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The Canadian Supreme Court Turns Down a Chance To Establish Free Trade Within Canada

Summary:
I previously blogged about a Canadian constitutional challenge to a New Brunswick restriction on purchasing beer from other provinces and bringing it back to New Brunswick. The Canadian Supreme Court ruled on the case yesterday, and, unfortunately, declined its opportunity to establish a broad principle of free trade within Canada. The constitutional provision at issue, Section 121, states: 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. On its face, that sounds pretty broad. But the court came up with a narrow interpretation of the scope of provincial measures that are prohibited: [114]   In summary, two things are required for s. 121  to be violated. The law must

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I previously blogged about a Canadian constitutional challenge to a New Brunswick restriction on purchasing beer from other provinces and bringing it back to New Brunswick. The Canadian Supreme Court ruled on the case yesterday, and, unfortunately, declined its opportunity to establish a broad principle of free trade within Canada.

The constitutional provision at issue, Section 121, states:

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.

On its face, that sounds pretty broad. But the court came up with a narrow interpretation of the scope of provincial measures that are prohibited:

[114]   In summary, two things are required for s. 121  to be violated. The law must impact the interprovincial movement of goods like a tariff, which, in the extreme, could be an outright prohibition. And, restriction of cross-border trade must be the primary purpose of the law, thereby excluding laws enacted for other purposes, such as laws that form rational parts of broader legislative schemes with purposes unrelated to impeding interprovincial trade.

Applying that standard here, the court found that the New Brunswick restriction, Section 134(b) of the Liquor Control Act, did not violate Section 121:

[125]  We conclude that the primary purpose of s. 134(b) is to prohibit holding excessive quantities of liquor from supplies not managed by the province. New Brunswick’s ability to exercise oversight over liquor supplies in the province would be undermined if non-Corporation liquor could flow freely across borders and out of the garages of bootleggers and home brewers. The prohibition imposed in s. 134(b) addresses both. While one effect of s. 134(b) is to impede interprovincial trade, this effect is only incidental in light of the objective of the provincial scheme in general. Therefore, while s. 134(b) in essence impedes cross-border trade, this is not its primary purpose.

The court could have gone for a number of broader standards, but for whatever reason chose not to. That means free trade within Canada is now dependent on the provinces to avoid interprovincial trade restrictions on their own, or it has to rely on the new Canadian Free Trade Agreement (which updates the previous Agreement on Internal Trade, and is sort of like an international trade agreement that applies to the Canadian provinces). It is possible that this Free Trade Agreement will have some success in getting rid of interprovincial barriers, but a constitutional principle would have been broader and more effective. This court decision was a missed opportunity for Canadian free trade.

Simon Lester
Associate Director @CatoTrade. Formerly @WTO. Founded http://WorldTradeLaw.net . Taught trade law @MelbLawSchool, @UMichLaw, @AUWCL.

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