Thank you, Mr. Chair.
Good afternoon. I'm Rowland Dunning, executive director of the Canadian Association of Liquor Jurisdictions, or CALJ for short. CALJ represents provincial liquor authorities in all ten provinces and the three territories. Thank you for the opportunity to speak today.
CALJ's members believe that Canadians deserve easy and comprehensive access to the fine wines produced across this country. How much access do consumers have, you might ask?
Well, they have a broad choice of Canadian wines in their province's or territory's retail stores, amounting to $1 billion in sales just last year, and they can order any Canadian wine any time through private or special ordering services, which we have outlined in our submission.
Provinces are ensuring these programs become even better and faster. They can take wine home with them on their person and for their personal use when they visit wineries in other provinces. In short, Canadian consumers already have good access to Canadian wine, and that's why we think the proposed amendment is unnecessary. In fact, the only reason Bill C-311 exists, and the only reason we're all here today, is that some wineries feel they shouldn't have to pay provincial markups on these sales.
We would be happy to elaborate on these liquor board supports for Canadian wine and on the private order systems that allow consumers to order any wine from any Canadian winery through their home province's liquor retailer.
Every province and territory does apply a markup or a commodity tax to the sale of alcohol to raise revenue and to help pay for government services such as health care, education, and other important priorities.
Yes, a portion of our markup revenue covers the cost of retailing, but most of it goes to provincial spending priorities as well as to helping offset the social, health care, and law enforcement costs that arise when alcohol is not used responsibly.
We're all for tourists visiting wineries in other provinces and taking wine home with them. However, we do have concerns with direct sales into other provinces, since this is a new and distinct retail channel. The impact on our businesses and provincial revenues from allowing direct sales could be substantial. In some U.S. states and the U.K., direct sales account for 4% to 5% of total wine sales. This is the equivalent of about $300 million in annual wine sales in Canada.
Proponents of the bill say the liquor boards could still collect a portion of their markups by adopting a permit system like that used in some U.S. states. These are cumbersome systems whereby out-of-state wineries and even consumers have to register with tax authorities and purchase permits. Our existing private ordering services are much simpler. Why would anyone want to change from the simple and convenient Canadian service to the bureaucratic American system unless they wanted to avoid legitimate provincial charges on wine sales?
Here's something else to seriously consider. Beyond being unnecessary, we think the bill may actually pose a threat to the overall well-being of the Canadian wine industry. Canada's international trade agreements require equal treatment of imported and domestic wines. CALJ's members are frequently reminded of this obligation by federal trade officials, and Canada's trading partners pay close attention to liquor boards, particularly the sale of wine.
I'm sure you all know that wine has been a focus of discussions between Canada and the EU during the current CETA negotiations. In fact, it is our understanding that the EU have asked DFAIT about this bill and its international implications and have not received a response. CALJ's members do a lot to support Canadian wine, supports our international trading partners readily assert are not entirely consistent with our trade obligations.
In the eighties, Canada lost a trade challenge about wine, and the focus of that challenge was differential markups between domestic and imported products. Proponents of Bill C-311 suggest it is consistent with our international trade obligations, as it allows for the direct sale of Canadian and imported wines; however, foreign wines would have to be sold by Canadian retailers and would be subject to provincial or territorial markups, while Canadian wines sold directly by wineries would not.
We're right back at the problem that caused the trade challenge in the eighties regarding differential markups. We believe this would be so large a concern that Canada would immediately face complaints from its trading partners. Even if direct sales from Canadian wineries paid full markups, it appears to us that foreign wineries would have to be allowed to make direct consumer sales as well.
In any trade dispute, Canada would face complaints not only about the new provisions allowed by the bill but also about all of the measures that support Canadian wine. In such a dispute, Canada and Canadian wine have much to lose.
In summary, and on three key messages that I would like to bring to this committee's attention, CALJ believes Bill C-311 is both unnecessary and potentially harmful to the Canadian wine industry.
First, it could create an unfair system whereby some wineries would pay provincial charges and others would not. Second, it could significantly undermine provincial revenues. Third, it could result in trade complaints that would significantly damage the domestic wine industry.
Thank you for allowing us the opportunity to present our views on this matter.