Responses to Comeau and WTO/NAFTA

Responses to Comeau and WTO/NAFTA

I had the opportunity to present to the British Columbia wine industry at the end of June 2017 as part of Wine Talks 2 at Okanagan College in Penticton, hosted by Liquidity Wines.

Below are the five themes I presented that the BC and Canadian wine industry should be considering in response to systemic shocks from the Supreme Court of Canada (SCC) deciding the Comeau appeal (will affect interprovincial shipping) and from the WTO challenge and NAFTA renegotiation. (Note, this is not a SWOT, or a roadmap! But the industry should be preparing a strategy...)


Systemic changes are likely coming resulting from the WTO challenge, inclusion of wine into the NAFTA renegotiation, and/or SCC decision on Comeau.

Let’s not underestimate the risk that the WTO challenge poses, and what the NAFTA re-negotiation could also mean. Much of the BC industry no longer needs most of the government support structure that it enjoys, and I believe – but don’t know - that the industry is resilient.

If the WTO challenge succeeds – and I think it will, in some measure – that resilience will be tested in the face of the long list of practices that the countries bringing the WTO challenge have raised and that observers like wine lawyer Mark Hicken have enumerated.

What does resilience look like? For starters, it should include:

  • stronger balance sheets in the face of higher operating costs, which may mean leaner operations

  • a secure domestic (BC) market anchored by reliable consumers

  • export market diversification

2. Opportunity.

An SCC decision upholding Comeau would be a boon to most BC and Canadian wineries, and a lifesaver for small to medium wineries, if suddenly we have a Canada-wide Direct to Consumer (DTC) market. Also, let's not forget the benefits for long-suffering consumers!

If the SCC upholds Comeau to the extent of reducing or eliminating internal barriers to wine shipments, it will mean the “judicial deconstruction” of provincial liquor monopolies where they act to favour domestic producers. What is the alternative? In a potential post-Comeau era, the industry should be alert to the possibility that market power in the liquor supply chain merely shifts from a publicly run system to one permitting private sector concentration of segments of the liquor supply chain. Is it any better to end public monopolies only to have them replaced by private ones?

Even if the SCC does NOT uphold Comeau and reverts to “Gold Seal” (precedent-setting case in 1921), the regulated price landscape may be shifting. Some liquor boards are already recognising their competitive risks, and are lowering prices (New Brunswick and Nova Scotia have done so on non-craft beer.) What does this mean for wine?

3. Leadership.

BC has the opportunity to again lead the Confederation (in this, our 150th year) as it did after Bill C-311 in opening our market to other Canadian-produced wine.

For the British Columbia government: it should be positioning the BC Liquor Distribution Branch for a post-Comeau Canada (either via SCC or Canadian Free Trade Agreement). This should look like:

  • Fewer barriers to entry/lower markups

  • increased elements of private sector participation in supply chain

  • putting the customer first (price signal, incorporating a review of NB and NS pricing change)

For the industry: it is hard to find BC industry advocacy or articulation of value statements in the face of WTO/NAFTA and/or Comeau.

  • How are the BC industry’s interests being assessed, articulated and promoted to our governments – front channel as well as back channel?

  • What is BC’s position?

  • What body is endorsed by/empowered to speak for the industry?

There is an urgency to articulating an industry position:

  • NAFTA renegotiation begins August 16, 2017

  • SCC due to hear Comeau December 7, 2017

Which leads me to…

4. Governance.

In the face of external shocks like WTO/NAFTA and Comeau, the importance of strong governance is thrown into greater relief.

Many BC wine industry leaders have been working on this through the UBC/Kedge Wine Leaders forum, and we hope progress is imminent. Today, we have:

  • BC Wine Institute – marketing, communications and advocacy of products and experiences

  • BC Wine Authority – standards-setting body

  • ??? – for policy and advocacy of interests of the industry

There are alternative models out there, and possibly no need to create yet another body. But this needs to be agreed and formalised in BC.

5. Competitiveness.

British Columbia is known as a high-operating cost, expensive and challenging wine market.

As a jurisidiction: The system is distortionary and consumers suffer.

Regulatory, taxation and supply chain adjustments can be made… or they can be forced on the industry.

As an industry: Go out into the world, be bold!

Selling out in a market behind protectionist walls is not a strategy... and the domestic (BC) scene is not a diverse enough place to support the business plans of 275+ grape wineries.

The industry, consumers and BC wine culture are not helped by differential tariffs, protections and trade barriers, but with smart advocacy to government these can and should be overcome by a dynamic and competitive industry.

As an industry, take a consistent approach to going to market, welcome competition (returning to the Resilience theme), and strengthen the fundamentals that will support the industry over the long term. Finally, DIVERSIFY: export-led growth is the best path forward for the industry at large.