U.S. asks World Trade Organization to create panel to rule on B.C. wine sales in grocery stores

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      One of former B.C. premier Christy Clark's wine reforms is under fire from the Trump administration.

      Today, U.S. Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue announced that their government has asked the World Trade Organization to establish a panel to resolve a dispute over the sale of wine in B.C. grocery stores.

      The former B.C. Liberal government allowed B.C. wines to be sold on the shelves if the stores had VQA retail licences.

      But imported wine could only be sold in grocery stores in a store-within-a-store that has a separate cash register.

      “Canada is an important market for U.S. winemakers,” Lighthizer said. “Discriminatory regulations implemented by British Columbia are unfairly keeping U.S. wine off of grocery store shelves, and that is unacceptable.

      "Canada and all Canadian provinces, including B.C., must play by the rules," he continued. "The Trump Administration will continue to hold our trading partners accountable by vigorously enforcing U.S. rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO.”

      Canada, and not the B.C. government, is the respondent, so it will be up to the Trudeau government to defend the provincial policy.

      That's because WTO disputes are between member nations and not between a country or a corporation and a city or a province.

      Attorney general and the minister responsible for the Liquor Distribution Branch, David Eby, has to deal with the consequences of U.S. and Australian trade complaints to the World Trade Organization.

      Major concerns were voiced years ago

      The first whiff of trouble came in January 2015 when California wine producers claimed that B.C.'s liquor reforms violated NAFTA, the General Agreement on Tariffs and Trade, and the trade deal between Canada and the European Union.

      The B.C. Wine Institute, which represents domestic wineries, adamantly rejected that claim, saying the California wine industry representatives were "misinformed".

      But in April 2015 B.C. Green Leader Andrew Weaver also raised some of the same concerns as the California wine producers. He wrote a blog post suggesting the Special Wine Store Licence Auction Act violated Annex 312 of the North American Free Trade Agreement.

      Then in May of 2016, Ottawa-based diplomats representing the U.S., European Union, and five other countries (Australia, New Zealand, Mexico, Argentina, and Chile) signed a joint letter to then premier Clark.

      They objected to her government allowing B.C. wines to circumvent the store-within-a-store regulation. Collectively, these countries and the EU are home to more than a billion people.

      At the time, then Opposition liquor policy critic David Eby told the Straight that the B.C. Liberals likely knew that their actions would trigger trade complaints.

      Eby also predicted in 2016 that this would lead to B.C. backing down and  allowing imported wines on grocery store shelves without having to conform to the store-within-a-store regulation.

      "I don't think that either the federal or provincial governments would want a dispute over liquor policy to get in the way of trade in forestry products between Canada and the United States," Eby said at the time. "So I can see that [wine in grocery stores] would be an easy sacrifice for them to make and say 'now we can get something on softwood lumber'."

      After the 2017 provincial election, Eby became B.C.'s attorney general and is the minister responsible the Liquor Distribution Branch.

      He's made no public comment on the Trump administration's recent action.

      Save-On Foods has a booming wine business

      Ultimately, it's up to Eby if he wants to reverse the policy to make the trade complaint go away.

      However, this would be difficult, given that grocery corporations have already bid on VQA licences and won the legal right to sell B.C. wines on store shelves.

      Save-On-Foods, which is part of the Jim Pattison Group, has opened departments selling wine at 18 B.C. grocery stores. It could file a legal claim against the government should these licences be suddenly extinguished as a result of the U.S. complaint.

      The first formal trade action against this measure occurred in January 2017 just before the Obama administration left office.

      In response to pressure from U.S. winemakers, then U.S. Representative Michael Froman launched a complaint at the World Trade Organization against Canada.

      The Trump administration filed a second U.S. complaint against Canada on this matter in September 2017.

      The following month, Argentina, Australia, New Zealand, and the European Union requested to join the consultations with the WTO.

      Wines from New Zealand, Australia, and Argentina can only be sold in a store-within-a-store in B.C. grocery retail outlets.

      Australians also filed a complaint

      The U.S. isn't the only country that's pushing hard on this matter.

      In January 2018, Australia initiated a complaint at the WTO against Canada regarding the sale of wine in B.C., Ontario, Quebec, and Nova Scotia.

      "Australia claims that a range of distribution, licensing and sales measures such as product mark-ups, market access and listing policies, as well as duties and taxes on wine applied at the federal and provincial level, appear to discriminate against imported wine, in violation of the WTO's General Agreement on Tariffs and Trade (GATT) 1994," a bulletin states on the WTO website.

      In its complaint, the Australian government alleged that granting B.C. wines exclusive access to a "retail channel of selling wine on grocery store shelves" appears to "discriminate on their face against imported wines".

      "Imported wine is subject to a wide range of mark-ups, fees and taxes, while BC wines are permitted to 'direct deliver' wine to customers," the Australians also alleged. "This system provides a substantial benefit to BC wines."

      Complicating matters is a recent Supreme Court of Canada ruling regarding provincial regulations over the sale of liquor.

      It upheld New Brunswick's right to restrict liquor imports from other provinces as long as the regulatory scheme had a legitimate public-policy goal: i.e., "public supervision of the production, movement, sale, and use of alcohol" within the province.

      The Supreme Court of Canada does not hold sway over WTO dispute-settlement panels, which could create a conundrum for Eby should its ruling run contrary to the province's objectives in supervising alcohol consumption.