Opinion: Let's uncork internal trade in Canada in time for the holiday season

A memo to Dominic LeBlanc, minister responsible for Canada-U.S. trade: While you’re patiently waiting for your phone to ring with an invitation to resume trade talks with the U.S., perhaps you could turn your attention to another part of your ministerial mandate that desperately needs attention — your responsibilities for internal trade and the One Canadian Economy.

If ever there were a time to eradicate barriers to internal trade in Canada, that time is now. And what a gift you could give to the Canadian economy if you get rid of them by Christmas.

Permit me a short recap of some points I’ve made in these pages over the past year. Internal trade is a big deal. Over $500 billion worth of goods and services move across provincial and territorial borders every year — equal to almost 20 per cent of Canada’s GDP. Last year, one-third of Canadian businesses participated in internal trade.

Our made-in-Canada internal trade imbroglio is being noticed internationally. Earlier this year, the IMF published a report that concluded that eliminating internal trade barriers could boost Canada’s GDP by nearly seven per cent — roughly $210 billion in today’s terms.

On the other hand, leaving these barriers in place represents the equivalent of a nine per cent tariff on internal trade flows. Recognizing the chaotic state of our trade relations with the U.S., the IMF concluded that “the prize is large. Turning 13 economies into one is no longer just an aspiration — it is an economic imperative.”

Perhaps we have been unable to galvanize sufficient public attention to this quest because its subject matter is comprised of some pretty dreary measures. Many internal trade barriers range from the arcane (differences in professional accreditations) to the absurd (conflicting provincial road transport regulations governing axle-spread limits and winter tire mandates).

However, one set of barriers has attracted attention in both Canada-U.S. trade talks and domestically. These are provincial liquor board practices that restrict the listing of out-of-province wines in our liquor stores. Let’s pour a glass of B.C. VQA and take a look.

First, a few facts and figures. There are presently 600 wineries in Canada with 306 in B.C. and 186 in Ontario. Ontario remains the largest producer of wines based on an annual harvest of 70,000 metric tonnes of grapes compared with B.C.’s 16,000 metric tonnes.

Over the past few decades, both provinces have successfully built quality wine industries around a common Vintner’s Quality Alliance (VQA) designation. Both have backed VQA with legislation and established provincial wine authorities to ensure standards are met and wines seeking VQA designation are, in fact, produced from 100 per cent Canadian grapes.

This common framework of authentication should make it easy for consumers to pick up a bottle of B.C. Pinot Noir at a Liquor Control Board of Ontario (LCBO) store in Toronto or an Ontario Chardonnay in a Vancouver Liquor Distribution Branch (LDB) outlet.

However, this isn’t the case. In this Buy Canadian moment, our respective liquor boards — among the largest single-desk purchasers of wine in the world — seem to have virtually no room for out-of-province wines. This at a time when both provinces have engaged in high-profile trade retaliation by clearing their liquor board shelves of dozens of U.S. wines.

On a research trip to my local LDB Signature store yesterday, I uncovered one lonely Ontario VQA wine tucked away on the bottom shelf of the B.C. VQA section (a Malivoire Cabernet Franc priced at $42.99). I asked a friend in Toronto to check out the state of B.C. wines in his local LCBO store. The LCBO website lists 60 B.C. wines in its catalogue. Hopes were raised when my friend was directed to a display shelf specifically designated for B.C. wines. Here he found 11 B.C. wines (all in the $30-plus range) alongside some Ontario products that had managed to invade the B.C. shelf space.

Facing a glaring absence out-of-province VQA wines in our stores, our internal trade ministers have chosen to focus their attention on tearing down barriers to direct-to-consumer wine shipments. These prevent consumers in B.C. from buying a case of wine directly from an Ontario winery and vice versa.

In July, nine premiers signed an operating agreement on direct-to-consumer sales of alcoholic beverages — a common framework to enable consumers to order wine directly from licensed producers in participating provinces for personal consumption. Wine purchased in this way avoids the need to list through existing provincial liquor board systems with their wholesale requirements, markups and distribution costs. While Ontario and seven other provinces committed to implement this immediately, one said it needed until next February to set up its processes. That province is B.C. Quebec and the territories remain on the sidelines.

While a breakthrough of sorts for wineries and consumers, the deal falls far short of creating a single Canadian market for wine. Wine industry representatives estimate that sales through the direct-to-consumer channel may only reach a few per cent of all wine sales in Canada.

So how can we begin to eliminate some internal trade barriers and build a path to a single market for wine in Canada — all in time for the holiday season?

Here’s a suggestion. Both B.C. and Ontario liquor boards should agree to make available shelf spaces for, say, 20 VQA wines from the other province. Both could ask their respective wine industry associations to offer a list of wines that could fill this allocation. The boards could then promote sales through a buy-Canada showcase that could include an opportunity for consumers to vote on which of the wines presented should be given permanent listings.

Of course, details would need to be worked out. In fact, given the shelf space made available by clearing out U.S. wines, I think the 20-contestant number is likely too low. (To put this in perspective — and with nothing against the Kiwis — the LDB lists 78 New Zealand wines; the LCBO over twice that many.)

However, it would be a welcome start and a highly visible representation of what a reduction in internal trade barriers could mean to consumers.

We would be happy to toast this particular barrier goodbye.

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 talks and in international negotiations on B.C.’s provincial liquor board practices.