For a grand bargain on internal trade

Scenes from a dying country...

The government of Newfoundland, in language recalling Quebec’s Quiet Revolution, uses its recent Throne Speech to signal its determination to be “masters in our own house.” This calculated appeal to Newfoundland nationalism is prompted by reforms to equalization that offer the province more than it received before....

In Quebec, the nominally federalist premier Jean Charest laces his “inaugural” speech with even more stridently nationalist language, in an apparent bid to outdo the “autonomist” Action Democratique and the “separatist” Parti Quebecois. This, after his government demanded, and was granted, a whole series of further concessions from Ottawa: formal recognition of the Québécois “nation,” a seat at UNESCO, and so on.

In Alberta, the government cannot decide whether it is or is not in favour of the concept of a single national securities regulator, but leans towards retaining the current system of 13 provincial and territorial regulators, albeit with a provision allowing for mutual recognition of each other’s rules -- that is to say, formalizing their redundancy.

And now the provinces are signing free trade treaties with each other.

Ah, but that’s the good news, right? Just when it seems federalism is disappearing from view, a couple of wise and far-sighted premiers put parochial interests aside, and sign the Alberta-British Columbia Trade, Investment and Labour Mobility Agreement. Now Quebec is proposing a similar arrangement with Ontario, and Ontario allows as how it might just be interested. Years away, of course, but still, something to consider.

Actually, that’s the bad news. Much though the provinces will pretend that this proliferation of discriminatory trade deals -- we’ll allow your construction workers in, Alberta, but not yours, Saskatchewan -- shows that “federalism works,” in fact it shows precisely the contrary. The whole point of federating was to avoid this sort of nonsense: to create a single national economic space, without barriers of any kind.

It was never intended that, 140 years later, the provinces would still be carving up the country into preferential trade areas. Rather, the Fathers of Confederation envisaged a common market, with a federal overseer -- as is the case in every other federation. That’s why they included a Trade and Commerce power among the list of jurisdictions assigned to the federal government: if the issue at the time was tarriffs, rather than investment restrictions and other non-tarriff barriers, the principle is the same.

Trade treaties between provinces have nothing to do with federalism. They are the kinds of things that sovereign states could arrange amongst themselves. What sovereign states can’t achieve is the kind of total economic integration that is possible within a federation, where barriers to trade are not just bargaining chips, to be kept or dealt away according to whether others do likewise, but are banned outright -- and where there is a recognized authority to supervise and enforce this proscription. In a federation, we call that the federal government.

Leaving it to the provinces to negotiate does not just fall short of this goal -- it takes us in the opposite direction. A common economic space presupposes a common political space: internal trade barriers are forbidden in most countries, not just because they are inefficient, but because they are absurd -- because it is absurd to put up barriers to trade with ourselves. Whereas the very process of inter-provincial negotiation presupposes that there is no common political space, no ourselves, but rather 13 different ourselves.

So we are in a pickle. Viewed strictly as a legal matter, the feds could probably invoke the Trade and Commerce power, and strike down provincial trade barriers unilaterally. But politically, they don’t dare. What’s needed is not just federal leadership, but provincial followership, a formal acknowledgment of the federal role in enforcing the economic union, and they’re not likely to sign onto such a thing without getting something in return. Fortunately, the feds have a bargaining chip.

It was to be expected that the transfer of billions of dollars to resolve the so-called “fiscal imbalance” issue would fail to shut the provinces up. No sooner had the money been granted than Quebec began agitating for the conversion of all federal cash transfers into tax points, placing them forever beyond reach of grasping Ottawa. By itself, this is no bad thing: if there are to be no conditions attached to federal grants, then by all means let the provinces take ownership of the taxes they represent, and be accountable for them. But it’s time the feds got something in return. And that something is the economic union.

Is there the makings of a Grand Bargain here? Stephen Harper has spoken in the past of the necessity for the federal government to assume its responsibilities over internal trade. (“Our economic union is too weak because Ottawa has failed to use the powers it has under the Constitution to ensure that goods and services can freely flow across provincial borders.”) And once, long ago, another federal Conservative leader proposed something broadly similar: a Canadian Covenant, it was called, complete with a federal Inter-Provincial Trade Commission, “to regulate and enforce the rules of inter-provincial trade.” His name? Jean Charest.