British Columbia wineries are now able to sell their products directly to Alberta consumers following an agreement between the two provinces. Bottles of British Columbia wine are displayed at a liquor store in Cremona, Alta., on Feb. 7, 2018.Jeff McIntosh/The Canadian Press
After a mere 158 years, there is finally free trade between the provinces. Well, not all the provinces – just Alberta and British Columbia. And, fine, last week’s pact is limited to allowing Alberta residents to buy B.C. wines directly. And the agreement will only last a year.
Still, in an economic union as dysfunctional as Canada’s, even small victories have to be celebrated as a crack in provincial trade barriers that have sapped national prosperity since Confederation. The deal that the two provinces inked underscores the durability of the politics of protectionism.
Alberta wine lovers had been illicitly ordering bottles from B.C. vintners in defiance of the province’s law, not to mention the British North America Act. In response, the Alberta government decreed a year ago that it would not stock products from any winery taking part in such nefarious schemes. (Alberta has privatized liquor retailing, but wholesaling and stocking decisions remain within its purview.)
Now, a deal has been reached that will give Alberta consumers access to more than 300 wineries, while the province will get a cut of tax revenue. If all goes well, the provinces might even renew the deal after a year.
And who knows? Perhaps other provinces could be added. Perhaps other products could be added. Perhaps Canada might, one day, become a national economic space instead of an assemblage of fiefdoms.
In fairness to the two Western provinces, they have been at the forefront of efforts to promote internal free trade. Along with Manitoba and Saskatchewan, they are members in the New West Partnership Agreement. A recent analysis from Queen’s University found that the pact boosted productivity and increased the chances of a business exporting to other provinces, in part because its structure allowed for fewer exceptions. At best, that is a good beginning. Such deals still represent managed trade, not free-flowing commerce.
Manitoba’s approach to liquor sales is a far better example. The province allows Manitobans to – gasp – buy alcohol from outside the province. There is no complexity involved, just the simple political decision to prioritize economic freedom and efficiency over petty revenue concerns. If only that political will were in greater supply.
The Supreme Court has ensured that the question of creating a single economic space will have to be resolved politically, not through legal channels. In a 2018 decision upholding provincial liquor monopolies, R v Comeau, the court ruled that provinces have wide latitude to enact policies that hinder interprovincial trade, if that is a secondary effect of such a policy rather than its intent. Protecting monopoly profits from liquor sales, however disadvantageous that may be to consumers, is just such a policy.
Indeed, the court went so far as to write that “full economic integration would significantly undermine the shape of Canadian federalism.” It’s a sad statement that the top court believes that economic parochialism is an essential characteristic of Canada.
Such parochialism comes at no small cost. The Queen’s study points out that eliminating interprovincial trade barriers could bump up gross domestic per capita by 4 per cent. Or, to frame it differently, consumers could see the prices of goods and services drop by up to 14.5 per cent if internal free trade were to be achieved – enough to mostly offset the impact of inflation since 2020.
For most of the last 158 years, it’s been merely stupid to not pursue such a vision. But in the last couple of months, since Donald Trump began lobbing threats of economy-crushing tariffs toward Canada, that failure has moved past dumb to self-destructive.
If Mr. Trump makes good on his threats, Canadians will need every economic advantage that can be stitched together to offset the damage from sharply curtailed access to the U.S. market. Internal free trade must be at the top of the list.
This space has previously argued for Ottawa to bribe the provinces, an unfortunate if necessary recognition that a rational calculation of mutual interests won’t get you nearly as far as a rational calculation of mutual interests, and a few billion dollars. (In theory, the boost to growth and productivity would defray much of the cost.)
The provinces will not act on their own. The Supreme Court has folded its hands. It is up to the federal government to – after a mere 158 years – create the economic union that should have been the right of all Canadians all along.