Gérard Comeau just wanted to save some money on booze. In the fall of 2012, the New Brunswick man drove to Quebec and, after stocking up in a border town, headed home—only to be stopped en route by the RCMP. Not only did the Mounties seize his 14 cases of beer and three bottles of liquor, but they slapped him with a nearly $300 fine. Under New Brunswick's liquor law, residents are prohibited from possessing more than one bottle of liquor or 12 pints of beer purchased outside the province.
Comeau's ill-fated beer run is now the focus of a landmark legal brawl, with the Supreme Court set to hear the case in December. The decision could challenge provincial monopolies on alcohol sales. More importantly, it could topple trade barriers between provinces that cost the Canadian economy billions every year, and that provincial governments failed to address in their recent free-trade deal.
In essence, the Supreme Court has to interpret Section 121 of the Constitution Act of 1867, which states: "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." It seems like an obvious endorsement of free markets, but nothing is ever that simple in Canada. To some, the clause means that interprovincial trade should be free of tariffs or duties but the provinces can impose import or export limits. They point to a 1921 Supreme Court decision rooted in that view. Others, including Comeau, argue that the Constitution already bans other barriers to the free flow of goods, including restrictions on how much alcohol a resident can carry home from another province.
Globe editorial: How one man's thirst for cheaper beer could redefine trade in Canada
Many are hoping the Supreme Court will take a stand on broader internal trade and make its decision applicable to all provinces. If that happens, the ruling could affect a slew of provincially regulated industries, including dairy, poultry, trucking and construction—a hodgepodge of rules long due for an overhaul.
In June, 2016, the Senate compiled a list of the most preposterous restrictions. For example, unpasteurized cheese from Quebec cannot be shipped to other parts of Canada. Meanwhile, varying rules on beer bottle sizes prevent breweries from shipping to some provinces. The Supreme Court has an opportunity to fix this skewed trade landscape, says Germain Belzile, a researcher with the Montreal Economic Institute. "This [case] could upend all the cozy arrangements in the provinces."
By quashing competition, inflating prices and hampering business growth, internal trade barriers reduce the GDP by as much as $130 billion, the Senate report estimated. Considering these repercussions, the provinces should get out in front of the Supreme Court decision and rewrite their laws to remove these barriers.
The trouble is, provincial governments are more concerned about retaining control. The result has been a half-hearted commitment to free trade—and that includes the Canadian Free Trade Agreement signed in April. It's a superficial deal that excludes sectors such as alcohol,
water, cultural industries and tobacco. Instead of dismantling government monopolies, the new agreement reinforces the provinces' right to maintain them. The promise to study ways to liberalize trade in alcohol is a cop-out, and the doubling of maximum fines for trade infractions to $10 million remains an inadequate deterrent.
It's time for the provinces to drop the pretense and broker a substantive deal. The federal government also has a role to play. It can start by tossing out the Prohibition-era law that restricts the movement of alcohol between provinces. The 1928 Importation of Intoxicating Liquors Act requires imports to be conducted by a provincial liquor board. It's a relic of a bygone era that gives the provinces licence to maintain internal trade barriers from which they benefit through lucrative tax revenues at the expense of domestic wine and beer makers.
There is a chance the Supreme Court could rule against Comeau, but it's hard to imagine. Precedents from different eras and antiquated laws have no place in a modern Canada, especially as federal and provincial politicians preach free trade on the global stage. When leaders such as Ontario's Kathleen Wynne lecture Americans on the ills of protectionism but are complicit in holding on to similar policies at home, they lose credibility. Much like overpriced beer, voters find hypocrisy hard to swallow