however, produced varieties of grapes not conducive to the
production of high-quality wines, and with a captive domestic
market, they had little incentive to change their behaviour.
Thus, Canadian wine producers concentrated their efforts on
“hiding” the attributes of poor-quality grapes rather than
enhancing the attributes of high-quality grapes. The result was
low-quality wine.
The second important aspect of the protection was that the
high Canadian tariff was levied on a per unit rather than on an
ad valorem basis. For example, the tariff was expressed as so
many dollars per litre rather than as a specific percentage of
the price. Charging a tariff by the litre gave most protection to
the low-quality wines with low value per litre. The higher the
per-litre value of the wine, the lower the percentage tariff
protection. For example, a $5-per-litre tariff would have the
following effects. A low-quality imported wine valued at $5 per
litre would have its price raised to $10, a 100 percent increase
in price, whereas a higher-quality imported wine valued at $25
per litre would have its price increased to $30, only a 20
percent increase in price.
Responding to these incentives, the Canadian industry
concentrated on producing low-quality wines. The market for
these wines was protected by the nearly prohibitive tariffs on
competing low-quality imports and by the high prices charged
for high-quality imports. In addition, protection was provided
by many hidden charges that the various provincial