A Supreme Court ruling that there’s no ‘constitutional guarantee of free trade’ will stifle both competition and lower prices for consumers
By SYLVAIN CHARLEBOIS
Atlantic Institute for Market Studies
THE SUPREME COURT of Canada has ruled that provinces have the right to erect interprovincial tariff barriers. That’s bad news for Canadian consumers and the health of the national economy.
It is, however, a relief for provinces that for years have allowed fiscal priorities to supersede consumer choice and common economic sense.
In 2012, Gerard Comeau bought 344 bottles of beer, two bottles of whisky and one bottle of other spirits in Quebec, then brought it all back to his home province of New Brunswick. He had done this several times before, even though a 90-year-old law made it illegal. This time, however, Comeau was arrested and fined $292.50.
But the Comeau case was never just about beer. It was essentially about enabling regional economies across the nation to thrive through cross-country expansion.
The Supreme Court unanimously ruled on Thursday that there is no “constitutional guarantee of free trade” within Canada.
For the agri-food sector, that decision has tremendous significance. Who would have thought that $292.50 held such vast potential over domestic food trade?
For almost nine decades, interprovincial barriers have multiplied and handicapped many food companies. For businesses buying ingredients or specialty products from another province, it’s been a problem. Barriers were erected to suppress competition, and sell more taxed and overpriced food products and beverages produced at home.
Canada has a myriad of trade barriers (along with the agri-food sector’s addiction to marketing boards). We needed the Supreme Court to make us realize that we need to get our interprovincial act together.
But it didn’t happen.
Because of this ruling, creative companies in smaller provinces won’t have a fighting chance to expand and compete in larger markets, such as Quebec and Ontario. Wineries, craft cheese producers, craft breweries, speciality meat producers and many other small-scale operations will face mounting obstacles domestically. And the obsolete provincially based quota system to support dairy, poultry and egg production facilities will remain in place.
A different decision could have allowed for a redistribution of some of the agri-food wealth around the country. For example, dairy processing has been concentrated in Quebec. The court, with a different ruling, could have shifted a weak and obsolete equalization system that has some provinces supporting others.
A different outcome would also have resulted in more competition and lower consumer prices.
And fiscal policies could have changed if provincial economies became more open.
There is a public will for more economic integration and that makes internal barriers undesirable. But then, interprovincial trade barriers never made sense. We have just 37 million inhabitants spread out across a vast country. Protecting micro-markets in 10 regions is illogical.
Those who support the status quo argue that a different ruling could have triggered a race to the bottom in both health standards and food safety. That’s nonsense. Risk management practices in the Canadian agri-food sector are exemplary.
As we continue to seek opportunities abroad, the federal government and the provinces need to clean up trade at home first.
It has taken over 90 years – and a timid fine of $292.50 – but perhaps Ottawa has finally received a strong message that Canadians deserve better, even if the Supreme Court has opted to stay on the sidelines.
Sylvain Charlebois is dean of the Faculty of Management and a professor in the Faculty of Agriculture at Dalhousie University, Senior Fellow with the Atlantic Institute for Market Studies, and author of Food Safety, Risk Intelligence and Benchmarking, published by Wiley-Blackwell (2017).
© Troy Media