 months’ written notice. Those that break the rules get a light slap on the wrist. The maximum fine for trade infractions is a paltry $10 million—a tiny amount given that internal trade represents one-fifth of Canada’s annual GDP, totalling a whopping $385 billion a year.

A real free trade deal would include compensation for ordinary Canadians when their livelihoods are threatened by arbitrary provincial trade wars. It would be backed by a federal government willing to scrap regressive federal laws that legitimize provincial monopolies in alcohol (and soon, marijuana). It would take a harder line with provinces that try to thwart energy projects—such as the Trans Mountain pipeline—that are clearly in the national interest, perhaps by withholding or reducing transfer payments.

Free trade within Canada ought to be a no-brainer. A 2016 Senate report concluded that internal trade barriers reduce Canada’s GDP by as much as $130 billion and hurt consumers by limiting competition and inflating prices. That patchwork of provincial rules also damages businesses by driving up compliance costs and hampering expansion to new markets.

If you’re thinking the Alberta-B.C. trade war is an isolated incident, think again. In December, Saskatchewan declared that contractors with Alberta licence plates would be barred from new provincial highway projects. Saskatchewan said it was retaliation for Alberta banning Saskatchewan contractors from its highway construction sites. There’s long been bad blood between Quebec and Newfoundland over power projects. British Columbia meanwhile, isn’t the first province to try to block an Alberta pipeline project.

The British Columbia Wine Institute, for one, says we should all be concerned. “If Canadian wine can be prohibited from being imported based on its province of origin, so can any product from any other province. All Canadians are vulnerable to provincial actions like this.” In vino veritas. In wine there is truth.

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