Provincial Procurement Policy and the Federal Trade and Commerce Power

The Obama Administration and Harper Government are exploring a deal where the US would drop the "Buy American" provisions of the stimulus package in return for provincial governments dropping their own local preferences in government procurement.

Stockwell Day is consulting with the provinces, and says he won't do anything unless "most" of them agree.

Constitutionally, I think there is a decent argument that the Feds could pass a law requiring "national treatment" and "most favoured nation" status on provincial procurement rules. In the Inflation Reference, the Supreme Court upheld wage controls affecting the provincial public service. It is widely accepted that valid federal legislation can bind the Crown in right of a province.

The Inflation Reference upheld the federal law on the dubious grounds that 1970s-era inflation was an "emergency" akin to the world wars. But there's a better case that a principled-based law imposing on provincial governments the general requirements of international trade agreements (especially national treatment and most favoured "nation" status) would be wholly constitutional. Indeed, it's hard to see why you would have a federation if you don't have free trade within it.