Beer Sales Go Flat as U.S., Canada Push Trade Dispute : Brewing: Each country has hampered the other with duties and sanctions. And a quick resolution is unlikely.
American brewers are pressing the Clinton Administration to fire a fresh round in a beer trade dispute with Canada that is costing brewers on both sides of the border millions of dollars each month.
The United States slapped a duty on beer produced in Ontario last summer. Canada swung back with sanctions on the Stroh Brewery Co. of Detroit and G. Heileman Brewing Co. of La Crosse, Wis., which had lobbied for a tough U.S. stance.
“We have urged the U.S. Trade Representative’s office to increase the duty and extend it to other provinces,” said Randy Smith, a Heileman vice president. “I think it’s only because of the transition of power in Washington that there hasn’t been a quick reaction.”
Further wrangling in the beer trade dispute between Canada and the United States is sure to worsen already sour trade relations between the two countries, which signed a free trade agreement in 1989.
Industry sources said the next move will come from the United States, where brewers claim their brands are unfairly locked out of Canada’s lucrative market. That bodes poorly for any solution before the summer beer-drinking season, when revenues swell.
“The Canadian industry is resigned to the fact that it is probably not going to be resolved until the end of the calendar year 1993,” said Bill Chisolm, analyst at Levesque, Beaubien Geoffrion Inc. in Toronto.
The feud, which began in 1990, erupted last summer when a tentative deal to open Canada’s beer market to the United States collapsed, prompting a tit-for-tat tariff war between Canada’s largest province and U.S. trade officials.
“I think it’s fair to say that unless we get some movement from the U.S. side to reopen discussions fairly soon, it might not get resolved before this summer,” said Barry Joslin, a vice president of Molson Cos. Ltd., Canada largest brewer.
In June, 1992, Washington slapped a 50% duty on Ontario-produced beer following complaints by Stroh and G. Heileman about unfair pricing and an environmental levy by the Ontario government.
Canada retaliated with a 50% levy on beer shipments by Stroh and Heileman, effectively locking them out of Canada.
An official of the U.S. Trade Representative’s office would only say that the Clinton Administration has not yet formed a policy on beer trade with Canada and “it may take a while” before a public statement on the issue is released.
Smith said Heileman’s beer trade has worsened in recent months as Canadians raise new barriers and strengthen previous restrictions. Heileman’s beer exports to Canada are down 50% from last year.
“The best way to get everyone to talk seriously is to in essence cut off trade completely and everyone will get to the table real fast,” Smith said.
Canadian brewers, meanwhile, say they have been more than fair to the Americans after proposing arbitration under the General Agreement on Tariffs and Trade, the Geneva-based world trade body, in late 1992.
Canadian trade officials said Washington has flatly rejected that offer.
Molson said it is losing about $1.6 million (U.S.) each month from the dispute, while Labatt losses run about $790,000, dire signs after a record drop in beer sales last summer.
Dave Murphy, an official with Canada’s External Affairs and International Trade Department, said it has received no new offers from Washington after Canada’s offer of arbitration.
“It may be some time before we get into the issue again,” he said.
While both sides are ensnarled in the tariff feud, beer drinkers in both countries end up paying more for each other’s beer. Stroh said a case of 24 beers which it sells wholesale to Ontario for $4.65 ends up costing consumers $28.
Even Miller Brewing’s recent purchase of 20% stake in Molson’s brewery division is affected, since the tariffs keep Molson’s beer prices high in the U.S. market.