There were also some pleasant surprises resulting from free trade. Two
Canadian industries that many economists expected to suffer from the
FTA and the NAFTA were winemaking and textiles. Yet both of these
industries prospered as Canadian firms improved quality, productivity,
and benefited from increased access to the huge U.S. market. Applying
Economic Concepts 33-1 discusses the success of the Canadian wine
industry after the tariffs on wine were eliminated.
Applying Economic Concepts 33-1
Canadian Wine: A Free-Trade Success Story
Before the Canada–U.S. FTA was signed in 1989, great fears
were expressed over the fate of the Canadian wine industry,
located mainly in Ontario and British Columbia. It was heavily
tariff protected and, with a few notable exceptions, produced
mainly cheap, low-quality products. Contrary to most people’s
expectations, rather than being decimated, the industry now
produces a wide variety of high-quality products, some of
which win international competitions.
The nature of the pre-FTA protection largely explains the
dramatic turnaround of the Canadian wine industry once the
FTA took effect. First, Canadian wine producers had been
protected by high tariffs on imported wine but were at the
same time required by law to produce wine by using only
domestically grown grapes. The domestic grape growers,