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Excerpt from Booze, Cigarettes, and Constitutional Dust-Ups: Canada’s Quest for Interprovincial Free Trade by Ryan Manucha

Ryan Manucha is a scholar of interprovincial trade law. A graduate of Harvard Law, he has written extensively on the topic of Canada’s economic union for the nation’s leading think tanks and published works in outlets such as The Globe and Mail and CBC Radio. He was recently commissioned to provide policy analysis to a provincial government.

Like the story of Canada itself, the nation’s internal trade tale is still being written. Each segment of the narrative threads together the chronicle of a maturing economic union. As pre-confederation Canada transformed from Europe’s backyard garden to an independent state hungry for political autonomy and economic growth, it moved to shuck its insular colonial fiefdoms in favour of domestic integration. Gone are the days of border inspectors stationed at Coteau-du-Lac, Quebec, who monitored the passage of goods between Upper and Lower Canada flowing along the St Lawrence River.^{1Gordon Blake, Customs Administration in Canada: An Essay in Tariff Technology (Toronto: University of Toronto Press, 1957).}

Canadian internal commerce is now primarily governed by the rules-based order provided by the Canadian Free Trade Agreement, which supplements the nation’s section 121 “free trade” clause found in the Constitution Act, 1867. But has Canada truly left provincialism behind? There may have been no border services tower at the New Brunswick-Quebec border. Yet nearly 150 years after confederation, the Supreme Court endorsed the detainment and penalties inflicted upon Gerard Comeau by RCMP officers on account of the surplus beer he’d bought back from a liquor store located on the other side of a provincial frontier.

Focusing solely on Comeau’s legal defeat, without considering internal trade’s full account, one might falsely surmise that the Canadian project of domestic trade liberalization is in the same place as it started; that interprovincial trade barriers plague the nation just as they did the colonies of British North America. Such a conclusion, however, would ignore significant jurisprudential and political developments. Inside of one hundred years, the Supreme Court of Canada has gradually added strength to the constitution’s section 121 free trade clause. It went from an obscure paragraph meant to address those prehistoric interprovincial tariffs and customs duties to one that can now strike down modern non-tariff barriers. Section 121’s role in Canada’s legal landscape has dynamically expanded, rather than stagnate in scope. It would not be surprising if, over the next one hundred years, the nation’s highest court were to endow in section 121 even more power.

Canada’s internal trade story is a never-ending project of cross-country integration. The newest chapter of the saga is headlined by the rise of collaborative federalism, manifested in highly technical consensus-based exercises in regulatory reconciliation under the CFTA’s RCT process. Looking ahead, internal trade-barrier resolution will chiefly come from the exhaustive work of subject matter experts who are tasked with ironing out a litany of differing jurisdictional rules—on topics ranging from truck weight allowances to drug scheduling protocols—at the sustained encouragement of elected political officials.

The story of internal trade offers a means to introspect about our institutional foundations, and it also allows us to consider how Canada conceived of a national identity and its place in the world. The constitution’s internal free trade clause of 1867 was itself birthed after successive blows by foreign lawmakers seeking to protect their own interests. A loss of imperial preferences with Britain in the 1840s, followed by the termination of free trade privileges with the United States in the 1860s, forced pre-confederation Canada to look inward in order to realize grand notions of nationhood. Both shocks were at the fore of drafters’ minds as they composed a constituting document that included an internal free trade clause. National identity and internal free trade collided once again during the attempt to modify Canada’s fundamental essence following patriation in 1982. The Charlottetown Accord was an effort to redefine the Canadian state through constitutional reform, and contemplated changes to section 121 were slated to reinvigorate the economic union. These proposed modifications to the internal trade provision were an expression of a new national character.

Subsequent recourse to a domestic trade agreement in 1995 after the accord’s failure manifests the quintessentially Canadian characteristics of compromise and acceptance of diversity. Opting for an internal trade compact, rather than constitutional change, brokered a middle ground between the pursuit of national objectives on the one hand, and the sanctity of provincial autonomy on the other. It also happened to coincide with an era of popularity and salience for international trade agreements amongst Canada’s political establishment (not to mention the doctrines of neoliberalism floating through the halls of Canada’s governments and the pages of think tank memoranda).

The COVID-19 pandemic has revealed the fragility and vulnerability of globalized supply chains, and the renewed importance of national unity. For instance, Canadian health officials were left scrambling when the Trump administration invoked the Defense Production Act, blocking the export of crucially important N95 masks manufactured by 3M in the United States, and when the Biden administration refused to allow for the early export of US-manufactured vaccines. In many ways Canadians responded to this self-preserving isolationism and filled the voids left by foreign trading partners, just as we did when the United States abandoned the Reciprocity Treaty in 1866 and when Britain did away with favourable imperial trading preferences in 1846. As just one of many examples, Alberta sent vital medical supplies to Ontario, British Columbia, and Quebec during some of the darkest days of the COVID-19 pandemic.^{2“Alberta to Send PPE to Ontario, Quebec and BC,” CTV News Edmonton, 11 April 2022, https://edmonton.ctvnews.ca/alberta-to-send-ppe-to-ontario-quebec-and-b-c-1.4892347}

The most recent chapter of the country’s interprovincial trade story, with the CFTA’s growing primacy and collaborative model for resolving disharmonious regulations through institutionalized government-to-government negotiations, reveals that classic Canadian capacity for compromise. It balances economic unity with provincial and territorial autonomy. This acceptance of diversity has also paved the way for the many regional trade agreements that may play an increasing role in liberalizing internal trade in the years to come. There is room for a more progressive and inclusive internal trade agenda, and this may also be a part of the next chapter in the nation’s internal trade tale. Institutionalizing the participation of Indigenous peoples in Canada has been discussed in the context of international trade policy, but has not yet seeped into the conversations about interprovincial trade.

