All froth, no brew: Alberta’s failed beer protectionism

By adding taxes on all beer, then subsidizing Alberta brewers, the province has defied free trade and the country's Constitution

CALGARY, Alta. Aug. 3, 2016/ Troy Media/ – In a flourish of self-congratulatory bravado, Alberta Finance Minister Joe Ceci has announced yet another major overhaul to Alberta’s brewing industry.

Prior to the New Democrats taking power in the spring of 2015, Alberta enjoyed the best market for beer in all of Canada. Although it was by no means perfect, Albertans had a far greater selection of products from around the world at much more competitive prices than any other consumers in any other province.

Then the tinkering started.

For years, members of the Alberta Small Brewers Association had lobbied the government in Edmonton to protect them from outside competition and provide financial supports. These efforts fell on deaf ears until the current political regime took office.

The first major overhaul took place on Oct. 28, 2015, when the government imposed a tax on craft beers brewed outside of the New West Partnership (British Columbia, Alberta and Saskatchewan). This tax violated both our Constitution’s free-trade clause and long-established case law from the Supreme Court of Canada. No province is permitted to erect a “tariff barrier” – a tax assessed by weight, volume or a percentage of value – that impedes interprovincial trade.

As intended, the tax drove up prices on beer from outside the New West Partnership. But the increase in price failed to further the government’s goals of supporting local jobs and diversifying the economy – the mantra constantly intoned in Edmonton these days.

Ontario-based Muskoka Brewery was forced to pull out of Alberta entirely and lay off its Alberta employees. Steam Whistle Brewery, based in Toronto, languished under a 525 per cent tax increase and was forced to ask the courts to provide relief.

Some small Albertan import agencies saw sales drop by nearly 60 per cent. And since B.C. beers were exempt, producers from across the Rockies began shipping more than ever into Alberta.

Far from protecting local jobs and diversifying the economy, the tax cost Albertans jobs, made businesses less-profitable and flooded our market with products from outside the province.

Back to the drawing board.

The second major overhaul was announced on July 28. As of Aug. 5, all beers in Alberta will be taxed at the highest rate regardless of their place of origin. Alberta brewers will be subsidized by taxpayers based on the volume of their sales. Up to$20 million in grants will be available.

But this does precious little to remedy a constitutional problem created by this government last fall.

Section 121 of the Constitution Act, 1867, says that products from each province must be “admitted free” into every other province. When reading the many drafts and revisions of this provision in the years leading up to 1867, it is clear that the Fathers of Confederation wanted to tear down all government-imposed impediments to internal 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 said one of “the chief benefits expected to flow from confederation [is] the free interchange of the products of the labour of each province.”

Historical record aside, the judge in the recent case against Gerard Comeau, charged for importing beer from Quebec to New Brunswick, also recognized that Section 121 was “clearly intended” to uphold free trade between the provinces.

And this is why the recent Alberta tax announcement rings so hollow. Alberta brewers will receive taxpayer money based on volume sold to offset costs. That’s merely an indirect means of imposing a tariff barrier on beer from elsewhere in Canada.

Alberta’s new plan is to do covertly what it can’t do openly. No court will have difficulty seeing through this sleight of hand.

Derek James From is a lawyer with the Canadian Constitution Foundation in Calgary.

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