Dispute Settlement.
Finally, the dispute-settlement mechanism seems to have worked well. A
large number of disputes have arisen and have been referred to panels.
Panel members have usually reacted as professionals rather than as
nationals. Most cases have been decided on their merits; allegations that
governments’ liquor monopolies levied in order to protect local
producers.
When the tariff was removed under the FTA, the incentives were
to move up-market, producing much more value per hectare of
land. Fortunately, much of the Canadian wine-growing land in
the Okanagan Valley in B.C. and the Niagara Peninsula in
Ontario is well suited for growing the grapes required for good
wines. Within a very few years, and with some government
assistance to grape growers to make the transition from low-
quality to high-quality grapes, Canadian wines were competing
effectively with imported products in the medium-quality range.
More recently, Canadian wineries have also started producing
wines of higher quality.
The success of the wine industry is a good example of how
tariffs can distort incentives and push an industry into a
structure that makes it dependent on the tariff. Looking at the
pre-FTA industry, very few people suspected that it would be
able to survive, let alone become a world-class industry.