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Free trade alters beer landscape

The Story


"Brewery shutdowns are an inevitable consequence of opening up the Canadian beer market," says CBC reporter Keith Boag in this clip from The National. Labatt's is closing a plant in Waterloo, Ont., and there could be more closures on the way. In preparation for the more competitive beer market that free trade will bring, Molson already shed several plants in 1989. And with the upcoming elimination of interprovincial trade barriers - regulations that restrict beer sales between provinces - the beer market is about to get way more competitive.

Medium: Television
Program: The National
Broadcast Date: July 22, 1992
Guest(s): Peter Clark, Charles Fremes, Hugo Powell
Host: Peter Mansbridge
Reporter: Keith Boag
Duration: 2:26

Did You know?


• The Canada-U.S. Free Trade Agreement came into effect Jan. 1, 1989.
• The beer industry was temporarily exempt from the agreement. The industry lobbied the Mulroney government for this exemption, convincing the government that inefficiencies and the existing interprovincial trade barriers would leave Canadian breweries at a massive disadvantage when flooded with cheaper American beer.

• The United States was quite upset with this exemption and fought to get rid of it as soon as possible. In 1992, GATT (General Agreement on Tariffs and Trade) officials ruled that the beer industry had to open up its trade barriers within the next year.
• The Canadian and provincial governments subsequently signed an agreement to begin removing interprovincial trade barriers on beer. This was expected to help Canadian breweries remain competitive in the face of American competitors.

• Interprovincial trade barriers on beer had been around since the 1890s. This made more sense in the early years when there were a lot of small breweries to protect. But in the late 20th century these restrictions were inhibiting Canadian brewers. Molson and Labatt had to operate numerous plants across the country because most provinces wouldn't allow beer to be sold that wasn't brewed within the province. This was very inefficient. And smaller regional breweries were prevented from selling to other provinces at local prices.

• After the removal of interprovincial barriers, Molson and Labatt continued to close unnecessary plants; now that they didn't have to brew the beer in the province where it was sold, they could have fewer, more efficient, plants. Between 1989 and 2004, Molson went from nine plants (the remainder of what had already been cut from 16 in 1989) to five plants across the country. Labatt went from 12 to eight. While this was good for profitability, the downside, of course, was the loss of jobs.

• Removing trade barriers had a remarkable benefit for regional beers. Much was made of the fact that Moosehead, a popular brew from New Brunswick, had been on sale in the United States since the 1970s but was only made available across Canada in the 1990s. A 1992 Economist article noted: "An absurd consequence [of interprovincial trade barriers] is that one of [Canada's] most popular exports, Moosehead beer from the Maritimes, is available in New York and Los Angeles, but not in Toronto, Montreal or Vancouver."

• After Canada's beer industry entered into free trade, prices were expected to drop. But according to Paul Brent's book Lager Heads: Labatt and Molson Face Off for Canada's Beer Money, that didn't really occur: "For the cost-conscious, a discount category did emerge, but mainstream prices stayed the same."
• Between 1989 and 2004, the price of an average case of 24 bottles has risen by 50 per cent, or $10.40. Approximately 39 per cent is attributable to inflation.


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