Very pleased that a condensed version of this article appeared as a Globe and Mail op-ed on February 8, 2018 (Alberta Banning B.C. Wine: The Sour Grapes Look Bad on Canada.)
Here is the full version.
That Alberta has announced a ban on the “import” of BC wine is shocking.
That our Canadian federation has arrived at this place – with deafening silence on the part of the federal government – is even more shocking.
How and why did we get here? Let’s address a couple of myths and set out a few cool-headed facts about oil pipelines and wine, about jurisdiction, the importance of predictable and robust regulatory systems, and above all, why it is only in Canada that wine can even be a “banned” product between provinces.
BC and Alberta have the two most integrated provincial economies in the country (estimated at about $30-$35 billion combined). We consume each other’s goods and commodities (yes, including oil here and wine there), we have common labour standards and our residents move freely back and forth to live and work in the other province in a host of occupations and industries.
Consider that BC, Alberta and Saskatchewan (and Manitoba in 2020) are members of the New West Partnership, an agreement in effect since July 1, 2010 encouraging the further integration of the western provinces (some commentators note Alberta may now be offside that agreement and subject to fines).
Consider that Canadian oil is exported almost exclusively to the US, and that it sells at roughly a $22 discount per barrel (the price delta between West Texas Intermediate crude at Cushing, Oklahoma and Alberta’s Western Canadian Select reached $27 on Thursday January 30th 2018). Canada exports about three million barrels of oil per day – leaving a lot of money on the national table that could make Canadians as a whole better off. Even if we want to be less dependent on oil to power our first-world society in 20 to 30 years, we should realistically acknowledge its role today. Whether we agree that a $7.4 billion oil pipeline project is worth the investment or the risk, we should consider its potential positive economic impact.
Much of the instantaneous commentary in reaction to Alberta Premier Rachel Notley’s announcement that the AGLC will cease purchasing BC wine in response to BC Environment Minister George Heyman’s abrupt announcement of a new review of BC’s spill response regulations, centred on the mismatch between a globally traded commodity, backed by large corporations versus a farmgate BC-origin product mostly consumed locally.
David vs. Goliath?
Examining the wine side of the equation a little more closely, consider that most of the wine produced in British Columbia is directly or indirectly controlled by three large companies:
Arterra Wines Canada headquartered in Mississauga, ON (formerly Constellation Brands Canada, a subsidiary of the largest publicly traded wine company in the world, acquired in 2016 and taken private by the Ontario Teachers Pension Plan for $1.0 billion);
Andrew Peller Ltd. headquartered in Grimsby, ON, a publicly traded company that acquired three BC family- or group-owned wineries for $95 million in 2017; and
Mission Hill/von Mandl Family Estates, a private entity presently controlling approximately 10% of the vineyard acreage in the Okanagan Valley, with principal offices in Kelowna, Vancouver and Toronto.
Not that smaller and family-owned wineries won’t feel the substantial pinch of Alberta closing its doors to BC-origin wines: they will. Many small to medium size BC wineries’ largest “export” market is Alberta. But indignant British Columbians can’t claim with any degree of accuracy that BC’s wine industry is made up only of small or farmgate wineries.
A 2017 economic impact study of the Canadian wine industry (based on 2015 data) estimated the BC wine industry’s overall economic impact at $2.7 billion. Before British Columbians panic about the potential erosion of this economic value to the BC economy and to important regional centres like Kelowna and Penticton, consider that the estimated annual revenue from BC wine sales is $360 million, of which Alberta estimates it purchases $70 million (20%).
Who prevails, who referees?
Leaving aside the relative economic impacts for each province of the curtailment of the other province’s “flagship” good (with all the legitimate pride that entails) the jurisdictional implications aim a stake at the heart of the Canadian federation.
The BC government’s assertion of the need for a “Phase 2” spill response regulatory review takes on the authority of the federal government in two ways: it proposes to regulate coastal waterways and the marine environment, which is squarely in federal jurisdiction under the Fisheries Act, the Navigation Protection Act (administered by Transport Canada) and possibly other legislation; and it challenges the spirit and regulatory integrity of a federally-approved (National Energy Board) project to expand interprovincial energy infrastructure. Further, it aims a challenge at the commodity produced by a neighbouring province which has de facto been deemed to be in the national interest for decades.
The Alberta government’s ban on “imports” of BC wine may be seen as a cheap shot, and it is certainly unhelpful to the jurisdictional crisis in which Canada now finds itself.
The absence of the adult referee in the form of the federal government asserting its jurisdiction is among the least excusable “non-actions” in the whole saga. Alberta should stand down on banning BC wine. BC should stand down on an indefensible assertion of jurisdiction or of trying to regulate a commodity long deemed in the national interest: going to court is a lengthy, expensive waste of taxpayer dollars. Canada’s reputation as a reliable, attractive place to invest is already compromised and could be irreparably damaged.
And last but not least, if the Canadian federation ever completed its work in dismantling interprovincial trade barriers (the Canadian Free Trade Agreement came into effect July 1, 2017 – but excepted Canadian beverage alcohol again, an omission on which the Supreme Court of Canada may force governments’ hands via a decision in the Comeau case), BC wine wouldn’t even be eligible as a pawn in this most unseemly tit-for-tat spat between the provinces.
Not the finest moment for BC, or Alberta, or Canada.
Karen Graham is the founder and principal of Wine Drops, offering perspectives on policy and business matters in the Canadian wine industry. She has conducted energy and environmental policy analysis for a variety of organisations over a decade in British Columbia, and presently serves (2017-18) as the Director, Advocacy and Stakeholder Relations of the Greater Vancouver Board of Trade.