Brigid Simmonds, chief executive of the British Beer & Pub Association, told a committee of MPs that the system under which the larger pubco brewers sold beer to pubs was "great".
Campaigners have warned that the tied system is leading to a growing number of pubs having to close because landlords could not shop around for cheaper supplies.
But Ms Simmonds told the Business Select Committee that under the system companies invested tens of millions of pounds in pubs to make improvements and try to attract more customers.
"It would be throwing the baby out with the bath water if we stopped the tied system. It is a great system."
People could run their own pub by investing just £30,000 under the tied arrangements, she said.
Ms Simmonds acknowledged that people were not going to pubs as often as they used to and were drinking more at home because of the economic climate.
Steve Kemp, political officer of the GMB union, commented: "This stonewalling by the BBPA on the serious problems in the pub trade shows what our members are up against."
The Government is consulting on setting up a statutory code for pub companies and tenants.