B. International and Interprovincial Trade
| Author | Patrick J. Monahan - Byron Shaw |
| Pages | 287-298 |
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A key distinction in the trade and commerce jurisprudence is between "interprovincial and international trade" on the one hand and "local trade" on the other. Parliament has exclusive legislative authority to regulate international and interprovincial trade - the regulation of goods, persons, capital, or services crossing provincial or Canadian borders for a commercial purpose. Provincial jurisdiction is limited to the regulation of trade within a province. The text of section 92 of the Constitution Act, 1867 limits the provinces to the regulation of transactions, activities, or persons "in the province." Provincial power over local trade is derived from section 92(13) "Property and Civil Rights in the Province" and section 92(16), "Matters of a merely local or private Nature in the Province." Accordingly, the provinces have no jurisdiction to regulate transactions, activities, or persons entering or leaving the province.3Parliament has exercised its authority to regulate imports, exports, and interprovincial trade in a wide variety of contexts for various policy objectives.4Few doubts have ever been raised about the constitutional validity of these enactments. However, doubts have been raised about Parliament’s ability to regulate local or intraprovincial trade.
In the Margarine Reference,5for example, the Supreme Court of Canada considered the validity of federal legislation banning the manufacture, importation, or sale of oleomargarine. It was conceded that oleomargarine was substantially as nutritious and fit for human consumption as butter. According to the Supreme Court, the purpose
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of the legislation was "to give trade protection to the dairy industry in the production and sale of butter as against substitutes"6and "to benefit one group of persons as against competitors in business in which, in the absence of the legislation, the latter would be free to engage in the provinces."7The legislation considered in the Margarine Reference did not merely ban the importation of oleomargarine; it also prohibited its local manufacture and sale. The Supreme Court held that the federal prohibition on manufacture and sale was invalid, since it amounted to regulation of property and civil rights in the province. However, the Court stated that the legislation would have been upheld if it had been restricted to a prohibition on importation:
There is next the prohibition of importation of these substances. ... Such scope of action is clearly necessary to the nation’s jurisdiction over trade with other states. Only Parliament can deal with foreign commerce; provincial power cannot in any mode, aspect, or degree govern it: and it would be anomalous that the jurisdiction to which regulation is committed, which alone can act, and which in this segment of trade is in substance sovereign, should be powerless to employ such an ordinary measure of control.8
In the result, the Court upheld the portion of the legislation banning importation on the basis that it could be severed from the invalid attempt to regulate local manufacture or sale.
The Supreme Court drew a similar distinction between interprovincial and international trade on the one hand and intraprovincial trade on the other in R. v. Dominion Stores Ltd.9The case concerned the constitutionality of Part I of the Canada Agricultural Products Standards Act, which established and regulated the use of grade names for various classes of agricultural products. Part I of the Act applied to the local sale and possession of agricultural products. Part II of the Act compelled the use of the same grade names in the export and inter-provincial movement of agricultural products. Part I was held to be unconstitutional in its application to intraprovincial trade. However, the validity of Part II was both conceded by the party challenging the legislation and assumed by the Court.10While Parliament could not
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regulate grade names for agricultural products traded locally, it could apply precisely the same regulations to products traded interprovincially or internationally.
Similarly, in Labatt Breweries,11the Court struck down section 6 of the federal Food and Drugs Act on the basis that it applied to the manufacture and sale of light beer within a province. The Court suggested that the legislation would have been valid if it had been limited to the regulation of interprovincial or international trade.12Parliament subsequently amended section 6 of the Act so as to restrict its mandatory application to importation or interprovincial movement of food articles.13There has been no suggestion that the amended legislation would be open to constitutional challenge. Indeed, any such a challenge would fail, since the amended statute conforms to the criteria identified by the Court as necessary to support federal trade legislation.
Early attempts to support federal legislation that incidentally impacted on local trade were rejected by the Privy Council. For example, in the 1937 case of British Columbia (A.G.) v. Canada (A.G.),14the Privy Council held that a federal statute regulating trade in natural products was invalid - even though the natural products were almost entirely exported - because the legislation directly regulated certain transactions that could be completed within a single province.
The Supreme Court of Canada has departed from the Privy Council’s restrictive approach and permitted federal attempts to regulate local trade in several important ways. First, the Supreme Court has upheld federal legislation providing for voluntary regulation of local trade with mandatory federal standards. Second, the Supreme Court has upheld federal legislation that is part of a cooperative and comprehensive federal-provincial marketing scheme. Third, some cases may be interpreted to suggest that Parliament may enact legislation that in-
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cidentally regulates local trade where the legislation is necessary to a scheme for the regulation of interprovincial or international trade.
One approach employed by Parliament to address the limitation on its trade power is to apply mandatory restrictions on interprovincial or international trade and voluntary restrictions on local trade. For example, under the Motor Vehicle Safety Act,15Parliament creates a national safety mark and prescribes standards that must be met before the mark can be affixed to a motor vehicle. It is mandatory to affix the mark to vehicles that move across provincial borders and, thus, mandatory for all such vehicles to comply with the applicable product standard. Local manufacturers have the option of affixing the safety mark for vehicles sold within the province of production. However, in the event that a manufacturer chooses to affix the mark to a vehicle, the vehicle must comply with the standards applicable to that mark. The legislation has been upheld on the ground that Parliament may establish national trademarks and regulate their use.16Thus, Parliament can regulate the use of a national safety mark even by manufacturers engaged in the local production and sale of a product.
Although the standards in the Motor Vehicle Safety Act are ostensibly voluntary in relation to vehicles sold within a province, in practical terms they are mandatory for all vehicles. The vast majority of vehicles manufactured in Canada cross either a provincial or an international border. Moreover, it is impossible to separate vehicles traded locally from vehicles traded interprovincially or internationally at the point of production. In practice, all vehicles are produced to meet a common North American standard, and vehicles intended for local trade are indistinguishable from those intended for export. Therefore, the manufacturer voluntarily affixes the mark to all the vehicles produced, regardless of their ultimate point of sale. In short, the practical effect of the federal scheme is to require that all motor vehicles produced in Canada meet federally prescribed standards.
The courts have imposed some limitations on the ability of Parliament to regulate local production through use of voluntary schemes,
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however. In Labatt Breweries,17the Supreme Court struck down regulations enacted under the federal Food and Drugs Act that established compositional standards for light beer. Producers that labelled, packaged, or sold a product as light beer were required to comply with federal standards. The federal government argued that the regulations should be upheld on the basis that they established voluntary labelling regulations, detailing the standards that must be met if specific designations were used on food labels.18The federal government argued that such a voluntary labelling scheme could be justified under Parliament’s trade powers.
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