The Canadian wine industry is a small industry as compared to the major wine producing industries of the European Union or the United States of America.
It is essentially a niche market and most of the wine produced in the country is meant for the domestic market. The country is also a major importer of wine from the European Union and the United States as well as other countries such as South Africa. The major wine producing areas in the country are British Columbia, Nova Scotia and southern Ontario.The Okanagan Valley in British Columbia and the Niagara Peninsula in Southern Ontario are the largest wine producing regions in the country. Other regions include the Similkameen valley, southern Fraser River valley, southern Vancouver Island and the Gulf Islands in British Columbia and the shores of Lake Erie and Prince Edward County in Ontario. There are small-scale productions of grapes and wine in Nova Scotia and southern Quebec.
Canadian Ice-wine is a unique product and assumedly Canada’s most famous product in this industry. (Meilke, 2004)The internal trade policy of the Canadian federal government provides a great deal of protectionism to the industry and treats the industry as an indigenous market which needs to be regulated in such a manner so as to ensure protection against competition from imported wines. The government has been trying to ensure that this industry can be sustained and promoted amongst its population. The government has been highly restrictive in regulations regarding sales of imported wine.
Such restrictive trade practices have caused both the European Union and United States to raise a clamor and efforts are being made by them to deregulate the market.In Canada, the industries are under strict control of the provincial governments in place of the federal government and in provinces, which have their own local wine industries the situation is caused severe. In their attempt to promote their own products, the provincial governments have been notorious in their discriminatory efforts in regulating the sale of imported wines. Due to this level of protection provided by the local and federal governments it is feared that under competitive markets Canadian wines may not be able to sustain its sales figures.
It is also noticeable that such discriminatory practices by the provincial governments are not restricted to foreign wines but have been known to discriminate against wines produced in other provinces. (Chong, 2008) The federal regulations for internal trade of wine is referred to and dealt in detail in the Agreement on Internal Trade, consolidated 2007 edition, chapter ten. The chapter clearly a mention that Article 402 or the right of entry and exist does not apply to this industry.However, articles 400, 401, 403, 404, 405 and 406 dealing with application, reciprocal non-discrimination, no obstacles, legitimate objectives, reconciliation and transparency respectively apply to this chapter dealing with the wine and other beverages industry. (Heien, 2005) The idea of the agreement was to ensure a unification of all industries devoid of any provincialism and prevent establishment of inter provincial trade barriers and demolish existing barriers and foster economic growth based on inter provincial trade which would allow easier and freer movement of labor, procurement of resources and investment in its industries.
The agreement also entails greater levels of transparency, labeling of wine and wine products etc. articles 1000 to 1013 deals with various aspects of the industry. Article 1011 enlists the various exceptions found to be agreeable; they are regarding the wine industries of British Columbia and Ontario and maintain that discriminatory efforts of theses provinces regarding the number of wine outlets in the province were agreeable as long as they adhered to the norms of October 4, 1987.Other such exceptions are also listed. The signing of the Free Trade Agreement with the United States and the GATT had put serious doubts on the future of the industry but the opposite was reported.
The industry has recorded astounding growth rates in the domestic market in spite of bad weather in 2003 and 2005. Additionally, the introduction of Vintners Quality Assurance standards ensured better quality wines were produced and as a result, it fuelled the growth of the industry.The industry recorded the eleventh highest growth rate among the listed 215 industry groups in between 1997 and 2005. The GDP of the industry was reported to be 7. 1 percent, double the rate of 3 percent of the nation as a whole. In 2007, the industry reported a growth of 76 percent on its shipments of manufactured wines up from 413.
5 million USD in 1997 to 727. 3 million us dollars in 2005.Apart from the sales tax and income tax it collects from the sales of wine, the federal government has also introduced a new Excise Act in 2001. Previously the industry was exempted from this act but after July 1 2001, the industry has also come under the purview of this act. The CVA has been pushing for an amendment to this act because it feels that certain sections of the act can have detrimental effects on the wineries business. The government has also imposed excise on labeling of the wines.
Additionally the government has also introduced a new excise duty on wines that are given away as sample at wineries. Wine sold through consignment stores was also taxed. This has also caused a great uproar and efforts are being made by the CVA to amend this act. Additionally, there is a special duty that is applicable to wine that is imported by or distributed a licensed dealer. The government also earns through the licenses it provides to both sellers and manufacturers of wine.
Manufacturers are required to have an “E” license and the wholesalers are provided with “W” license. The excise is not levied at the time of purchase but is remitted at the point of sale of wine from the wholesalers and retailers. (Aspler, 2006)From the study of the industry done, one can come to the conclusion that there are various aspects of the wine trade that need to be improved upon to ensure that the industry can compete with imported liquor. The country also needs to do away with the policies, which prohibit free transportation of wine produce between provinces. Additionally the industry would be limited as a local market in itself.
Even though the industry has shown remarkable growth, it still does stay restricted to the domestic market. In order for the market to grow, greater protection is required. However, by subsidizing exports, an imbalance in trade practices and prices may result. The federal government is seen to be treating this industry with maternal touch whereby it is protecting the causes of the industry. The Canadian industry has a niche market in its Ice-wine category and this sector needs to be tapped further. If this type can be marketed globally, sales may improve in this section in the global market.
(Copeland, 2006)
