Alberta is launching a trade challenge against Ontario over liquor policies that allegedly discriminate against Alberta's small brewers.

"It doesn't make sense that it's easier to sell Alberta beer in Tokyo than in Toronto," Alberta Economic Development and Trade Minister Deron Bilous said Monday.

"We are asking for equitable market access in Ontario so Alberta's liquor producers can benefit the same way Ontario's producers do by selling their product in Alberta."

The action is under the Canadian Free Trade Agreement. It comes after Ontario-based Steam Whistle Brewing and Saskatchewan-based Great Western Brewing Company successfully challenged Alberta in court over the graduated markup schemes for small brewers first announced in 2015 and rolled back in 2016.

Alberta contends its open liquor market makes it harder for the province's small craft brewers to compete against larger out-of-province breweries, so it provided them subsidies to help them compete.

Alberta is targeting Ontario because that province has the largest liquor market in Canada. Bilous said Ontario's import policies are the most restrictive.

The Alberta Gaming Liquor and Cannabis commission (AGLC) lists 745 Ontario products among the 3,700 available in Alberta liquor stores. By contrast, the Liquor Control Board of Ontario (LCBO) lists only 20 Alberta products.

Bilous said he has talked to other provincial trade ministers about switching to an open liquor market like Alberta but says they are reluctant to change anything.

Ontario surprised by challenge

Neil Herbst, co-owner of Alley Kat Brewing and chairman of the Alberta Small Brewers Association, supports Alberta's decision to lay a trade complaint. He said his members have tried with little success to get their products on the shelves of liquor stores in other provinces.

Herbst said other provinces, particularly Ontario, apply higher storage and receiving fees to out-of-province wine, beer and liquor.

In one case, the LCBO charged Alley Kat $400 in lab fees to assess the safety of $1,600 worth of beer, even though breweries across Canada follow the same federal food safety guidelines.

"Any time you think you can get in or think you have some insight can get into the province, something new is applied," he said.

Alberta Economic Development and Trade Minister Deron Bilous announced the trade complaint against Ontario Monday at Edmonton brewery Blind Enthusiasm. (CBC )

When asked for comment by CBC News, the Ontario government said in a statement it was surprised by the Alberta government's trade challenge.

"Just last week, I sat across from representatives from the government of Alberta and not once did they mention this to me," Economic Development, Job Creation and Trade Minister Todd Smith said in the statement.

The statement said the government of Ontario is committed to reducing interprovincial trade barriers, as was made clear in the government's fall economic statement. "We hope Alberta will join us in our work to reduce interprovincial trade barriers and red tape," the statement added.

Alberta United Conservative Party leader Jason Kenney tweeted his support for the trade challenge, but a spokesperson for the party questioned the government's timing.

"While we welcome action to address unfair barriers being imposed by Ontario on Alberta products, it is strange that the NDP is only now addressing this after over three and a half years in power," said Christine Myatt in an emailed statement.​ "It's notable that the minister also announced this trade challenge at the same time as he abandoned his illegal subsidy that has cost Alberta millions of dollars in fines.

"It's also strange" to see the Alberta government "once again fixated on beer policy during the midst of a major economic crisis," the UCP statement said.

Small brewers to pay lower markups

Also Monday, the government said it was cancelling the Alberta Small Brewers Development Program on Dec. 15 to comply with a trade ruling in June that found it contravened the Agreement on Internal Trade.

In its place, Alberta will impose a graduated markup ranging from 10 cents to 60 cents a litre for brewers that produce under 50,000 hectolitres a year. Brewers will be able to apply for a lower markup based on their production, regardless of where they are from.

Finance Minister Joe Ceci, who is responsible for the AGLC, said the development program has grown the province's fledgling craft brewing industry. But it has run afoul of inter-provincial trade agreements.

In June, a three-person panel ruled that the program violated the provincial trade agreement. Alberta was given six months to amend or repeal the program. The ruling was the result of a complaint lodged two years ago by Calgary beer importer Artisan Ales Consulting Ltd.

In October 2015, the Alberta government introduced a lower markup for beers produced by smaller brewers in Alberta, Saskatchewan and British Columbia.

Economic Development and Trade Minister Deron Bilous and Blind Enthusiasm Brewing's Greg Zeschuk say Ontario's liquor policies are unfair to Albertan craft breweries 0:44

The province rolled back the policy in August 2016, instituting a markup of $1.25 a litre for all beer. At the same time, it introduced a rebate for Alberta craft brewers, known as the Alberta Small Brewers Development program, to help the craft beer industry in the province.



Artisan Ales alleged both measures put the company at a disadvantage and caused a significant drop in sales.

The government says there are 137 craft breweries and liquor distilleries in Alberta.

Herbst said there were only 10 members when ASBA was established in 2013. Alberta now has 99 small brewers.