Québec’s Margarine Madness

Commentary, Marketing Boards, Rolf Penner

The longest, strangest case of protectionism in Canadian history was supposed to end on September 1. A trade panel had said that Québec must open its borders to the import of coloured margarine. Clocking in at 119 years, this market intervention in the dairy business is a textbook example of how governments, under the guise of public health concerns, play favourites and regulate to the detriment of other industries and consumers.

It’s a long, tangled story. According to Ronald L. Doering, a food lawyer and former president of the Canadian Food Inspection Agency, it began in 1886, shortly after margarine was invented in France. Sir John A. Macdonald’s national Conservative government quickly bowed to pressure from a dairy lobby that feared competition by erecting tariff walls to keep the butter substitute out of the country. It also passed legislation making it illegal to manufacture or sell substitutes for butter. This outlawed margarine in Canada for the next 60 years, except for the brief period of 1917-1924 when wartime pressure necessitated its use.

Following the Second World War, pressure mounted to legalize margarine. A Royal Commission studied the matter, but the Liberal government of William Lyon Mackenzie King didn’t have the stomach to choose between dairy farmers and consumers. So the whole sordid affair was dropped into the lap of the Supreme Court, to decide whether or not the ban was constitutional. In December, 1948, the Court concluded that it was an issue of property and civil rights, a matter that fell under provincial jurisdiction. The butter lobby filed an appeal with the Judicial Committee of the Privy Council in England, which still had the final say over our Supreme Court.

At the same time, negotiations were underway for Newfoundland to join Canada. Discussions moved along nicely until the butter/margarine issue came up. Canada insisted on banning the artificial spread. Sir John Crosbie had founded the biggest margarine maker on the rock, the Newfoundland Butter Company—which, oddly, never made butter—and he lobbied hard to keep it in business. Newfoundland’s negotiators said that if it came to choosing between Canada and margarine, they would choose margarine. At the eleventh hour a deal was struck. Newfoundlanders would be allowed to eat margarine as long as they didn’t sell it to the rest of Canada. Although this violated Section 121 of the Canadian constitution, that problem was simply ignored.

On October 16, 1950, England’s Privy Council agreed with our courts, that margarine was a matter to be decided by the provinces. They quickly implemented a patchwork of regulatory restrictions across the country. Provinces that didn’t ban margarine outright made it illegal for the spread to be yellow. This stimulated a lot of creativity from entrepreneurs selling the product, such as sneaking yellow margarine in from the United States. The bootlegging problem got so bad that some provinces set up special squads to carry out midnight raids reminiscent of the prohibition era.

Fast forward thirty years, and eight provinces still had restrictions on coloured margarine. One by one, they caved and in 1995 Ontario repealed an act prohibiting it. That left Québec as the sole jurisdiction left in North America with a ban in place. Both Ontario and Québec still have legislation that restricts the trade in vegetable oil products. The power of the butter lobby has weakened, but intense pressure continues. Both it and the edible oil industry still spend millions of dollars trying to influence politicians.

This brings us up to date. An inter-provincial trade panel ruled earlier this year that Québec must open its borders to butter-coloured margarine. So two weeks ago, after almost 120 years, long-haul truck drivers were finally supposed to be spreading yellow margarine across La Belle Province.

Most people regard this battle between butter and margarine as a quirky, isolated phenomenon. Doering points out that it’s not: “Most Canadians have little appreciation for how often regulators find themselves in the middle of titanic commercial struggles. Consumer protection laws are often more about having a level playing field and competitive advantage.” In fact, a whole host of trade restrictions between provinces—covering the gamut from labour to agriculture, transportation, investment, processing and even alcoholic beverages—are more onerous than international ones.

Québec has apparently waffled on implementing this common-sense reform. This failure to comply could spark an inter-provincial trade war. How can we expect the international community to take us seriously in cases like softwood lumber, if we still can’t freely trade vegetable oil amongst ourselves?