Loonie goes up, Ontario wine goes down and the U.S. gets angry: a NAFTA story
Cross-border shoppers might be applauding the recent strength of the Canadian dollar, but according to an upcoming Bank of Montreal report, that same soaring loonie is actually hurting a major source of domestic foodie pride: Canadian wineries. With the dollar surging as of late, the rising price of wine from Canadian vineyards—half of which are in Ontario—is putting severe pressure on domestic sales, as penny-wise oenophiles look to imported wines from countries like Argentina and Australia, where the wine-producing season is longer and production costs are relatively cheap.
The Globe and Mail reported yesterday:
BMO estimates the Canadian wine industry lays claim to about one-third of the domestic market thanks in large part to a growth spurt that began in the late 1990s. Still, it warns that displacing imports from lower-cost global producers remains a serious challenge going forward.
“The competitiveness of the Canadian industry is going to be reduced,” said Kenrick Jordan, a senior economist with BMO Nesbitt Burns Inc.
With uncertainty on the horizon, we can expect more calls like those from Tim Hudak’s Progressive Conservatives to make VQA wines more readily available. And considering that, as the Globe’s Rita Trichur points out, a litre of VQA wine has an economic impact of $11.50 in Ontario compared to just 67 cents for the same amount of imported wine, the economic health of the wine industry might well become a real election issue. In an interesting twist, the Globe has since updated its story to note that U.S. wineries are warning they might retaliate under NAFTA should Ontario move to increase access to Ontario wines. Is this a trade war brewing, or just saber rattling? We’ll be watching.
• Canada’s wineries feel heat of hot loonie [Globe and Mail]