Canada’s Trade Ministers sign a new trade deal, which may or may not change anything.

I am almost sorry to write this post, as it dives into the depths of internal trade deals. But that, apparently, is what I do, so here goes…

Late last week, the federal government and provinces announced the new Canada Free Trade Agreement (CFTA), which is basically an inter-provincial trade deal designed to replace the current (and flawed) Agreement on Internal Trade (AIT).

The politicians involved have trumpeted the deal as a new era in inter-provincial relations. I am not a trade lawyer so I can’t really speak to the relative merits of the deal as a whole. However, I did spent a couple hours examining the beer (more accurately, alcohol) related sections to try to determine how this deal might affect cross-provincial beer trade.

In short, not very much.

Sure, they have established a Working Group on Alcoholic Beverages, which over the next year is supposed to work out a way to allow greater trade between provinces around alcohol. That may bear some fruit, but at this point none of us know what will come from it.

In the meantime, every province has added to the deal a list of exceptions to exempt alcohol from the deal. (For the most geeky of you, the deal is structured t0 include everything unless explicitly excluded, so exemptions matter.)

Almost every province has added in an exception that excludes the sale of alcohol. Many are written to protect government retail monopolies, but others try to entrench preferential treatment for local breweries. Here are a couple of the more explicit statements:

• Nova Scotia: “this measure may involve discretionary decisions based on various factors, limitations on market access, imposition of performance requirements, discrimination or right of entry and exit on services, investments, and goods produced in Nova Scotia in favour of residents of Nova Scotia or entities established in accordance with the laws of Canada or a province or territory thereof and having a place of business and substantive business activities within Nova Scotia” (a long-winded way of saying creating policies to privilege Nova Scotia breweries). (p.224)
• New Brunswick: “The New Brunswick Liquor Corporation reserves the right to preferentially promote and market locally produced alcoholic beverage products.” (p. 229)
• PEI: “these measures may involve discretionary decisions based on various factors, imposition of performance requirements, right of entry and exit, or discrimination in favour of residents of Prince Edward Island or entities established in accordance with the laws of Canada or Prince Edward Island and having a place of business and substantive business operations within Prince Edward Island.” (p. 246)
• Manitoba: “Manitoba reserves the right to adopt or maintain any measure limiting market access or right of entry and exit in the sub-sectors noted above.” (p.292)

I pick these because they have the clearest language around their protected barriers. Every province has submitted an exclusion that allows them to control the import of alcoholic products into their jurisdiction. The provisions generally protect the exclusive authority of a liquor board to decide what enters the province and their right to make selections entirely as they see fit, including to privilege local breweries.

In other words, the status quo.

First, to be clear I am not, here, making a proclamation for or against these provisions. I am simply pointing out they exist so that beer fans can realize the realities of what the CFTA will mean for beer. And what it means is that very little is going to change in the coming years.

Second, I appreciate they have struck a committee to look at these issues, which might lead to a side deal around alcohol. However you will forgive me for being a bit skeptical around that, as establishing committees is a time-honoured practice in Canadian politics to avoid coming to a resolution on a prickly political issue.

In short, this new deal does little for beer in terms of resolving longstanding issues around cross-provincial trade. The politicians, frankly, ducked.

I have to say I don’t entirely blame them. This is a hard issue. As much as we theoretically support cross-provincial free trade, we also want our local breweries to succeed, which might mean protective measures to give them a chance to grow. There is no easy solution. Hence the committee.

I have to note one more thing I found in the deal. Alberta put in an exemption that catches my attention. I re-publish it here in its entirety:

If another Party has:
(a) excluded or impaired the access of Alberta beverage alcohol products or related services in its market;
(b) imposed performance requirements; or
(c) otherwise discriminated in favour of the residents or enterprises present in that Party’s market, and
If consultations with that Party have failed to resolve the matter, Alberta reserves the right to provide treatment no less favourable than the treatment provided by that other Party to Alberta’s alcoholic beverage products or related services, until such time as a mutually satisfactory resolution of the matter is achieved. (p.304)

A tempest in a beer mug?

The clause basically says that if Alberta finds another province has unfairly limited access to Alberta beer, they retain the right to retaliate (after consultation) in kind. Fascinating!

They are the only province to put in such wording. In the context of the court cases currently ongoing against the province’s new beer policies (read here and here), it is meaningful. I also note that Alberta is the only province with completely open borders, meaning they are the only jurisdiction that does not have an automatic capacity to respond (via border controls), and so I can see why they wanted this clause. It gives them, at least, a stick in any dispute.

But it does speak to how little the new CFTA actually does to lower inter-provincial barriers for the sale of beer. If provinces can entrench the status quo and Alberta can insert a new capacity to retaliate, it means nobody could agree on a new regime and things will continue as they are.

You are welcome to be either relieved or disappointed, depending on your perspective. The take-home point, however, is that very little has changed from the official unveiling of this deal today.