Freeing trade … one way or another

It is encouraging in principle that Canada’s premiers have reached an agreement on freeing up internal trade among the provinces and territories. But it is a long journey from the photo op and press release that were offered after last week’s gathering in Whitehorse to a concrete deal providing greater freedom and prosperity for citizens. And without a proper map, the premiers may never get there.

The existing rules contained in the agreement on internal trade (AIT) were created with similar fanfare in 1994 and have proved completely ineffective, mostly because they were designed by the same people who face internal political pressures to obstruct trade. Putting them in charge led to predictable results, including rules mandating different sizes for little plastic restaurant coffee creamers in different provinces. How will this agreement be different?

It is hard to tell because there does not seem to be an actual agreement, just an agreement to agree, the text of which we won’t be allowed to see until it is ratified, which rather complicates the task of intelligent public discussion before it becomes a fait accompli. Like the AIT, it may well fail to implement genuinely freer internal trade, but present another opportunity to bicker about it unproductively for decades.

The limited detail we have already offers reason for doubt. The premiers appear to have reached a rhetorical presumption for freer trade but a practical presumption against it, in the form of “negative lists,” which enable each party to identify exceptions that will be excluded from the rules. Not the ideal starting point. Opposition to a wider opening was reportedly centred in Alberta, where Premier Rachel Notley wants to ensure government spending remains largely within the borders. And participants conceded they have yet to untangle the nonsensical web of restraint that hinders wine sales across provincial lines.

It’s not all bad news. Canada’s Constitution plainly mandates internal free trade in Section 121: “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 is a testimony to the intellectual and institutional grip of protectionism that this section has been spuriously ignored for decades based on the tendentious and discredited 1921 Supreme Court decision Gold Seal v. Alberta. When anyone dares challenge provincial protectionism in court, they generally succeed, most notably in the New Brunswick Comeau ruling on beer sales, which for jurisdictional reasons applies only to that specific case, but which will almost certainly be upheld on appeal and become a binding precedent.

It is essential that the premiers free themselves from their protectionist instincts and accept that freer internal trade, like freer international trade, is good for everyone. It is not a matter of trading “concessions,” but a logical process in which each participant agrees to stop building costly barriers against others, in return for the dismantling of costly barriers against themselves. For every local interest helped by protectionism, there are a hundred citizens and firms denied access to the better prices and better service competition brings. And almost every firm that benefits from a particular piece of protectionism sees those gains lost to the rules that work against it.

Given their track record, it’s possible the provinces will once again fail to follow through on their stated intentions. In that case, it becomes Ottawa’s duty to follow both the logic of free trade and the contents of Canada’s Constitution. They are plainly mandated to demolish barriers to internal trade. One model for doing so was proposed in a Macdonald-Laurier Institute paper six years ago, which suggested adopting an Economic Charter of Rights that establishes a federal Economic Freedom Commission able to initiate legal action against provincial protectionist measures, in response either to public complaints, or, crucially, investigations it initiates itself.

To make a citizen of one a citizen of the whole, in George Brown’s ringing phrase, would not just make Canadians more prosperous, but would also strengthen the bonds between us as citizens.

The provinces say they want to eliminate the absurdities that now clutter Canada’s interprovincial trade, and we hope they do. Should they fail, the federal government must not allow another 20 years of selfdefeating inactivity. Ottawa has a constitutional hammer, and should bring it firmly and boldly down.