Breaking down Canada’s internal trade barriers

By Justin Ling Web Only

Breaking down Canada’s internal trade barriers

 

Beer is flowing freely from province to province; wine could soon follow. And if some political mavericks get their way, provincial agricultural barriers could be next.

Credit political will and perhaps a broader reading, of late, of Canada’s founding documents: Internal free trade has been a hot topic.

Ever since a New Brunswick Court of Appeal sided with an ale-loving New Brunswick man in R. v. Comeau, it seems like it’s just been a matter of time until the Supreme Court of Canada weighs in and Canada will become, once and for all, a free-trade zone.

The case turned on the wording of Section 121 of the Constitution Act, 1867: “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.”

Government lawyers had tried to convince the top justices that the clause was merely a prohibition on tariffs or taxes — giving  “free” literal meaning — rather than interpreting it as an admonishment of provinces to regulate or prohibit the inflow or outflow of goods like, say, beer.

That logic comes from the 1921 Gold Seal Ltd. v. Alberta (Attorney-General) Supreme Court decision, which read the narrow view of Section 121.

In a ruling upheld by the Court of Appeal, the provincial judge in the case concluded that: “There is nothing in the wording used in section 121 of the Constitution Act, 1867 that would lead one to infer that the Fathers of Confederation intended to restrict the words ‘admitted free’ to ‘admitted free of customs duties or charges.’”

But one man is taking the — sometimes unpopular — view that, while it might do more than just restrict the imposing of duties, perhaps Section 121 isn’t quite as strongly-worded as it appears to be.

Asher Honickman, partner at Matthews Abogado, contends that Section 121 can’t be read alone, and that it should be “married” to Section 91(2) — “the exclusive legislative authority of the Parliament of Canada extends to...the regulation of trade and commerce.”

Honickman, speaking to the Canadian Constitution Foundation’s Law and Freedom conference in January, argued that there is a “plethora of precedence in this country” resting on the idea that “Parliament can regulate interprovincial trade.” And that didn’t come from nowhere. It’s fundamental to the division of powers between Ottawa and the provinces.

“If Section 121 was supposed to have been a restriction on federal power as well, especially on federal trade power, you would not have think that it would have been included in the section on taxation,” he argued, and he’s not wrong — Section 121 falls under Section VIII: “Revenues, Debts, Assets, Taxation.”

In a paper on the matter, Honickman points a big red arrow at the Comeau ruling, wherein the presiding judge writes: “this is obviously not a ‘division of powers’ case.”

That’s far from obvious, Honickman says. On the contrary, though the New Brunswick law found invalid prohibited Mr. Comeau from bringing his beer from Quebec into New Brunswick was unconstitutional because it impugned Section 121, also impugned Section 91(2). In other words, it was doing Parliament’s job.

“In essence, I am proposing that s.121 be interpreted as a reaffirmation of Parliament’s exclusive authority under s. 91(2), rather than as a stand-alone provision,” he writes.

Honickman knows his position is novel and, perhaps, not in the mainstream.

Rebutting Honickman at the Canadian Constitution Foundation was Ian Blue, an administrative lawyer at Gardiner Roberts in Toronto. He took Honickman’s case to its logical conclusion: Why would the framers of the Constitution build a system whereby the majority in the House and Senate — Ontario and Quebec — could slap trade barriers on smaller provinces?

In a paper on the matter, Blue goes back to Confederation to argue that there is no way its framers had envisioned such a system.

“Macdonald, a capable lawyer and the shrewdest parliamentary tactician of his time, would have known that the federal trade and commerce power would not restrict Parliament from imposing its own interprovincial trade barriers if it so decided. If members of Parliament seeking to protect provincial producers were to form a parliamentary majority, they could enact protective trade barriers at any provincial border,” Blue writes.

And, he says, there was little vagueness in the intent of the Fathers of Confederation. As the Americans seemed intent on raising non-monetary barriers — like a stop-and-inspect policy — or a ban on trade altogether, Canada’s founders were trying to mitigate risk.

“As the Confederation debates show, considerable value was placed upon the free-trade-within-Canada advantages which were hoped to mitigate the effect of pending exclusion from the American market,” Blue writes.

Regardless of the intellectual debate, Comeau seems set to advance the issue of internal trade forward. But the debate over the marriage — or divorce — of Sections 121 and 91(2) has yet to play out.

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