Premiers, listen up: Canadian wineries need market access

A thriving Canadian wine industry is a key driver for agriculture and the promotion of regional tourism

With internal trade barriers costing Canada as much as $130 billion annually, all Canadians should be concerned about the failure last week of Canada’s premiers to reach agreement on how to remove barriers on the direct shipment of wine across provincial boundaries.

Attempts were made with federal legislation passed in 2012 to solve the problem, but the intent of the changes were frustrated by provincial actions. Restrictions on taking wine and beer across provincial boundaries were challenged last year in the Comeau case, but the Supreme Court of Canada refused to give life to constitutional free trade protections.

Also last year, alcoholic beverages were left out the new Canada Free Trade Agreement and instead left for further study by a Working Group on Alcoholic Beverages.

This working group recommended to the premiers at their meetings in St. Andrews, N.B. that they increase the exemption on personal transportation of wine across provincial boundaries from one case to two cases. No change was recommended to outright prohibitions on internet sales and direct shipment to consumers from wineries across provincial borders.

The recommendations showed that the advisers to the premiers working group fundamentally do not understand the Canadian wine market or the Canadian wine industry. In our modern economy, most interprovincial sales involve the internet or direct shipment rather than consumers personally transporting goods across borders.

Canadian wine consumers value choices — a variety of terroirs, varietals, blends and styles. Canada’s wineries are mostly small operations with low volumes and high production costs. They cannot supply the volume required to deliver through the LCBO and applying LCBO mark-ups would make their pricing noncompetitive. Generally, the provincial liquor monopolies do a poor job of efficiently distributing specialty product.

The growth and prosperity of the Canadian wine market requires that Canadian wineries have direct access to the whole Canadian market. A thriving Canadian wine industry is, in turn, a key driver to the revival of rural areas through value added agriculture and the promotion of regional tourism.

Canada is the only wine-producing country in the world that does not consume predominantly its own domestic wines. In the U.S., domestic wines represent 65 per cent of the market, in Australia and France, 75 per cent and in Italy, 87 per cent. In Canada, interprovincial trade restrictions make 100 per cent Canadian wines effectively unavailable to more than 80 per cent of the population and represent only 12 per cent of total domestic consumption.

In the U.S., 47 states have opened their markets to direct shipment from other states, as have three Canadian provinces — British Columbia, Manitoba and New Brunswick. They have done so without sacrificing other policy objectives, such as public health and safety and the preservation of governmental liquor revenues.

Ontario could easily do the same and polling shows that this would be an extremely popular move (87 per cent support). Provincial revenues could be preserved by requiring shippers to collect and remit sales and other taxes and container depots from shippers.

The LCBO could be protected by excluding products stocked at the LCBO. It is estimated that only about 130,000 cases of Canadian wine nationally would be shipped between provinces. This is less than 1 per cent of the market.

All that is necessary is for Premier Doug Ford to order the LCBO to remove its current policy restriction on the direct shipment of wines to Ontario consumers from out of province.

It is time for Ford and the other premiers to stop letting the bureaucrats in their provincial liquor monopolies set liquor policy. For the good of our country, the premiers need to start showing leadership on internal trade issues.

Al Hudec is a Vancouver lawyer who regularly provides legal and regulatory advice to Okanagan wineries.