Thank you, Mr. Chairman.
Spirits Canada is the only national trade association that represents the interests of Canadian spirits manufacturers and marketers. On behalf of the Canadian distilled spirits industry, we appreciate this opportunity to appear before you today to share our perspectives on the ongoing negotiations between Canada and South Korea to reach a potential free trade agreement.
Let me begin my comments with a strong endorsement on behalf of our member companies for an FTA between Canada and Korea. Korea is an important beverage alcohol market in its own right, and in addition may also be of strategic interest in terms of acting as a form of gateway or springboard for the entire region.
By volume, total spirits consumption in Korea is approximately the same as in the United States, or about ten times the size of the entire Canadian market. The leading local beverage alcohol products in Korea are beer and a locally made spirit called soju, but international whiskey brands also have a significant presence.
At its very core the Canadian spirits industry is comprised of primary manufacturers. Our members buy agricultural products like rye, barley, and corn predominantly from local farmers here in Canada and transform these grains into premium consumer goods that are enjoyed by discerning adult consumers around the world.
It sounds simple enough, but in reality the experience, technology, investment, knowledge, and dedication behind this part-science, part-art, part-magic creation is truly something to behold.
Our signature product is Canadian whiskey. Canada is fortunate to be one of only four regions in the world with an internationally recognized premium whiskey category. Our main competitors in terms of the international trade of whiskey are the United States, with American bourbon, and Ireland and Scotland, each with their own distinctive whiskey styles.
By practice and by law, all Canadian whiskey must be distilled and matured in Canada, which creates important local manufacturing, employment, and other significant economic spinoff activities.
The Canadian spirits industry has important manufacturing, maturation, and/or bottling facilities across the country, including Lethbridge, Hay River, and Calgary in Alberta; Gimli, Manitoba; Amherstburg, Brampton, Grimsby, and Windsor in Ontario; and Montreal, Dorval, and Valleyfield in Quebec.
The Canadian spirits industry is an international trade focused sector, with 70% of our overall production and 80% of Canadian whiskey production actually shipped and enjoyed outside of Canada.
The spirits business is also a brand business. Consumers, and yourselves, I'm sure, would be most familiar with us through our companies' world-renowned and respected brands like Crown Royal, Canadian Club, Canadian Mist, Gibson's, Schenley, and Wisers. These Canadian whiskey brands are icons for Canada and for a premium Canadian quality all over the world.
I began my comments with an endorsement of a free trade agreement with Korea. Let me now identify the key elements of any FTA that are a prerequisite to our support: one, recognition and protection of Canadian whiskey and Canadian rye whiskey as geographic indications and/or distinctive products solely of Canada; and two, duty-free access to Korea for Canadian whiskies immediately upon ratification of the agreement.
Korea currently imposes a 20% customs import tariff on Canadian spirits, limiting the ability of Canadian whiskey brands to compete effectively for their fair share of the consumer adult beverage market. In contrast, Canada eliminated its import duties on all whiskies and other brown spirits as part of the World Trade Organizations' Uruguay Round a number of years ago. I should also point out that American whiskies received similar concessions in the recently concluded U.S.-Korea FTA. Canadian whiskies need equivalent market access opportunities to ensure that they can compete effectively with U.S.-sourced whiskies in Korea.
We would also like to take this opportunity to extend the industry's thanks and appreciation to Canadian trade officials within the Department of Foreign Affairs and International Trade with the Canadian embassies, missions, and consulates around the world, as well as officials with the Department of Agriculture and Agri-Food and the Department of Finance in their ongoing diligent efforts to open up new export market opportunities through FTA negotiations such as those undertaken with Peru, Colombia, and the Caribbean community.
Thank you for your attention.
We'd be pleased to answer any questions.