Subsidizing brewers just another unconstitutional trade barrier

Government efforts should be focused on tearing down all trade barriers, so that Alberta brewers gain access to other provincial markets

CALGARY, Alta. Aug. 15, 2016/ Troy Media/ – Well, that didn’t take very long. The money is rolling out the doors already.

Kevin Moore of [popup url=”http://twosergeantsbrewing.ca/” height=”1000″ width=”1000″ scrollbars=”1″]Two Sergeants Brewing[/popup] confirmed to the Fort Saskatchewan Record that he received his first “rebate from the government” already. This payment was made under the dubious Alberta Small Brewers Development Program announced on July 28.

Under the program’s terms and conditions released by the government last week, Alberta’s brewers can receive up for $12 million a year to give them a leg up on their competition from outside the province. And since there are now some 40 eligible breweries, the government could, in theory, be doling out nearly half a billion in beer subsidies annually. In that case, it would be less expensive to just give every brewery employee in the province a $100,000 government salary.

This new program is intended to solve the problem created last October when the government erected an unconstitutional trade barrier to keep beer from other provinces out of Alberta. The idea was that taxing beer from elsewhere at a higher rate would cause Albertans to buy local. But it seems that no one in the government was familiar with section 121 of Canada’s constitution, which says that products from each province must be “admitted free” into every other province.

Yet, for all the fanfare surrounding the new program, it fares no better constitutionally. It’s merely another attempt to accomplish the same goal – reducing competition to favour local industry. Only now, instead of taxing beer from other provinces higher than beer brewed in Alberta, all beer regardless of origin will be taxed equally (at a new higher rate) and Alberta brewers will be cut a cheque for the increased taxes on their products. The government is still trying to protect local industry from competition – a goal forbidden by our constitution.

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The Fathers of Confederation intended Canada’s constitution to prevent government-imposed impediments to interprovincial trade. George Brown said, “[the] Union of all Provinces would break down all trade barriers between us, and throw open at once… a combined market of four million people.” And Alexander Galt believed that one of “the chief benefits expected to flow from confederation [is] the free interchange of the products of the labor of each province.”

The evidence that Alberta continues to ignore the constitution is growing.

This week, Grande Prairie’s Daily Herald Tribune reported local brewers’ belief that the new, higher beer tax would have wiped them out had it not been accompanied by a subsidy. So ask yourself, if the tax is set high enough to destroy local businesses (which are now saved by a rebate of that same tax), can the government honestly maintain it isn’t now intended to destroy outside competition?

And then there’s the problem about who is paying for all of this.

As one Alberta brewer said to the media, “We, as brewers, don’t pay that tax,” and yet he also said, “The government is not trying to pass this onto the consumer.”

Of course, regardless of the rhetoric from government and the brewing industry, it is everyday Albertans who will pay. The cost of beer from outside of the province will increase, resulting in reduced selection on store shelves and in bars. Serving staff will sell less and earn less. Small businesses like Alberta’s mom and pop import agencies will decrease their sales volumes and could be driven out-of-business entirely.

Far from strengthening and diversifying our economy, this program could have the opposite effect. Higher prices. Less choice. More tax. Consumers will pay and only a well-connected few will benefit. And since taxpayers are subsidizing breweries, this is a step towards socializing the brewing industry by making them dependent on government support.

The constitution is supposed to ensure open markets within Canada. Yet the Alberta government seems to have a mistaken belief that adding a level of sophistication to an otherwise unconstitutional form of tariff barrier can transform it into a permissible one.

Interprovincial trade barriers cost our economy between $50 billion and $130 billion each year, and there’s little question that other provinces have their own barriers that make it difficult for Alberta brewers to get their products sold elsewhere. But the solution is not to create new barriers. Instead, the effort should be focused on tearing down all trade barriers, so that Alberta brewers gain access to other provincial markets.

Derek James From is a lawyer with the [popup url=”http://www.theccf.ca” height=”1000″ width=”1000″ scrollbars=”1″]Canadian Constitution Foundation[/popup]. 

Derek is a Troy Media [popup url=”http://marketplace.troymedia.com/our-contributors/” height=”1000″ width=”1000″ scrollbars=”1″]contributor[/popup]. [popup url=”https://www.troymedia.com/become-a-troy-media-contributor/” height=”600″ width=”600″ scrollbars=”1″] Why aren’t you?[/popup]

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