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An analysis of the effect of the Free Trade Agreement on profitability in the British Columbia wine industry Ross, Kimberly J.


The 1988 Canada - United States Free Trade Agreement and GATT decision radically altered the trading regime between the two countries. Historically wellinsulated from a competitive environment, there was concern that the British Columbia wine industry would not be able to compete under the new trading rules outlined within the Free Trade Agreement and resulting from the GATT decision that once imported, all products were to be afforded national treatment. This study was undertaken to determine whether or not the industry is better off under the Free Trade Agreement with respect to profits and the ability to compete head on with imports. A benchmark situation covering producer organization/market structure, prices, production and profitability portrays an industry prior to the Free Trade Agreement that is profitable, however, the profitability appears to be based on the fact that the B.C. government was protecting the industry against foreign wine producers. Section 4.0 of the study outlines the trade related factors; policy and procedural changes. Details of industry policy, the FTA, GATT ruling, and interprovincial barriers are discussed with a graphical analysis of the impact of B.C.'s domestic policies on the international market. Section 5.0 studies the industry changes as a result of Section 4.0. Changes in pricing, production (domestic and imported), industry sales and revenue, profitability and marketing strategies lead to the conclusions presented in Section 6.0. The conclusions of the analysis support the hypothesis that the B.C. wine industry is at least as profitable as it was prior to the policy changes and its growth suggests that the most profitable segments of the industry are the premium estate and farm winery segments.

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