Liberalization of Markets

Free my grapes: Dismantling Canada’s interprovincial barriers to trade

In collaboration with Dan Paszkowski*

In June 2016, the Senate of Canada released a report entitled “Tear Down These Walls: Dismantling Canada’s Internal Trade Barriers,” which called upon federal and provincial/territorial governments to take priority action on removing internal barriers to trade. The Senate views this call to action as an opportunity to lay the groundwork for growth and prosperity throughout Canada. Senators argued that it was time to act, but while almost two years have passed, and the Canadian Free Trade Agreement (CFTA) has been finalized, it has not removed all internal trade barriers.

For one thing, the CFTA failed to include a chapter on alcohol, opting instead to create a federal and provincial/territorial Alcohol Beverage Working Group (ABWG) tasked with identifying specific opportunities and recommendations to further enhance trade in alcoholic beverages within Canada. The members of the group will submit their report to their respective governments on July 1, 2018. The Canadian Vintners Association has offered advice to the ABWG with the goal of formulating a federal-provincial/territorial recommendation for a direct-to-consumer legislative proposal which would create an acceptable interprovincial direct-to-consumer wine delivery system across Canada.

With potentially broader implications, the Supreme Court of Canada heard the Comeau case in December 2017. A federal law passed in 1928 gave provincial governments the exclusive authority to “import” alcohol into their territory. Every province has similar restrictions; a few provide very limited allowances for personal consumption, while in the rest, the legal limit is zero. The current legislative landscape across Canada is divergent, sporadically enforced, and usually misunderstood.

Canadians are ready for change. According to a recent Ipsos poll, 9 out of 10 Canadians think they should be allowed to bring any legally purchased product from one province to another. The survey, commissioned by the Montreal Economic Institute (MEI), the Canadian Constitution Foundation (CCF), and the Atlantic Institute for Market Studies (AIMS), also shows that a very large majority (84%) of Canadians think they should be allowed to order wine directly from a winery located in another province.

Economics also supports public opinion, as confirmed in a 2016 study published in the Canadian Journal of Economics which estimated that internal trade liberalization could add $50 billion to $130 billion to Canada’s GDP. Using a mid-range estimate of $100 billion, these economic gains represent more than $2,700 per Canadian.

In sum, there is no good reason to section off the country into distinct markets with limited access to a full selection of goods and services, while there are many good reasons—tens of billions of them—to bring down provincial trade barriers. Let’s hope the Supreme Court strikes down these relics of Prohibition, reasserting the spirit of Canadian Confederation for the next 150 years. And let’s hope that the Alcohol Beverage Working Group delivers on Canadian consumers’ wish to have a simple DTC system in place to support the interprovincial purchase and delivery of hard-to-find premium wines from Canada’s wine regions.

Op-ed also published in the National Post on March 22, 2018.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute, Dan Paszkowski is the president and CEO of the Canadian Vintners Association. The views reflected in this op-ed are their own.

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