Trade challenge! Alberta government dumps craft brewer grant program, focuses on Canadian provincial protectionism instead

You think America is bad with its protectionist trade policies? Ha. In Canada, the provinces don’t even get along (I, mean, we’re not perfect either). This week, the Alberta beer trade saga continued with the government launching a trade challenge against Ontario for what it sees as unfair liquor policies that prevent Alberta manufacturers from accessing the Ontario market. The complaint really applies to all provinces, but Ontario is the biggest market. The complaint is under the Canadian Free Trade Agreement, a partnership to reduce and eliminate barriers between the provinces.

The challenge is a solid one. Every province other than Alberta is controlled by liquor control boards. Many see these liquor control boards as gatekeepers to retail success as they use their control over government-owned liquor stores to promote local products with preferred placement and promotion. These provinces have strict limits on the amount of alcohol that can be brought across the boarder and non-tariff barriers for manufacturers and importers such as limiting listings and fridge space, weird differential handling fees, difficult application processes, tasting panels and specific package requirements that put liquor and beer products from other provinces at a disadvantage. Basically, most provinces have liquor monopolies that protect local products.

In the past, Alberta has veered off in some controversial directions to compete with those monopolies. In 2015, Alberta introduced a $1.25 markup tariff tax on beers from provinces outside of the New West Partnership (a trade agreement between the governments of British Columbia, Alberta and Saskatchewan). After official and unofficial complaints and government proceedings, Alberta made the $1.25 markup across the board. At the same time, in 2016, it enacted the Alberta Small Brewers Development Program, which provided a monthly grant to Alberta breweries. The program was basically a shell game that paid Alberta brewers back for the beer tax the province enacted. Then came more trade complaints and big lawsuits.

Now, the Alberta Small Brewers Development Program shall perish as of Dec. 15, according the government. In its place, Alberta is introducing a universal small brewer markup. Brewers who apply for this markup and produce less than 50,000 hectolitres in annual worldwide production (AWP) will be subject to less than the standard $1.25 per litre markup. A markup of between 10 cents and 60 cents will be applied per litre based on their AWP. Smaller brewers, regardless of province, will be able to apply for markups, which is cool. The government thinks the lower markup rates will allow those small brewers to reinvest in their business and continue to grow. But at the same time: Alberta is still promoting protectionism while complaining about protectionism. To the press release!

“It doesn’t make any sense that it’s easier to sell Alberta beer in Tokyo than it is in Toronto. It’s unacceptable. We’re fighting for the Alberta craft liquor manufacturers who create good jobs here in our province. They deserve a level playing field to sell their products across the country, without unfair trade barriers. We need more trade, not less.”

Deron Bilous, Minister of Economic Development & Trade

Under the Canadian Free Trade Agreement, Ontario will have 120 days to respond to the complaint. Ontario Trade Minister Todd Smith was apparently surprised by the move, according to this feature for the National Post:

“Just last week, I sat across from representatives from the government of Alberta and not once did they mention this to me,” he said in a statement.

“The government of Ontario is committed to reducing interprovincial trade barriers, as we made clear in our fall economic statement when we said we wouldn’t stand in the way of pipeline projects moving forward.”

It’s funny to think that Canadian governments can still surprise each other. Other fun facts from this press release:

• Alberta maintains the most open liquor market in the country, with more than 20,000 liquor products available for purchase across the province.
• Alberta now has 137 liquor manufacturers, including 99 brewers.
• Alberta lists 3,700 products from other parts of Canada, including 745 from Ontario. By contrast, Ontario imports only about 20 Alberta products despite their market being three times as large.
• Brewers with AWP of more than 50,000 hectolitres will continue to have the standard markup of $1.25 per litre applied to their product.