INTERPROVINCIAL TRADE BARRIER REFORM: BEER, WINE & DISTILLERY INDUSTRIES STILL AN UNSOLVED ISSUE (2021)

Until recently, the Federal Importation of Intoxicating Liquors Act criminalized the interprovincial importation of liquor by individuals. In 2012, the Act was amended to allow individuals to import wine across provincial borders for personal consumption. In June 2014, further amendments to the Act extended this personal use exemption to include interprovincial shipment of beer and spirits. Regrettably, the federal government’s action to liberalize and modernize interprovincial trade in liquor has been largely frustrated by protectionist measures enacted by several provinces and territories. With few laudable exceptions (notably British Columbia), it remains largely illegal for individuals to import wine, beer and spirits for personal use from out of province. It is key to note that first TILMA and then the NWPTA can take precedence in interprovincial trade matters.¹

The spirit, it seems of first TILMA, and now, NWPTA is being eroded: the current climate of cross-provincial borders retaliatory legislation, verbiage, and potentially, tariff-like penalties is completely counter to the spirit of economic health and resident benefit envisioned by the NWPTA. The effect of these protectionist measures is most keenly felt by British Columbia’s small and mid-sized producers, who commonly lack the volume and financial resources to sell to provincial liquor boards. As a result, many British Columbia liquor producers are limited in their ability to establish demand for their products in a national domestic market, which makes competition against large international producers more challenging. Interprovincial protectionist measures are also a drag on all producers who would benefit from internet-based sales and direct-to-consumer buying programs that provide better margins and enable more efficient supply management.

Perhaps most importantly, barriers to individual important of wine, beer and spirits are a hindrance to our tourism industry. Many out-of-province Canadian tourists now cannot bring British Columbia’s fine wines home to share with their friends and are unable to participate in the wine clubs operated by many of British Columbia’s enterprising wineries. Wineries lose because they are challenged to build long-term, loyal relationships with out-of-province customers, especially during the pandemic-restricted tourism / open tasting restrictions.

Consumers lose because their favourite British Columbia wine is not available to them at home. As they do in all other industries, barriers to interprovincial trade in wine, beer and spirits restrict opportunity, stunt growth, and limit consumer choice. Freer interprovincial liquor trade will allow British Columbia’s liquor producers to gain access to the national domestic market, improve financial stability of our liquor industry, and help British Columbia companies compete against imported products that have dominated sales in the past. In the decision on R v Comeau “Section 121,” said the Court, does not impose absolute free trade across Canada. We further conclude that section 121 prohibits governments from levying tariffs or tariff-like measures (measures that in essence and purpose burden the passage of goods across a provincial border); but, s. 121 does not prohibit governments from adopting laws and regulatory schemes directed to other goals that have incidental effects on the passage of goods across provincial borders.”

Background

Interprovincial barriers in Canada prohibit growth and limit consumer choice in many businesses and industries. A prime example of an industry still hampered by antiquated interprovincial trade barriers is the wine, beer and spirits industry. In 2017, the federal government liberalized interprovincial trade in liquor by allowing individuals to import wine, beer and spirits for personal consumption, and a few provinces (including British Columbia) have made their own regulations congruent with this federal exemption.

Despite the appointment of a federal cabinet minister several years ago as Minister of Interprovincial Trade, there has been no significant progress, although much talk. In the minority government of 2019, the mandate shifted to the Deputy Prime Minister. ²

Interprovincial trade in liquor remains restricted by a patchwork of regulations. British Columbia and Alberta have made encouraging overtures to other provinces to modernize their liquor laws to allow freer interprovincial trade in wine, beer and spirits. In 2020, MP Dan Albas (Okanagan-Similkameen-Nicola) introduced a Private Members Bill³ aimed at forcing Canada Post, a federally regulated corporation, to ship wine, beer and spirits over provincial borders and internationally.

SAQ (Quebec) has meanwhile threatened producers with legal action if they sell alcohol products based in another Canadian province to a resident of Quebec.⁴ This is no way to recover from a pandemic. The global e-commerce market for alcohol was estimated at US $28B in 2020, again due to the pandemic. Canada’s market was worth $400 in the same period, an increase of 75%.⁵ Why are we dragging our heels?

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Take an aggressive position at the forefront leading the charge to abolish barriers to interprovincial trade in wine, beer and spirits to incent growth in domestic businesses.
2. Work with other provinces, territories, and the federal government to remove barriers to interprovincial trade in wine, beer and spirits.

¹ Building upon the TILMA (Trade, Industry and Labour Mobility Agreement, the New West Partnership (NWPTA) continues to take precedence in interprovincial trade through its many exemptions. The NWPTA created Canada’s largest interprovincial free trade zone. It is a ground-breaking economic partnership between the Governments of British Columbia, Alberta, and Saskatchewan. The Agreement has a number of benefits for the three provinces, which include: • Reduced costs for businesses, governments, and consumers. • Streamlined regulations through mutually recognizing or otherwise reconciling unnecessary differences in standards and regulations. • An enforceable dispute mechanism to ensure that each province lives up to its

commitments. • Enhanced competitiveness through the free flow of goods, services, investment, and workers. The Agreement came into effect on July 1, 2010 and has been fully implemented since July 1, 2013. The Second Protocol of Amendment came into force on December 31, 2015.

² The Canadian Free Trade Agreement, which took effect on July 1, 2017, has faced criticism for its weak dispute settlement mechanisms and inability to compel provinces to reduce trade-restrictive measures. The issue of interprovincial trade was again highlighted in the Supreme Court of Canada's decision in R v Comeau, 2018 SCC 15. In Comeau, the Supreme Court held that provinces maintained the ability to enact laws that restrict commerce between the provinces if there is an overriding purpose, which included the right to control the sales of alcohol within New Brunswick. The mandate letter sets out the Prime Minister's goals for interprovincial trade, including the creation of the Canada Free Trade Tribunal:

Lead work with the provinces and territories to continue to eliminate barriers to trade between them, and work toward a stronger, more integrated Canadian economy. You will build on the Canadian Free Trade Agreement and actively assert federal jurisdiction where needed under section 91(2) of the Constitution Act, 1867 and Supreme Court decisions on the regulation of trade and commerce. Your work will include creating a Canada Free Trade Tribunal to hear, investigate, and help resolve cases where domestic trade barriers may exist.

³ Bill C-260 https://parl.ca/DocumentViewer/en/43-2/bill/C-260/first-reading

⁴ “No-brainer that Canadians should be able to by alcohol online from producers” Globe & Mail January 23, 2021

⁵Ibid