On December 6 and 7, the Supreme Court of Canada, in a televised hearing, will hear the Comeau or ‘New Brunswick Beer’ case. The outcome is critical to the future growth and success of the BC wine and tourism industries.
Currently, it is illegal for a tourist in the Okanagan to ship BC wine back home, unless he or she is from Saskatchewan, Manitoba or Nova Scotia. Internet orders are similarly illegal, except from those jurisdictions.
Restrictions on the inter-provincial shipment of Canadian wine were supposedly eliminated in 2012 when Parliament added a ‘personal use exemption’ to the Intoxicating Liquor Act, permitting shipment of Canadian wines across provincial boundaries for personal use ‘in quantities and as permitted’ by the destination province. Most provinces subverted the intent of the federal changes by adding or maintaining prohibitions.
Because Canadian wines are not readily available in most of the country, Canadians drink mostly foreign wines. In Argentina, Chile and South Africa, drinkers consume their domestic product almost exclusively. In Italy 86 per cent of consumption is domestic wine, and in France, 75 per cent. Americans consume 65 per cent.
Canadian wines are now regularly winning international recognition, but our industry does not have the production capacity to sell significant volumes into international markets or through the government monopolies.
Also, given the high cost structure of the Canadian industry, our wines would be prohibitively expensive if they were subject to the high mark-ups of the provincial liquor monopolies. Consequently, the Canadian wine industry is highly dependent on direct to consumer sales within Canada.
In the United States, as a result of a 2005 US Supreme Court decision which struck down inter-state barriers to wine trade, e-commerce sales and direct to consumer delivery is now the dominant sales channel for smaller US wineries which generally don’t have access to the major distributors.
Almost 100 years ago, Section 121, the ‘free trade’ provision of the Constitution Act, was narrowly interpreted as prohibiting only tariff barriers. As a result, there has been no constitutional safeguard against the proliferation of non-tariff trade barriers between provinces.
Internal trade agreements, such as the new Canada Free Trade Agreement, are ineffective in protecting against unreasonable internal trade barriers. They are riddled with exceptions, have ineffective enforcement mechanisms and are binding on the provinces only with their agreement.
The Supreme Court Justices need to develop a s.121 test that curtails discriminatory and protectionist barriers to inter-provincial wine shipments while at the same time allowing the provinces to impose reasonable rules to protect health and safety (to safeguard, for example, against the Internet purchase of wine by minors) and to protect provincial liquor revenue by, for example, the imposition of direct taxes.
The Supreme Court needs to recognize the economic reality of e-commerce and to strike down the discriminatory provincial rules prohibiting the shipment of wine across provincial borders. A recent Ispos poll found that 89 per cent of Canadians favour the elimination of such restrictions.
These restrictions strike the average Canadian as non-sensical, are impossible to enforce and serve no valid policy purpose that cannot be achieved in a less discriminatory manner.
Al Hudec, Oliver