Re: “B.C.’s wine producers will have to make room for U.S.,” Oct. 4.
With the conclusion of the United States-Mexico-Canada Agreement, the B.C. wine industry is apparently bracing itself for tempests of change driven by concessions made by Canada to open up B.C.’s in-grocery-store wine retail network to U.S. wines.
However, I respectfully suggest it is time to put a little water in our wine before we engage in any disaster scenarios here.
I use the word “respectfully” because I think our wine industry is worthy of our support — not as a victim of trade policy, but as a textbook case of how to adjust to and thrive in an open trade environment.
This is not the first time that the United States has had B.C.’s wine policy in its sights at the trade-negotiating table. The 1987 Canada-U.S. Free Trade Agreement contained an entire chapter on wine and spirits trade — which contained both concessions and carve-outs for the B.C. wine sector.
Successive Canadian attempts to justify arcane provincial protectionist measures have faltered at various world trade tables. Most recently, the clumsy effort by the former B.C. government to restrict in-grocery-store wine sales to B.C. products sparked a formal World Trade Organization challenge last year by the U.S. and the European Union — with additional wine-producing nations piling on. The U.S. has negotiated its WTO complaint into a concession under USMCA.
Let’s reflect a bit on history here before we turn to the alarm bells.
Under the pre-FTA protectionist regime, imported wines were assessed discriminatory mark-ups that were more than two times the mark-ups charged on B.C.-made wines in B.C.’s Liquor Distribution Branch network. This allowed B.C. wineries effectively to own the low- to mid-price segments of the market with poor-quality wines made from poor-quality grapes.
The FTA phased out these discriminatory mark-ups and exposed B.C.’s then-17 wineries and their grape-grower suppliers to increased competition from cheaper U.S. wines. The impact was consequential, as it affected the entire liquor-store network and the few private wine stores then in existence.
Acknowledging this impact, the Canadian wine and grape industry was the only sector provided a financial assistance package to help it adjust to the impacts of the FTA. In 1988, a $27-million federal funding program was rolled out to support the removal of poor quality, non-vinifera grapes in B.C. and Ontario. As a result of the adjustment package, B.C. grape growers pulled out more than half of the existing grape acreage and replanted much of it with higher-quality vinifera vineyards.
And then the B.C. industry made the bold choice to move up the value chain and produce better and higher-value wines.
Fast forward to 2018 — the impact of free trade has transformed the B.C. wine industry into one that has earned the attention and admiration of both tasters and tourists around the world. In 1989, in the depth of massive grape pull-outs and winery restructuring, few would have predicted that we would have 355 licensed wineries in B.C. today, supported by quality grape acreage that has increased five-fold to more than 10,000 acres.
A drive through the Okanagan Valley these days does not present a picture of a sector in trouble. In fact, the wine and grape industry’s impact on the B.C. economy is now almost $3 billion per year and growing.
And this takes us back to our local grocery shelves — or, more precisely — the only 29 stores in the province that are licensed to sell wine in-store. These stores represent less than three per cent of the 1,100 retail outlets that sell wine in B.C. Given the restrictions applied on in-store wine sales, I hardly expect that most British Columbians see their local grocery store as the place to go for their Friday night merlot. (By the way, don’t even bother looking for wine on grocery store shelves in Vancouver or Victoria, as you will be hard pressed to find an outlet licensed to carry it.)
If governments want to do anything this time around to help the B.C. wine sector adjust to additional competition from U.S. imports, they should look east, not south, and tear down the remaining inter-provincial trade barriers that discriminate against B.C. wines. The upside of better access to Ontario and Quebec liquor-store shelves would have a far greater impact on B.C. wine sales than the alleged downside of having to share the shelves of 29 grocery stores with U.S. wines.
How did we get to a place in Canada where imported wines are afforded more favourable access than wines from other provinces in our largest markets?
Meanwhile, back in B.C., a rejuvenated “Buy B.C.” program promoting B.C. wines throughout our retail network — including grocery stores — would assist. As Canada was unable to secure U.S. concessions in its “Buy America” procurement regime, maybe it’s time for a bit more “Buy Canada” in our policy and actions.
Stuart Culbertson is a former deputy minister in the government of B.C. He served as B.C. trade representative during the Canada-U.S. Free Trade Agreement negotiations and as assistant deputy minister in the Ministry of Agriculture, Fisheries and Food during the wine and grape restructuring program.
