CALGARY, Alta. March. 4, 2017/ Troy Media/ – Alberta is all abuzz. Alberta Premier Rachel Notley is back from her trip to Washington. She was there to advocate for the province’s economic interests against the rising tide of American trade protectionism and to explain how trade with Alberta benefits both us and the U.S.
She’s right. Protectionism is harmful and freer trade is good for both trading partners. Tariffs, discriminatory taxes, and other protectionist schemes hurt consumers on both sides of a trade dispute because they result in higher prices and reduced selection.
But I must admit I was surprised to hear that the Premier is such a strong defender of free trade, as her government has introduced its own protectionist policies that have gutted portions of Alberta’s craft beer industry.
The Alberta Small Brewers Development Program began in the summer of 2016 with the goal of helping Alberta’s craft brewers grow their businesses. It replaced an ill-conceived, short-lived, and illegal discriminatory tax that had been implemented in October of 2015.
Whereas, under the 2015 program, out-of-province craft beers were taxed at a higher rate than Alberta craft beers, under the current scheme, all Canadian craft beers are taxed at the same higher rate regardless of their province of origin. However, Alberta-based craft brewers receive a rebate “based on sales volumes of Alberta-made beer sold in the province.” The rebate effectively refunds Alberta brewers the difference between the old and new tax rates. Because it treats Alberta’s brewers more favourably than those from elsewhere in Canada, it is a barrier to free trade. It’s textbook protectionism.
Not surprisingly, and for the very reasons Premier Notley offered in Washington, as a result of these two policies, Alberta’s craft beer drinkers have noticed sharp price increases and reduced selection. For some reason, the Alberta government didn’t think this way about free trade when they devised their beer tax policies. No one in the Notley government seemed to grasp, or care, that many Albertans’ jobs depend on craft beer from elsewhere in Canada, and that their jobs as well as the interests of consumers would be hurt by the new trade barrier.
The discriminatory “tax-and-rebate” scheme has been devastating for Alberta importers bringing world-class products like Quebec’s Trou Du Diable’s beers into the province, local retailers catering to beer geeks who want access to a wide selection of unique products, and bars serving people who want to taste the best beers from across the country.
As Notley could have told Trump, prices have increased. Some out-of-province beers are now taxed at a rate 525 per cent higher than they were just two years ago. This is what happened to Quebec’s award-winning Moralite IPA, which sold for around $17 before, but now costs $24. This spike in price shocks customers and makes great Canadian beers more difficult to sell. As a result, previously popular beers like Yukon Red now sit on the shelf collecting dust, losing their freshness and losing money.
Selection has also shrunk. A $10 pint is a psychological barrier for most consumers, so bars have been reducing the serving size and their selection of premium out-of-province beers. In other cases, out-of-province craft beers are simply no longer available in the province because importers cannot sell them at the new higher rate of taxation.
Craft beer drinkers are victims of the Alberta government’s protectionism. No longer can Albertans brag that they enjoy the most consumer-friendly craft beer market in Canada.
But there are other problems. The current tax-and-rebate scheme has landed the Alberta government in court because it violates section 121 of our Constitution Act, 1867 as an illegal impediment to interprovincial trade. It is also the subject of a trade complaint brought under the national Agreement on Internal Trade, to which Alberta is a signatory, because it discriminates against beers from elsewhere in Canada.
Frankly, the scheme is a disaster. It’s unconstitutional and in violation of Alberta’s trade obligations. It’s increasing the price of craft beers and reducing the selection of products. And by hurting importers, retailers, and bars, it’s undermining Alberta’s economy.
Notley should practice what she preached in Washington – protectionism hurts us all— and remove this protectionist policy before lecturing anyone else on the benefits of free trade.
Derek James From is a lawyer with the Canadian Constitution Foundation in Calgary.
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