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Interprovincial trade barriers are against the spirit of Confederation

Andrew Smith completed his PhD at the University of Western Ontario in 2005. He now teaches international business and business history at the University of Liverpool, England, and lives in Paris with his family.

I was the expert witness in R. v. Comeau, a New Brunswick court case about interprovincial trade barriers that has serious implications for a number of sectors of the Canadian economy.

The case involves Section 121 of the Constitution Act, 1867, which declared that there should be interprovincial free trade. The case centres on a man who purchased a number of cases of beer in Quebec in 2012 and then drove back into New Brunswick, where the RCMP confiscated the beer. In court, I reported that Confederation was intended, in part, as a means of eliminating trade barriers within British North America. I informed the court that laws that create interprovincial trade barriers are thus anathema to the spirit of Confederation. The court will now need to decide whether such laws are constitutional.

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During my visit to New Brunswick, I was astonished by the degree to which the court case had captured the attention of locals, especially beer consumers and tradespeople who have been excluded from Quebec construction sites. I overhead one man declaring that because of today's restrictions on interprovincial trade, "Les Pères de la Confédération doivent se retourner dans leur tombes" – the Fathers of Confederation must be spinning in their graves.

It's rare for a business historian or any other management academic to be called as an expert witness in a constitutional law case. However, since my PhD thesis was on the role of business in the creation of the Canadian Constitution, I'm qualified to speak to what the framers intended when they drafted Section 121. The fact that I now teach about globalization and international trade deals to business students makes me appreciate the sheer wisdom of the drafters of the British North America Act in attempting to preclude any post-Confederation backsliding into interprovincial protectionism.

Canada is not the only federal system to confront the problem of internal trade barriers, as there is a natural tendency for subnational units to drift into protectionism.

In the European Union, judicial action such as the ruling by the European Court of Justice in the 1979 Cassis de Dijon case helped to push elected politicians to undertake the reforms needed to create the single market by 1992. For Canadians seeking to create a unified internal market, Australia is perhaps the best role model: Australian courts have vigorously used the equivalent constitutional section there, Section 92, to strike down interstate trade barriers. In Australia, judicial action has complemented the efforts of first ministers to bring about internal free trade. Given that Canada is on the verge of signing trade agreements that include the EU (via CETA) and Australia (via the Trans-Pacific Partnership), Canadians ought to pay attention to these examples.

Commenting on the Comeau case, Prime Minister Stephen Harper declared that restrictions on the interprovincial movement of beer are "ridiculous."

They are, but Mr. Harper's government has actually done very little to eliminate interprovincial trade barriers over the past nine years.

Economics teaches us that internal free trade will make Canada more competitive. In building political support for the elimination of interprovincial trade barriers, it may be necessary to set aside compensation for the incumbent firms that might suffer during the transition to internal free trade. One example would be the companies that were forced by provincial governments to build local breweries as a condition of selling their products in the province.

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Regardless of the outcome of the federal election, a first ministers' conference on the urgent subject of internal free trade should be held as soon as possible after Canadians vote on Oct. 19.

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