Canada-Europe trade anxiety has me thinking wine, ’88 vintage

Why the Canadian cheese industry will survive
Pinot Noir grapes just before they are harvested 09 October 2006 at the Byron Vineyard and Winery in Santa Maria, California. Cooler weather earlier this year delayed the ripening of grapes at many Central Coast vineyards. (Photo credit should read ROBYN BECK/AFP/GettyImages)

It’s the duty of a journalist to report sometimes on shattered dreams and social disruption. Just this morning, I had occasion to look back at a newspaper story in this grim vein, one I wrote in the spring of 1988. It reported on honest farmers about to lose their livelihoods—“wrenching restructuring,” I called it.

I painted a picture of thousands of acres of grape vines in Ontario’s Niagara region and B.C.’s Okanagan Valley about to be ploughed under, hundreds of growers wondering what they would do next, all because the new Canada-U.S. trade deal, along with international trade agreements, would bring a flood of foreign wine. “I’m finished,” I quoted one tiller of the soil saying.

This past summer, more than a quarter-century after I wrote that somber story, I was lucky enough to find myself, on a sunny July afternoon, quaffing a nice Cave Spring riesling on a patio in the heart of Niagara wine country. A few weeks later, on another bright day in August, I sipped a Nichol Vineyard cab franc while gazing out over Lake Okanagan from the winery’s terrace.

From those vantage points (life is good) the devastation predicted by representatives of both regions’ wine industries back in ‘88 was not immediately evident. It’s true a lot of vines were sacrificed: The crappy ones had to be replaced with top hybrids to provide fruit for the wine boom that was prompted in no small part by the pressure to compete that came with free trade.

So you’ll excuse me if I’m not rushing to the defence of the Canadian cheese industry on this week’s news that something tolerably close to a deal has been reached in the drawn-out Canada-European Union trade negotiations. There’s just not much oomph left in the arguments for protectionism (with the exception, I would argue, of the very particular case of Canadian cultural industries).

This is not to say, of course, that companies won’t have to work hard to adjust to fewer restrictions on European products coming into Canada, or take some big risks to try to grasp the opportunities presented by fewer barriers to our goods and services cracking the European market. Looked at more closely, the story of Canadian wine has lessons to teach about the unpredictable ways things will surely work out.

Here’s something worth considering. It’s actually incorrect to say that all those pessimistic assumptions made by the Canadian wine industry back in the heat of 1988 trade debate turned out to be wrong. In fact, in some limited respects, those who feared Canadian wine makers would be outgunned were right.

The anti-free-trade camp told us that Canadian wines would loose market share. It has come to pass. Canadian wineries saw their share of the domestic market drop, between 1987 and 2012, from 49 per cent to 30 per cent by volume. In other words, foreign wine’s share shot up to 70 per cent from 51 per cent. And yet, over the same period, the number of wineries in B.C. exploded to 206 from just 13, and in Ontario to 142 from the 18 that were turning out mostly plonk at the time the Canada-U.S. trade accord was finalized.

How can Canada’s wine sector have expanded so much while loosing market share? A major reason is that it commands a smaller percentage of a much larger pie. Canadian wine sales last year totaled 135 million litres, up from 96 million litres as recently as 2000; imported wine sold here climbed to 308 million litres in 2012, up from 163 million litres in 2000. (Thanks to the Canadian Vintners Association for all these stats.)

As well, Canadian wine has migrated to the higher-priced section of the liquor store. Evidence of quality: exports climbed to respectable 26 million litres last year, up from a mere 3.4-million-litre trickle in 1988. Harder to precisely quantify are the clever ways wineries have turned themselves into high-end tourist attractions, a major development hardly conceivable back in 1988, when Canadian wine was not exactly a prestige draw.

Obviously the wine experience won’t be replicated in every sector touched by the Canada-EU agreement. But it’s worth keeping in mind when we hear Prime Minister Stephen Harper and European Commission President Jose Manuel Barroso telling us from Brussels that the deal is win-win. That sounds like the sort of politician’s bromide best greeted with skepticism. How can Europe’s companies and Canada’s simultaneously do better? But look at how freer trade both brought more foreign wine to Canadian consumers and spurred the domestic industry to profitable innovation and diversification.

It could work that way for cheese, for seafood, or for any of a bunch of other industries we are less immediately familiar with as shoppers. Federal officials talk, to pick just one specialized example, about the potential in Europe for Canadian medical devices. I doubt they really know—that sounds like a pretty sophisticated business. Or they tout the upside for Canadian service firms bidding freely on European government contracts, down to the local level. Could be good. Or frustrating. Check back in a decade or so.

Perhaps we’ll speculate about it all over a bite at my place this weekend. I’ll crack one of the bottles I brought back from Jordan Village, Ont., or Naramata, B.C. Have to pick up some cheese on the way home, though— maybe, if a I can find it, a block of the Eastern Ontario “Lankaaster” recently judged, in a prestigious contest in England, the world’s best.