Federal industry minister James Moore want to discuss interprovincial trade, which will not be an easy sell to provincial premiers. Photo: Sean Kilpatrick/The Canadian Press/Files As the premiers prepare for their annual meeting next week, they find themselves in an unusual position. Normally these affairs involve the premiers issuing a long list of demands that Ottawa do this and pay for that, almost always in areas that are properly provincial. (See: cooperative federalism.) This time, the federal industry minister, James Moore, has provided the premiers with a demand of his own — namely, that the provinces get serious, 147 years after Confederation, about removing the barriers to trade between them.
Well, “demand” is too strong a word. The discussion paper the minister has distributed, entitled One Canada: One National Economy, is as polite, not to say deferential, as these things usually are. Nevertheless, for a federal minister even to raise the subject of interprovincial trade in public suggests something is afoot.
After all, the issues involved are almost entirely provincial, and there is, as you know, nothing provinces are more zealous to defend from federal interference than provincial jurisdiction. (See: cooperative federalism.) Still, the premiers are on weak ground, not only because of the palpable silliness of maintaining barriers to trade within a federation that was formed, in large part, for the purpose of dismantling them, but because in recent years Canada’s external trade has been so liberalized that we are really and truly in the position of having freer trade in some respect with other countries than we do amongst ourselves.
Canadian Prime Minister Stephen Harper speaks during an announcement in Fort Smith, Northwest Territories on Friday August 22, 2014. THE CANADIAN PRESS/Adrian Wyld
Moreover, any suggestion from the provinces that the feds “just leave this to us” must contend with the example of the Agreement on Internal Trade, unveiled with much fanfare 20 years ago. It was supposed to have guaranteed precisely the sort of free movement of goods, services, people and investment the feds are now talking about. It hasn’t worked out that way. As the federal paper diplomatically puts it, the AIT has “achieved limited success.” It covers only a limited range of economic activity, “relies unduly on moral suasion and good faith,” and is largely unenforceable.
So the feds propose two possible ways forward. One would focus on plugging the gaps in the AIT in certain “priority areas,” notably harmonizing the web of conflicting regulations businesses must contend with, opening up government procurement, and eliminating some of the agreement’s many exceptions.
A second, more ambitious approach would essentially tear up the AIT and start from scratch. Where the AIT is based on a “positive list” approach — only those sectors specifically mentioned are included — a new agreement would be based on the “negative list” approach increasingly used in international trade negotiations: everything is in unless it is specifically excluded.
So far, so lovely. But what will the minister do if the premiers give him the back of their hand? I said the provinces were on weak ground, but that doesn’t mean they realize it. After all, if logic had anything to do with it, we wouldn’t be in the situation we’re in. Worse, how will he avoid another AIT — that is, letting the provinces tie him up in negotiations that end up achieving little?
In this file photo, Ontario Premier Kathleen Wynne, left gestures as she responds to media after a meeting with Quebec Premier Philippe Couillard. THE CANADIAN PRESS/Clement Allard
There is an answer, if the minister is prepared to use it. The federal paper makes only oblique reference to it, but the feds potentially hold the whip hand in these discussions, in the form of the Constitution. While the issue has never been definitively tested at the Supreme Court, there is much scholarship to suggest Ottawa has all the power it needs to force the provinces into compliance with the common market.
A 2010 paper for the Macdonald-Laurier Institute, Citizen of One, Citizen of the Whole, argues forcefully that Section 91 of the 1867 Constitution, which assigns the federal government responsibility for, inter alia, “The Regulation of Trade and Commerce,” is sufficient in itself. The provision “unambiguously and decisively gives the federal government control over internal as well as international trade, including the power to strike down measures that deliberately, or accidentally, impose significant barriers to internal trade.”
As if that were not enough, the institute points to Section 121, which stipulates that “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.” Reading the two provisions together, the report’s authors assert “there is simply no room for doubt that those who created Canada wanted the federal government to have, and use, complete authority to rid Canadians of barriers to the free movement of goods, services, labour and capital within their national home.”
Premier Tom Marshall of Newfoundland and Labrador, left is seen during a break at the New England Governors and eastern Canadian Premiers 38th annual conference. (AP Photo/Jim Cole)
If the feds have the power, why don’t they simply use it? Why the blather about “working with our provincial partners”? Perhaps they don’t want to be accused of being the heavies. Or perhaps it’s because the feds themselves, for all their One Canada talk, have fairly limited ambitions for the project.
Any serious modern trade agreement, after all, must contend not just with the free movement of goods or people, but investment. The biggest impediments to capital flows are often not overt restrictions, such as foreign investment controls, but subsidies. Problem: the provinces are hardly the only ones guilty of using subsidies to distort and balkanize the flow of investment within Canada. The federal government is as much to blame, paying tens of billions in subsidies to business annually through scores of “regional development” and “technological innovation” programs designed to steer investment into this province or that riding. Is it really prepared to give up that political gift-bag, forever?
A federal government that asserted leadership over the economic union in the manner the Constitution prescribes would expose itself to the kind of scrutiny it would probably prefer to avoid. Not only would it have to account for whatever exceptions the provinces were allowed — can you imagine the feds ordering the provinces to open their hydroelectric monopolies to competition? — but it would come under pressure to subject itself to the same tests it applied to the provinces. Which is why we will probably still be discussing the same issue 20 years from now.
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