June 25, 2013
Whether the talks are with the European Union or the Trans-Pacific Partnership, when Canada sits down at the table to talk free trade the issue of supply management always come up. The extent to which a country will try to justify protectionist measures within a sector can reveal a lot about its overall commitment to free trade. Artificially distorting the market with tariffs or subsidies benefits some, but always at a greater cost to others. However, more interesting and perhaps more telling about Canada’s commitment to free trade than the supply management sector and the dairy industry is how Canada deals with professional sports.
Municipalities often reap their greatest benefits from thriving sports franchises, and two economics professors in the United States even concluded a successful NFL team can increase the per capita income of every person living in the city by approximately $100. With economic benefits like that, in addition to the pride of being able to cheer the home team on to victory, it is no wonder that cities compete for franchise locations. This often results in cities providing major subsidies to the industry by helping fund stadium infrastructure projects. Other levels of government are getting a piece of the action too, as they try to walk the line between encouraging the financial success of teams, winning the votes of fans, and increasing revenues from taxes on teams and players.
Game tickets in Canada, including season tickets and press boxes, are currently eligible for a 50 percent tax write-off for businesses and corporations. Originally put in place to promote ticket sales and provide stability in ticket revenue in contrast to more volatile individual ticket sales, the Ontario government is trying to eliminate the subsidy in its attempts to raise extra revenue for the cash-strapped province. The provincial government had hoped to play off public sentiment that if families can’t get a break when they go to watch a Maple Leaf’s game, neither should the corporations.
Don’t let the government rhetoric fool you though; they get their slice of the pie through the sales tax of every ticket sold to the public, every piece of merchandise, every over-priced food item or beverage at the stadium, every pint of beer sold at the local pub, or 12-pack for when the boys come over to watch the game. All of this revenue of course is in addition to the income taxes collected from every professional athlete in the country, almost all of whom are in the top tax bracket. The federal government alone takes 29 percent of a professional athlete’s salary in Canada.
Notwithstanding the occasional government interference, professional sports leagues are actually a model of modern capitalism. In no other industry is there the same level of absolute freedom of labour mobility. This isn’t just labour mobility within a country; this is free labour mobility on an international scale. Baseball players from Cuba and Honduras, Mexican hockey players from Russia, Sweden and Switzerland; had Alexander Ovechkin to immigrate with the hope of working in North America in any other skilled trade he probably would have been turned away. Free agents are able to play for any team regardless of their own nationality, the team’s nationality, or their previous work experience. And it’s not just players – whole teams can move and franchises can be set up almost anywhere that there is a market; almost anywhere, because despite Canada’s claim to support free trade, football is still very much a protected industry.
Every country wants to export more and import less, and free trade is supposed to dissuade protectionist measures while opening new markets for industry. When it comes to sports that Canada dominates like hockey, or sports where neither country has an absolute advantage such as rugby or soccer, Canadian business is happy to compete openly in the North American market. But when it comes to football, Canadians play by a totally different set of rules. That’s not just clever wordplay highlighting the difference between how the game is played – it is a fundamental truth about how the league is structured. The Canadian Football League (CFL) enforces the import/non-import ratio, which is a quota stating that 50 percent of the team’s roster must meet the league’s criteria for Canadian residency. In addition, the quota stipulates that a minimum of seven starters must be non-import players. Designated imports are players allowed to play on special teams or to replace an import starter, but are not allowed to start themselves.
Beyond enforcing Canadian content in every team, the league is also extremely protectionist about expansion and competing markets. In the past, there has been an attempt to expand the CFL into the United States, and from 1993 to 1995 the CFL included US-based franchises. Meanwhile, there has never been an NFL franchise in Canada. Even the agreement between Rogers and the Buffalo Bills to host eight games over five seasons in Toronto caused the CFL to break off negotiations to renew a contract that allowed NFL access to CFL players. The CFL has also strongly protested the idea of establishing an NFL team in Toronto over fears that it would hurt the CFL’s Toronto Argonauts franchise. In fact in 1974 when the World Football League intended to place a franchise in Toronto, the Toronto Northmen, Prime Minister Trudeau threatened to pass legislation to stop it from announcing that no US-based professional football league would be allowed in Canada.
So while Americans promote immigration and equal opportunity for players even from trade-sanctioned Cuba, Canada has no room in its multicultural mosaic for foreigners to “steal our jobs.” Recently even the Canadian Hockey League has put a ban on European goaltenders. How odd that it is Canada which requires individuals to show their papers before being allowed to work, play, or open a business franchise. It is time that Canada embraced free trade in football. Import quotas, Canadian content, residency requirements; if Canada wants to play in the major leagues of international free trade, it is time that the international major leagues are allowed to play in Canada.
About the Author
Luke Cooper has a Specialized Honours Degree in Economics from York University’s Glendon Collage. He graduated as the Economics Department’s top student, winning the prestigious Department Book Prize for outstanding achievement in Economics. Prior to enrolling at York, Luke spent over five years in the Canadian Forces Army Reserve including a posting to the Western Area Training Center (Training Support Company) at CFB Wainwright. There he assisted in facilitating the training of new recruits and soldiers about to deploy to Afghanistan. As a student, Luke was part of an award-winning delegation to the International Model NATO conference in Washington D.C., and was individually recognized for his work in the Defence Planning Committee. When he is not participating in the academic study of foreign and defence policy, Luke rides with the 1st C.A.V. (Canadian Army Veteran) Motorcycle Club, raising funds and awareness for injured soldiers and veterans hospitals.