Finance Committee on April 3rd, 2012

[Paul-André Bosc]

No. We import well over a billion dollars into this country—

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But do our exports make up for that import?

[Paul-André Bosc]

No, not even close.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

All right.

[Paul-André Bosc]

It's a small industry, but we're going to be more powerful exporters if we're stronger in our domestic market. There is no exception to that in the wine world. The powerful exporting countries are very strong in their domestic markets.

While it's not an immediate intent, it will be a by-product of this initiative down the road. If we're stronger at home, we're going to be stronger export players. There's no doubt about it.

[Debbie Zimmerman]

If this bill accomplishes what you've said, then it's accomplished what we want to see in the bill, which is that the Canadian market grows.

[Hillary Dawson]

Also, it's complementary. Not only are our wineries trying to sell directly to the consumer, but we are trying to build that profile across Canada in liquor boards. It's a matter of capacity and how able you are in doing business with a liquor board versus doing piecemeal business with consumers.

[The Chair, Conservative, James Rajotte]

Okay. Thank you.

[Hillary Dawson]

Also, they mesh well. One grows the other, just like in Ontario. Wineries grow liquor boards grow wineries grow liquor boards....

[The Chair, Conservative, James Rajotte]

Thank you.

I'm just trying to be fair to members in terms of their time; sorry.

I'll go now to Monsieur Caron, s'il vous plaît.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

My first question is for Mr. Hicken. Thank you very much for joining us. As an economist, I am very interested in the question of incentives being the illogical result of legislation. I was not here for the first part of the discussion, but I would like to hear your opinion as a lawyer.

Could legislation like this actually open the door to a new import industry that could make its money by importing products from areas with the lowest financial standards in order to subsequently distribute those products in the other provinces?

[Mark Hicken]

Generally the answer is no, because the realities of the retail wine market, particularly for this direct-to-consumer channel, are that, first of all, consumers only buy wine for immediate consumption. More than 90% of wine in North America is consumed within 48 hours of purchase. If you look at the retail wine market, too, in British Columbia about 97% of the volume of wine is under $25 a bottle. The reality is that the direct-to-consumer channel will only apply to premium to ultra-premium wines.

So even with respect to imports, you're not really going to see any difference unless prices are hugely different across the country. I mean, nowhere in Canada can you buy wine as cheaply as you can at Costco in the United States. It's just not the reality in Canada.

So I don't really see any significant economic impact, because no jurisdiction in Canada has prices that are significantly lower.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Yet it is quite a major concern to the extent that Ms. Zimmerman is talking about including provisions that require the grapes to be 100% Canadian.

[Mark Hicken]

Yes, absolutely it's a concern, and it's a very legitimate concern. But if you look at the experience in the United States, this particular channel, the direct-to-consumer channel, applies only to more expensive wines, so I do not see any danger in....

As I think somebody already mentioned, the reality is that for the blended wines that sell for whatever it is—$8 or $9 a bottle—in a liquor store, a consumer will not pay $3 or $4 per bottle to have that wine shipped across the country. They'll just go to the store that's near them.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I understand that and I understand that we are talking about high-quality and premium wines. But, in a given jurisdiction, is it possible at the moment to buy a bottle…? I know that Mrs. George mentioned Australia, whose wines are expensive to import, but there are closer places, like California and even Europe, whose wines might be cheaper to import privately, outside the various regulations.

What I am really asking is whether there is anywhere in Canada where you can buy bottles for $80 and resell them for $120 and make enough profit to break even in what we might call a new wine speculation industry.

[Mark Hicken]

The only effect will be if a price was so different from one province to another that it completely overcame the cost of shipping and also the risks and delays of shipping.

I know that already there are B.C. wine consumers who purchase wine in Alberta. They do so illegally right now, and presumably they could do so legally if this bill passed, but the reality is that the price difference would have to be huge for that to have any kind of significant effect. The price differences within Canada are not huge. The price differences from one province to another are not very substantial.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

What is your opinion on the matter, Ms. Zimmerman? We talked about national treatment and the problems that could arise with legislation like this or amendments to the act. You said that you were in agreement with the legislation, but we should come to grips with the question of the actual origin of the grapes, meaning that we should have only wine that is 100% Canadian.

Do you not think that, if an amendment like that is proposed and passed, it will frankly be difficult to be able to change the direction in which the legislation leads?

[The Chair, Conservative, James Rajotte]

You have 30 seconds for a response.

[Debbie Zimmerman]

Thank you.

We could say that there could be potential unintended consequences. However, we have stressed that we would like to see this bill apply only to Canadian. We've heard about the limitations on that because of the WTO issues, and we've been cautioned by our trade specialists, who are raising some issues with us as well. But I'm not a trade specialist. I can only say that we intended to raise the issue today, saying we support the bill. However, as grape growers in Ontario, we don't want our marketplace affected by imports. If it's only the premium brands, that would be great, because then we wouldn't just be shipping a massive amount of imports across the provinces.

I don't know how you control that. It will be up to the trade individuals.

[The Chair, Conservative, James Rajotte]

Merci.

As chair, I'm going to take the next round. I do want to try to address in my five minutes the two issues of “reasonable” and 100% Canadian grapes.

On “reasonable”, the question is for Ms. George.

As you know, we've worked together for many years on many different issues. I have a tremendous amount of respect for you and for your organization. I sympathize with the intent of your amendment in terms of not allowing the provinces to restrict interprovincial trade or the interprovincial movement of wine.

My concern is the same as that of Mr. Albas, though, which is that liquor distribution is a provincial responsibility. It is so under the Constitution, and as the federal government, we have to recognize that. What is your response to that?

[Shirley-Ann George]

Yes. The addition of the word “reasonable” would not remove their ability to set the quantity, so that concern doesn't exist.

Also, on “reasonable”, Mr. Hicken could respond to this—

[The Chair, Conservative, James Rajotte]

But if they can set the quantity with “reasonable”, then why make the change by adding the word “reasonable”?

[Shirley-Ann George]

Because it will force them to actually question their current amount and hopefully increase the amount that exists. If they will have to defend.... The potential exists for them to have to defend what “reasonable” is.

[The Chair, Conservative, James Rajotte]

For instance, if the change were made and Alberta put in restrictions, the Alberta government would have to defend that to me as a citizen of Alberta—if Bill C-311 were passed as currently written.

[Shirley-Ann George]

Mr. Hicken can talk to the point that there is precedent for the word “reasonable” in law. For example, Europe has that in its own wine law. This is something that exists and can be dealt with.