The recent Supreme Court ruling on interprovincial trade barriers is a significant loss for consumers and our Canadian economy, but a great win for inertia.
The Comeau case was never just about beer. It was essentially about enabling our domestic economy across the country to thrive. For the agri-food sector, the decision would have had tremendous significance, had it gone the other way.
Gérard Comeau made a purchase in Quebec of 344 bottles of beer, two bottles of whiskey and one bottle of other spirits, which he then brought back to New Brunswick. This is something he had done several times.
But this is, in fact, deemed illegal, based on a 90-year-old law. Mr. Comeau was eventually arrested and fined $292.50. This was in 2012. More than five years later, the Supreme Court ruled the fine to be constitutional.
Who would have thought that $292.50 had the potential to forever stifle the domestic food trade?
For almost nine decades, interprovincial barriers have multiplied and made the life of many food companies a living nightmare. For consumers, if no one catches you, you move on. For businesses, when buying ingredients or specialty products from another province, it’s been less than convenient.
Moreover, many of these products were taxed only to support provincial governments’ public coffers. Barriers were erected to suppress competition and sell more taxed and overpriced food products and beverages.
Canada has a myriad of trade barriers in addition to the fact that the agri-food sector is addicted to marketing boards. For many, these mechanisms’ countervailing power offers the only method possible to appease entrepreneurial angst in the sector.
Those on the freer trade side of the equation were counting on the Supreme Court of Canada to make leaders realize that we need to get our interprovincial act together. But it did not happen.
Because of this ruling, creative companies in smaller provinces won’t have a fighting chance to expand and compete in larger markets, such as Quebec and Ontario. Wineries, craft cheese producers, craft breweries, specialty meat producers and many other small-scale operations will face mounting obstacles domestically.
This much-anticipated ruling should have also turned out to be the wake-up call our supply-managed sectors needed. But our provincially based quota system to support dairy, poultry and egg production facilities will escape unscathed.
As well, this could have been an opportunity to recalibrate some of the agri-food wealth around the country. For example, dairy processing has historically been concentrated in the province of Quebec. Quotas are evenly distributed, based on domestic demand for milk, including processing. Now it is unlikely that we will see other provinces play a much larger role in dairy processing.
The Comeau ruling could have induced some deeply needed supply-management reforms to make the regime more flexible and current. New methods, capitalizing on terroir knowledge, could have made most gastronomic regions in Canada flourish. Right now, most production is done in Ontario and Quebec, and a different decision by the Supreme Court could have complemented what many consider a weak and obsolete equalization system which sees the “have” provinces supporting the “have-nots.”
A different outcome would have resulted in a reduction in the price of a variety of products you now enjoy. More competition could have put pressure on prices. Fiscal policies could have changed, given how open provincial economies were going to become. But now, we will need to wait awhile longer.
The will for more economic integration makes internal barriers undesirable. The case for a better flow of goods remains very strong in Canada, from an economic standpoint. Interprovincial trade barriers never made sense in the first place, and never will. We are only 37 million inhabitants in one of the vastest countries in the world. Distribution costs are prohibitive for many of our small- and medium-size companies, which often drive the open agri-food innovation agenda in this country. These companies have long needed just such a chance to thrive beyond one or a few provinces.
Some favourable to the current regime believe the Comeau ruling could have triggered a race to the bottom in terms of health standards and food safety. Such an argument is nonsense. Risk management practices in the Canadian agri-food sector are exemplary. As we continue to seek opportunities abroad, Ottawa and the provinces will need to clean house here first.
After 90 years, Ottawa was poised to finally receive a strong message that Canadians deserve better. But it was not to be. The Supreme Court has opted to stay on the sidelines.