Let Our Fathers of Confederation Guide the Premiers on Trade

This year, Charlottetown is celebrating the moment when our country was conceived. In 1864, the first of the Charlottetown conferences was convened to hammer out some of the philosophical and legal structure of our nation. It was the birth of a constitution that has served to create arguably the most successful experiment in democracy ever conducted, The Dominion of Canada.

Theirs was a project was to create a nation loved by its citizens because of its constitutional commitment to the protection of minority rights and personal freedoms, the “Canadian” rights and freedoms. “Freedom”, as Sir Wilfred Laurier stated during a campaign stop some 30 years later, “freedom in every sense of the term, freedom of speech, freedom of action, freedom in religious life and civil life and last but not least, freedom in commercial life.” Hover for a moment on the end of that statement.

Entrenched in section 121 of the Canadian Constitution is perhaps one of the most important bits of economic glue holding this fragile, tentative union together, the provision of free trade between the provinces. It could be argued without the creation of a Canadian free trade zone, comprised at the time of 4 million mismatched souls, the notion of Canada as a nation itself might never have even got off the ground. Certainly the cancellation of the Canadian-American Reciprocity Treaty in 1865 necessitated the creation of a more robust domestic market.

The founding fathers vehemently opposed Inter-Provincial Trade Barriers (IPTBs as we affectionately refer to them now). They believed if Canadians were to prosper it was essential that all Canadians could freely access markets within the country. Section 121 of the Constitution is explicit. In the final version from March 1867, section 121 reads: 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.

In spite of its seemingly obvious constitutional intent the forces of parochialism and protectionism have prevailed over the wisdom of our founders. Through a variety of decisions throughout the 20th century, subsequent interpretations of section 121 served to open the door to closing more doors. While customs duties and similar charges remain prohibited between provinces, successive governments have successfully closed or restricted their provincial borders through mazes of indirect taxation and absurd regulations stifling the free flow of goods and services.

Midway through the second decade of the 21st century and as we prepare to celebrate the 150th anniversary of Confederation, if our founders could be raised from the dead and made aware of what we are doing with their precious document, they would surely be puzzled.

You may ask, “How can this be? Surely our elected officials would not knowingly have undermined the most sacred foundation of our national architecture.” Actually, yes…they did, generally for short-sighted reasons based on either protectionist or isolationist principles.

Many of the barriers in question are at the same time serious and foolish. Have you ever wondered why regulation would be imposed to determine the size of the containers for milk and cream? Do we need protection from the amount of milk we put in our coffee? Another example, from province to province the regulations governing truck tires are not consistent. In fact, there are situations where depending on the load, trucks must stop and change tires when they cross the provincial border to be in compliance. This is one of a myriad of mysterious regulatory anomalies that business must decipher and comply with.

Perhaps the most ridiculous example, the infamous Quebec ban on pale yellow margarine, has been removed but it still serves to illustrate the deceptive thinking behind these barriers. Consumers didn’t need to be protected by the colour of the product inside so they didn’t mistake butter with something with “margarine” on the label, but it was designed to impose an extra cost on non-Quebec margarine producers, to benefit Quebec dairy producers, all at the expense of Quebec consumers. By the way, the rule that is still in place says butter sold in Quebec must be wrapped in foil. Why has never been explained.

Recently the federal government moved to eliminate restrictions on shipping wine from one province to another. In response several provinces promptly establish new regulations again restrict that trade. The inevitable result will be court challenges to the validity of these regulations which will again test the interpretation of section 121 to create great expense, delay and confusion. By the way, don’t be buying a case of wine in Nova Scotia and driving it to New Brunswick. The maximum amount of liquor that can be imported into New Brunswick from another province is one bottle of wine or hard liquor or 24 bottles of beer. There’s an immediate 292.50 fine and your crisp L’Acadie Blanc souvenir from the vineyard can be seized and destroyed.

As our clever student intern working on CFIB’s Atlantic IPTB report said at our summer meeting…”What’s the difference between Smokey and the Bandit and Atlantic Canada’s Alcohol policies? One is a foolish story about regular folks of coming to terms with 1970’s era prohibition style trade restrictions and the other is a Burt Reynolds movie. Ba-dum.

There are volumes of petty, preposterous, punitive rules and regulations so immense it is difficult to measure the economic impact on the economy. However anyone familiar with any industry can easily come up with their own examples. Measuring the overall impact is considerably more difficult. In 2010 Brian Lee Crowley, Robert Knox and John Robson wrote Citizen of One, Citizen of the Whole for the MacDonald-Laurier Institute publication True North. Three reasons are given why it is so difficult to measure the cost of ITPBs;

“First, IPTBs are so numerous and varied that no one has managed even to list them all. Second, they have such complicated effects that it is impossible to measure even their short-run costs with any certainty. Third, the harm they do accumulates dramatically over time in ways that are even harder to measure, especially their depressing impact on people’s enthusiasm for trying new things, which, after all, is the elusive “innovation” that is the Holy Grail of so much government economic policy.”

Regulations restricting inter-provincial trade clearly are in defiance of the spirit in which the constitution of this country was written. What is puzzling is the resistance of political leadership to addressing such a fundamental flaw in the application of policy and why it’s repeated. Surely, even the anecdotal evidence must be enough to raise sufficient concern for attention.

The federal government is finally beginning to show some sign it takes this issue seriously. James Moore, the federal Industry Minister, said his number one priority is a new internal trade deal that would replace the existing Agreement on Internal Trade (AIT), signed by the provinces 20 years ago. It left behind a patchwork of cumbersome barriers. Moore says, “The Agreement on Internal Trade … is out of date and it doesn’t make sense anymore.” In fact, it’s become practically useless. Ironically, since the AIT was signed 20 years ago, Canada has finalized trade agreements with over 40 countries, including the European Union and South Korea. Some companies now are noting it’s harder to do business inside Canada than internationally.

Later this summer the Council of the Federation (The Premiers) are meeting in, of all places, Charlottetown, and IPTBs will be on the agenda. PEI Premier Robert Ghiz has said he doesn’t have much to say about it right now, but he’s open for discussion. NS Premier Stephen McNeil is making the right noises and one might expect New Brunswick’s David Alward would support such measures.

Let’s hope the echoes of the ghosts of the Fathers of Confederation influence the Premiers while they are in Charlottetown. Eliminating these ludicrous trade barriers between the provinces is something they must advance now.