Far from a dull topic, interprovincial trade shines a spotlight revealing the history, personalities, and direction of this country. At the very least, it offers a cautionary tale about bringing back one too many lagers in the trunk of your car from your neighbouring province.

The seven days between the Globe and Mail report that a Chinese diplomat in the Toronto consulate had targeted Conservative MP Michael Chong and his family and the Trudeau government’s decision to expel him is bound to have big consequences for Canadian policy and politics, our relationship with China, and broader perceptions of the country’s place in the world.

One certain consequence though is that it has undermined my end-of-year review of 2022 for The Hub. I was prepared to give the Trudeau government the benefit of the doubt that it had undergone something of a genuine change in how it conceptualized China’s increasingly divergent interests and values and the implications for Canadian public policy. I was wrong.

In late December, I argued that the Trudeau government’s Indo-Pacific Strategy, which articulated a more hawkish approach to Canada’s relationship with China, was the most important policy development of the year because it ended a fifty-year strategy of engagement with a new policymaking paradigm rooted in a clear-eyed view about China’s geopolitical ambitions and national security threats. 

In particular, I wrote: 

The Trudeau government’s commitment to a new, more hawkish policy vis-à-vis China will be tested over time. But its Indo-Pacific Strategy should be viewed, at least in theory, as a major shift in strategy from engagement to a new, more circumscribed, and realist position. 

It thinks and talks about Canada’s relationship with China in a way that we haven’t seen in decades. At its core, [the Indo-Pacific Strategy] is an expression of Ottawa’s growing recognition that China is fundamentally a geopolitical and technology rival and possibly an outright enemy. 

My main point was that while the Trudeau government had been slower than most to recognize that Canada’s strategy towards China needed to change, the Indo-Pacific Strategy seemed to represent a “significant policy shift” with far-reaching implications. It exhibited a different mindset and reflected firmer language—including calling China an “increasingly disruptive global power…[that] engages in coercive behaviour”—than we had seen since Prime Minister Trudeau’s father had set in motion Canada’s strategy of engagement more than five decades earlier.

The outstanding question of course was: would his government stay committed to its self-characterized “evolving approach” to China when tested? 

The first test has now come in the form of the Chinese interference story in general and compelling evidence that Zhao Wei, a Chinese official in the Toronto consulate, targeted MP Chong and his family in particular. 

The Trudeau government has abjectly failed the test. Its delayed response has exposed a huge gap between the Indo-Pacific Strategy’s hawkish insights and the government’s own dovish disposition when it comes to Canada’s relationship with China. 

It now seems apparent that the strategy wasn’t a major policy development at all but rather a rhetorical smokescreen to obscure the Trudeau government’s ongoing unwillingness to actually change course on China.

The best (or worst) example was the Trudeau government’s open equivocation last week on whether to expel the so-called “diplomat” who targeted MP Chong and his family. Foreign Affairs Minister Melanie Joly told Chong and his parliamentary colleagues that the government was “assessing the consequences” that might result from diplomatic expulsion, including to the country’s economic interests. Prime Minister Trudeau similarly explained over the weekend that his government needed to make such a decision “very, very carefully” to account for such consequences. 

The explicit implication was that Ottawa must choose between sanctioning active threats to Canadian democracy from foreign governments or supporting the country’s trade and investment flows. It’s rather extraordinary to have Canada’s foreign affairs minister openly speculate in Parliament about how much Chinese interference we might have to live with in exchange for cheap manufactured goods. There are various ways to describe such a statement: “realistic” and “clear-eyed” aren’t the first words that come to mind. 

The consequences of these developments won’t just embolden China and other hostile actors as Chong has warned. They’ll also renew doubts that the Trudeau government is serious about the evolving geopolitical context and in turn further isolate Canada from its allies. It’s not an accident that we’ve been excluded to date from the 14-country Indo-Pacific Economic Framework or the AUKUS defence agreement between Australia, the United Kingdom, and the United States. 

The government’s slow response to the Chinese interference scandal is unlikely to bolster our petitions for inclusion in these initiatives or any others aimed to counter China’s growing aggression. Allied governments are bound to continue to rightly view Canadian policy as weak and confused. Actions ultimately speak louder than words. 

Which brings me to my mea culpa. In hindsight, I overestimated the Trudeau government’s words. They were back up by enough early policy steps, including new guidelines for research partnerships with Chinese scholars and universities and the mandated divestment by Chinese companies of certain Canadian mining assets, that it was possible to misjudge them in the moment as more substantial than they’ve proven to be.

But this recent episode has demonstrated that the Trudeau government hasn’t really changed its views about China much at all. This is still the same government that signed a COVID-19 vaccine deal in May 2020 with Beijing even though the two Michaels remained unlawfully detained and there was growing evidence that Chinese lies and obfuscation had contributed to the global pandemic. The prime minister and his Cabinet’s predisposition to China seems impervious to facts—or Canada’s interests, for that matter.

I have learned my lesson. I suspect that the Chinese have too. We’ll doubtless see some sort of reaction to Zhao’s expulsion. It might even be significant. But the Trudeau government’s evident apprehension to act is itself a win for China’s so-called “wolf warrior diplomacy.” It has signaled that Canadian policymaking has internalized the economic and geopolitical asymmetries between the two countries. Joly’s bizarre parliamentary testimony conceded as much.

What Canada needs is a government that can translate the words of the Indo-Pacific Strategy into policymaking action. The evidence of the past seven days is that we’ll need a new government to do that.