Alberta and B.C. left with limited options to escalate trade war

British Columbia Premier John Horgan held off on ratcheting up a trade war with Alberta Wednesday, but experts say both provinces still have a few limited options to raise the stakes.

Alberta Premier Rachel Notley has already deployed some of the weapons in the province's arsenal to protest B.C.'s proposed restriction on bitumen shipments, when she announced a ban on B.C. wine on Tuesday and an end to talks on increased electricity imports last week.

The limits on B.C. wine were a viable target because provinces control the purchase of alcohol, said Trevor Tombe, an associate professor of economics at the University of Calgary.

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"With booze, because it's a monopoly wholesaler owner by the government, it can easily change its purchasing decision."

Given the unique regulatory circumstances of alcohol, which are currently being challenged at the Supreme Court, Tombe points out that beer imports from B.C. would be another obvious target for retaliation.

While possibly less high profile than B.C. wine, Alberta imported about $58 million in 2014, the last year with data available from Statistics Canada, compared with $60 million in wine and brandy for that year.

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B.C. could retaliate with its own restriction on importing Alberta beer, but as of 2014 the province only bought about $7 million worth of beer from Alberta.

'Completely illegal'

Governments are, however, limited on putting restrictions or tariffs on most other goods that cross the border whether it's B.C. lumber or Alberta beef as those would be clear barriers to trade in violation of the constitution.

"That is completely illegal, and there is no ambiguity there," said Tombe.

Some have wondered about the more extreme option of shutting off existing Alberta oil and gas shipments westward to potentially drive up gas prices in B.C.

But even if it were effective, the Alberta government doesn't have control over the commodity and would need the co-operation of oil and gas companies.

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Ian Anderson, CEO of Kinder Morgan Canada, the owner of the controversial Trans Mountain pipeline, which is trying to expand its route through B.C., made it clear Wednesday that the company was not considering a supply shut-off as an option.

"The economic and commercial implications of such an action would be very complicated and impractical," he said.

"We aren't considering that, it's not commercially feasible."

'Everybody's left worse off'

Alberta could also potentially give B.C. a taste of project obstruction on environmental grounds by increasing objections to B.C.'s Site C megaproject, said Blake Shaffer at the C.D. Howe Institute.

Some in Alberta have expressed concerns about the negative downstream impacts of the giant hydroproject, including its impact on river flows, recreation, and how it will affect Wood Buffalo National Park, issues that Alberta could more formally object, he said.

"I wouldn't be surprised, and I'm totally speculating here, if we see that voice amplified," said Shaffer.

This kind of tit for tat trade wars ends up damaging everybody.- Brian Crowley

Alberta could also resort to smaller actions like more aggressive inspections of B.C.-licensed vehicles, limits on B.C. tradespeople working in Alberta, or discouraging tourism to B.C. But overall such escalations will likely leave everyone worse off, said Brian Crowley, managing director of the Macdonald-Laurier Institute.

"This kind of tit for tat trade wars ends up damaging everybody," he said.

"Everybody's left worse off, the result will be a net loss to the national economy of significant scale."

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He said Alberta's options are limited because the country was set up so the federal government would solve these issues.

"The reason that we created a federal government was so that the provinces wouldn't need to get into these kinds of spats over interprovincial trade."

Crowley said the federal government should show more resolve on the issue, but so far Prime Minister Justin Trudeau has decided to tackle the issue behind the scenes, aside from further voicing his support for the project.

"We're continuing to discuss and engage with the B.C. government, with the Alberta government," the prime minister said Wednesday before his weekly caucus meeting. "We're making sure we come to the right place that's in the national interest for Canada."