Breakenridge: Beer tariffs are a race to the bottom of the bottle

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Once again, Alberta’s NDP government is in a familiar position: defending the constitutionality of their craft brewery policy.

While many Albertans might agree with the general idea of favouring local brewers or promoting the local industry — or even fighting fire with fire when it comes to protectionist policies — that doesn’t and can’t trump our constitutional obligations or our commitment to internal trade agreements.

It may well be that the government’s policies have helped the industry grow. It’s certainly true that some of the changes ushered in under the previous government helped unleash the industry. Local regulations can also have a big impact.

But it’s also true that the NDP’s favourable treatment of Alberta craft brewers has coincided with a further increase in the number of them. However, it’s not helpful to keep having to go back to the drawing board to redesign the policy. Another legal setback should prompt the government to take a different approach.

The NDP originally implemented a lower markup rate for craft brewers in Alberta, as well as Saskatchewan and B.C. (signatories to the New West Partnership). After Ontario-based Steam Whistle Brewing challenged that, the NDP applied the top markup rate across the board and then offered grants to Alberta breweries.

So Steam Whistle is once again challenging the policy, this time alongside Saskatchewan-based Great Western Brewing. They say the high tax rates amount to a tariff on out-of-province beer, and therefore represents an unconstitutional trade barrier.

The hearing ran out of time Friday so it won’t be until September that the government will present its side.

The fact is interprovincial trade barriers remain that are harming craft brewers in every province, Alberta included. Fortunately, there’s some reason for optimism.

Later this year, the Supreme Court of Canada will hear a case that could have huge implications for interprovincial trade, and booze in particular.

It involves a man charged five years ago with transporting 14 cases of beer and three bottles of spirits from Quebec into New Brunswick — higher than the limit. He was acquitted by a provincial court judge who found such limits and restrictions to be unconstitutional.

Meanwhile, we saw the unveiling earlier this year of the proposed new Canadian Free Trade Agreement, aimed at further knocking down interprovincial trade barriers. It’s notable in this context that the agreement takes specific aim at subsidies (“incentives,” as they’re called), which could cause further problems for Alberta’s current approach.

On top of that, the Constitution Act is pretty clear about the obligation that all products “be admitted free into each of the other provinces.”

So first and foremost, Alberta could throw its support behind the push to drop trade barriers, and stop trying to have it both ways.

Second, let’s throw our support behind any Alberta-based breweries who wish to file similar trade complaints in other provinces.

Third, let’s look at other jurisdictions, particularly in the U.S., that have become craft beer meccas. Tariffs and protectionist policies don’t appear to be the typical path to success.

Fourth, if we’re still determined to find ways of giving the Alberta industry a leg up, let’s look at ways that don’t run afoul of trade agreements.

Further regulatory changes would help. Hopefully, the lowering of the small business tax can help, too. We could draw lessons from B.C. and allow Alberta-based brewers to sell their product in grocery stores or at farmers markets.

Lower taxes and less red tape might allow for more startups but may also entice out-of-province brewers to relocate or expand here. If we can get to a truly open market, we should make sure we’re the most competitive jurisdiction in the country to be a brewery.

In an ideal world, that would be the most obvious solution. Unfortunately, we’re not there yet.