California wine group seeks Obama administration's help in fighting three B.C. liquor policy changes

A B.C. lawyer questions whether a trade complaint will be filed given its cost and complexity

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      A Vancouver corporate lawyer says California wine producers will face a “complicated, long, expensive process” if they launch a trade complaint against the B.C. government’s liquor-policy reforms.

      Albert Hudec, an expert on the B.C. government’s liquor policies, made the comment after the California-based Wine Institute wrote a letter to Premier Christy Clark claiming that some government proposals must be amended or scrapped to conform to international trade deals.

      “British Columbia gives a variety of preferences to the domestic B.C. product, right?” Hudec told the Georgia Straight by phone. “Those preferences are severely limited by the various trade agreements: NAFTA and the new EU trade agreement, for example. So receipt of a letter like this is concerning. The commencement of a trade action would have a serious detrimental impact on the domestic industry.”

      The Wine Institute advocates on behalf of 1,000 California wineries and businesses, according to its January 21 letter to the premier.

      The signatory, vice president and international-trade counsel Tom LaFaille, told the Straight by phone he's reached out to wine-industry representatives in Oregon and Washington state as well as to Wine America about B.C.'s plans.

      "We've been in close contact with the Obama administration and U.S. trade representatives on this," LaFaille added. "They're looking into it and are still in the information-gathering stage, and I don't know what course of action they're going to take. But we work closely on a regular basis on trade barriers around the world for them. If it's a priority for the U.S. wine industry, then it becomes a priority for the administration. It's very supportive of U.S. exports."

      His letter to the premier cited three liquor reforms that would have to be revoked or modified to give California producers equal access in grocery stores.

      Specifically, he objected to Justice Minister Suzanne Anton’s announcement on December 19 that grocery stores can sell 100-percent-B.C. wine on designated shelves starting April 1.

      LaFaille also stated his opposition to Anton’s announcement on the same day that the government will issue a limited number of new liquor licences for the sale of only B.C. wines on grocery shelves.

      As well, LaFaille criticized the government’s plan to allow VQA stores and independent wine stores to sell their licences to grocery stores less than a kilometre from other liquor stores.

      “Since these new opportunities are not extended to imported wines, they violate Canada’s international trade obligations including NAFTA, GATT and the EU-Canada Agreement on wine sales,” LaFaille wrote.

      A trade expert says California’s Wine Institute could be in a tough fight if it invokes a free-trade agreement to challenge B.C.’s new liquor regulations.

      LaFaille sounded more conciliatory on the phone, telling the Straight that his organization is "greatly appreciative of the British Columbia government modernizing its wine laws". However, he said that the Wine Institute has strong feelings about these three measures.

      "We think it can be fixed pretty easily as they move forward in implementation," LaFaille stated.

      He revealed that the premier has informed him that Anton will be following up on his letter.

      "We're just asking for the same options and availability to British Columbia consumers that the British Columbia wineries would have."

      LaFaille said that if the policy isn't changed, the Wine Institute will look at all options. But he first wants to see how the government proceeds on April 1.

      Meanwhile, Hudec said that an industry association like the Wine Institute can file a complaint under NAFTA, which provides for free trade in wine and spirits in Chapter 8.

      Under the dispute-resolution section in Chapter 11, companies and associations can file complaints against governments.

      However, Hudec added that he does not think that the province’s plan to allow the sale of wine in grocery stores would impose “sufficient injury on the California exporters that they would actually go to the expense of filing a trade action”, though it’s a “troublesome possibility”.

      “That said, though, the province is giving our B.C. industry significant preferences, and as this becomes more widely known and understood, it will be kept on the agenda by the Americans and Europeans as a significant trade irritant,” Hudec stated. “The provisions of the European Community free-trade agreement are very similar, so they would have the same legal rights as the California producers.”

      Anton did not make herself available for an interview with the Georgia Straight.

      The Canadian Centre for Policy Alternatives recently released a study addressing investor-state disputes under NAFTA, noting that Canada has paid out $172 million in damages arising from the 35 complaints under Chapter 11.

      When contacted by the Straight, the author of the report, Scott Sinclair, stated that there appears to be “little basis for an investor-state dispute” under NAFTA. That's because while the B.C. policy could hamper U.S. exports, it does not undermine U.S. investments in B.C.

      However, Sinclair suggested that the U.S. government could launch a complaint against Canada on behalf of the industry either under NAFTA or at the World Trade Organization.

      With files from Carlito Pablo.