WTO wine trade challenge: implications

On January 18, 2017, in a surprise move, the Obama Administration launched a trade challenge (USTR press release) with the World Trade Organisation (WTO) against Canada in respect of BC-only wine on British Columbia grocery store shelves – with all of two days left in its mandate.

As of February 7, 2017, New Zealand and the European Union had given notice to the WTO that they too would join consultations on the matter. There have been rumblings for some time that Canada’s major trading partners in wine objected to BC-only wine on grocery shelves – among other issues – as not being WTO-compliant. The seven countries (counting the EU as one entity) who wrote a letter to the BC government in April 2016 represent about 95% of the wines imported to Canada. (See previous post on underlying principles of a potential challenge.)

It was surprising that the US would launch a challenge in the first place – not only due to the imminent change in the Administration, but that the cost-benefit assessment of bringing a complex, probably expensive trade action against Canada seemed to argue against proceeding. However, now that it has, and with the recent request by the EU and New Zealand to join consultation on the US challenge, a few things are becoming clear.

First, this development takes the seriousness with which Canada’s trading partners take the issue to a different level. BC cannot claim that it is merely American “saber-rattling”: clearly other trading partners are equally exercised about the trade compliance of BC-only wine on grocery shelves.

Second, it must not only be about BC. With a population of approximately 3.7 million people of legal drinking age, BC is too small a fish to pursue. This suggests that other provinces are in play as well. Ontario has embarked on wine in grocery, albeit with a different plan, and a specified “off-ramp” of three years for those stores carrying Ontario-only wine in grocery stores. This, together with elements of Quebec’s model, may be on the minds of the countries who are consulting on Canada’s trade compliance under WTO rules.

Third, and of the greatest concern for the BC wine industry generally, the addition of the EU and New Zealand – and possibly more – increases the likelihood that the consultations (the first formal phase of the WTO challenge process) will result in additional issues being brought forward. For example, additional items up for scrutiny include the standing of pre-existing retail licenses, the auction process, and even direct delivery from BC wineries to domestic consumers.

The next steps under the WTO process are that the country bringing the challenge and the target country have a minimum of 60 days of consultation (which may be joined by third parties, as we are seeing) to try to resolve the dispute bilaterally. After 60 days, or March 19, 2017, the country bringing the challenge may then request adjudication by a WTO panel.

It is to be hoped that consultation will result in a negotiated solution that averts the arbitrary decision by a WTO panel, one that affirms the principles of equality of opportunity and no less favourable treatment, while minimising the harm to the BC wine industry that could come through findings on an expanded scope of the original complaint. Lovers of BC wine – and there are many, me included – do not wish to see the BC wine industry crippled. Indeed, it is mature enough to stand on its own feet in BC’s retail environment (provided retail in BC is itself on a healthy footing). But for lovers of wine generally, the constriction of consumer choice implied by the move to BC-only wine on grocery shelves does not sit well, and should be examined.

I do love BC wine, but I don’t love facing discrimination against my tastes in, and access to, wines from around the world.