Will Canada Be Punished for Banning U.S. Alcohol?

That's the question The Drinks Business asked Tuesday as it reported on the introduction of the Combating Attacks on our National Alcoholic Drinks by Allies (CANADA) Act by Rep. Claudia Tenney (R-NY).

The short answer is – No. At least not in the long run.

The bill calls for a Section 301 investigation by the U.S. Trade Representative. The investigation is to start within 30 days after enactment.

While Section 301 investigations can take up to a year to complete, it's a safe bet the Trump Administration will seek to finish any investigation quickly. USTR is expected to hold public hearings on its investigation into accusations 60 nations dumped products resulting from excess capacity into the U.S. or failing to prohibit importation of goods made with forced labor on April 15. That's about 1-1/2 months since the probe was announced.

Tenney misses the point: Increasing tariffs on some Canadian products won't result in Canada's provinces ending their bans. And it certainly won't win back the lost Canadian business for U.S. wineries, distillers and brewers. We suspect those bans will remain in place until Donald Trump is out of office.

Meanwhile, as the Wine Institute is convening a meeting to help California wineries plan their next steps to reduce their dependence on Canada, the Canadian Government is already moving to reduce its dependence on trade with the U.S.

On July 2, Prime Minister Mark Carne7 announced a $200 billion plan build additional infrastructure in British Columbia to double Canada's non-U.S. exports over the next decade, reducing reliance on the American market while positioning British Columbia as Canada's strategic gateway to Asia's fastest-growing economies.

One area will be exporting natural gas, for which Carney said demand is expected to rise by 60% by 2040. The goal: For Canada to be the preferred supplier of natural gas to fast-growing Asian markets.

Another will be to expand the Port of Vancouver, which moves a billion in trade every day, reaching more than 170 countries. But bottlenecks have developed "and they're worsening," Carney said. "It means we lose some business to the United States. It increases prices here at home. Overall it's holding back our economy." So the government will support $10 billion in major infrastructure upgrades to expand capacity.

In short, the net effect of increasing tariffs on Canada – which is what a Sec. 301 investigation would be all about – isn't going to punish Canada more than it's already being punished. Rather, it will further spur Canadian leaders to seek ways to make their nation less dependent on the U.S. That's not punishing Canada. It's punishing the U.S.