GATT Rulings, Excise Reforms and Trade Patterns: The Alcoholic Beverages Industry in Canada

GATT Rulings, Excise Reforms and Trade Patterns: The Alcoholic Beverages Industry in Canada

This paper uses a disaggregated micro-model of the alcoholic beverage sector to investigate reforms of discriminatory pricing practices attributable to differential provincial markups and federal excise levies in Canada. The reform of markups has been demanded in a recent GATT ruling. We find that major changes in the structure of this industry could follow and that both provincial and federal government tax revenues respond to measures initiated by the other level of government. A cooperative tax reform strategy, which leaves each level of government with unchanged revenues, is then modeled. This entails major changes in trade patterns, relative outputs and producer revenues.