A few years ago, Gerard Comeau, a retired steelworker from Tracadie, New Brunswick, went on a 185 kilometre booze run to Pointe-à-la-Croix, Quebec. Like countless other folks in New Brunswick, Gerard opted to make the two-hour drive to cross over the Restigouche River into the neighbouring province to pick up cheap booze which often sells at half the price of the same product in the New Brunswick Liquor Corporation (NB Liquor) outlet.
When Gerard brought his 14 cases of beer and three bottles of liquor back home that day, little did he know he was triggering a series of events which would place him in the company of our Fathers of Confederation. Sir John A. MacDonald and George Brown’s healthy taste for tipple notwithstanding, Gerard had something more in common with the framers of the Constitution: the desire to promote free trade. Gerard’s free trade efforts, however, led to him being charged with illegal importation of alcohol.
Three years later Mr. Comeau showed up for court. With the help of some constitutional experts and lawyers, Gerard argued that Section 134 of the New Brunswick Liquor Control Act is unconstitutional.
New Brunswick’s regulations, like Nova Scotia’s complex assortment of liquor laws, are empowered by a 1928 federal statute, the Importation of Intoxicating Liquors Act. It demands alcohol only move in or out of provinces with permission from its liquor control board. It was designed primarily to stop bootlegging as Prohibition was lifted at different times in different jurisdictions. It’s also a pretty handy law should a province want to enable a monopoly and jack up its prices without having to consider all that messy stuff like supply, demand and other market forces.
When they got together in Charlottetown, this isn’t quite how the founding fathers envisioned our free trading Dominion.
In his decision, Provincial Court Judge Ronald LeBlanc dusted off our history and ruled that New Brunswick’s restrictions on bringing alcohol into the province violate the Constitution’s free-trade provisions. LeBlanc cited Section 121 of the Constitution Act; “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.”
Judge LeBlanc correctly recognized and emphasized free trade between the provinces was the intention of the signatories and a founding principle of Canada.
To find the turning point between the signing of the Constitution and when our free-trader Gerard was charged, we need to go back to the 1920s. During the height of the Prohibition era, the Supreme Court of Canada (SCOC) was asked to rule on an interprovincial trade dispute and, in the process, essentially gelded the free trade provisions in Section 121.
As the story goes, the Canada Temperance Act (CTA) governing the sale of liquor finally came into force in Alberta in 1921. In February of that year Gold Seal, a liquor retailer in Alberta, asked Dominion Express to deliver some liquor to customers outside of Alberta. Dominion Express refused because it felt that to do so would violate the federal CTA. So began Gold Seal Ltd. v. Alberta (Attorney General) which eventually made its way to the high court.
In the Gold Seal decision, the SCOC’s interpretation of Section 121 limited its application to prohibiting only interprovincial “customs duties.” For what some have advanced were purely political reasons the SCOC kicked Section 121, and with it the free trade intention of the Fathers of Confederation, to the curb.
Since then, successive politicians, courts, government officials, special interests and political constituencies in every province have used the Supreme Court’s ruling to successfully impose a myriad of trade schemes and regulations on everything from eggs, wheat and coffee creamers to truck parts and, of course, liquor.
However, the LeBlanc decision in the Comeau case has drawn back the curtain on a very important and equally inconvenient truth. Provincial liquor control regulations, which provide the foundation for our provincial liquor monopolies, including the NSLC, may not pass muster according to intention of the constitution.
Last Friday, the New Brunswick government announced it is seeking leave to appeal the Comeau ruling directly to the New Brunswick Court of Appeal. The federal Conservatives are also calling on the federal government to act as an intervener if the Court of Appeal agrees to hear it and are also asking the Trudeau government to refer the case to the Supreme Court to clarify Section 121.
So what does this all mean for entrepreneurs and small business in Nova Scotia? It could mean a great deal.
As a backdrop to all of this, the Premiers are embroiled in retooling the Agreement on Internal Trade (AIT). A deadline for an agreement passed March 31, 2016, but hope remains something will eventually get hammered out. There is some urgency as international trade agreements, such the Comprehensive Economic and Trade Agreement (CETA) with Europe and the Trans-Pacific Partnership (TPP) are coming into play. Why the urgency? Without change, under these new agreements, we may end up with foreign companies having greater access to opportunities in Canada than firms located in a neighbouring province or territory.
We’ve seen some regional progress on this front with the New West Partnership between B.C., Alberta, Saskatchewan and Manitoba and last year the Atlantic Premiers signed the Council of Atlantic Premiers’ (CAP) Red Tape Reduction Partnership and opened the Joint Office of Regulatory Affairs. All moves aimed at streamlining the flow of business between provinces.
In fact, just last month at a CAP meeting in Annapolis Royal, in an under-reported but nonetheless significant development, Premiers McNeil, Gallant, MacLauchlan and Ball agreed to advance three specific recommendations to reduce trade barriers brought forward by business groups led by the Canadian Federation of Independent Business, the Atlantic Chambers of Commerce and Canadian Manufacturers and Exporters.
So while the Premiers seem to collectively understand internal free trade is an urgent priority, the Comeau case could force the issue. If the case is referred to the SCOC and should that ruling be upheld, it will have profound implications for not only liquor regulations, but it might well call into question the constitutional validity of the tens of thousands of other interprovincial trade restrictions, prohibitions and conditions on business now in place; restrictions which are estimated to cost our national economy upwards of $14 billion every year.
It’s also encouraging the Atlantic Premiers are asking business for concrete recommendations to address regional trade problems. CFIB believes this is another step in the right direction. We encourage business owners to bring forward red tape and trade issues which require attention and we will be monitoring to ensure governments respond with solutions. If you do business in more than one province and you’re running into red tape between jurisdictions, CFIB wants to know about it.
With liquor regulations under the microscope, perhaps now is the best opportunity to assist our burgeoning local wine, craft beer and boutique distilleries. These small businesses are providing important economic growth opportunities, especially in rural areas. Eliminating archaic, Prohibition-era liquor regulations is something the Atlantic Premiers should get out in front of now.
This could have enormously positive impacts downstream in the accommodation, food and beverage and tourism industries. More and more entrepreneurs in Nova Scotia are risking their own capital and creating ventures in these sectors which are showing tremendous possibilities. Government needs to create the right environment for business and then get out of the way.
Eliminating cross-border restrictions on trade of alcohol products being manufactured throughout our region is a good place to start looking for solutions. It is one example of a broader need to remove barriers to business. Allowing more competition and freeing up the flow of commerce by eliminating restrictions on internal trade is an idea whose time has arrived.
Originally published in the Chronicle Herald, June 7, 2016