British Columbia’s wine industry is bracing for new competition on grocery-store shelves under the proposed deal to replace NAFTA, ending a policy that had prompted trade complaints from the United States and other major wine-producing countries.
The province created new rules three years ago to allow grocery stores to sell wine, but only from B.C. wineries.
Under the proposed United States-Mexico-Canada Agreement (USMCA), Canada has agreed that the province must eliminate the protectionist policy by Nov. 1, 2019. B.C. quickly confirmed it would abide by that provision of the agreement.
“It’s not great news," said Miles Prodan, president and chief executive officer of the B.C. Wine Institute. “Those licences, since we were able to move them onto grocery shelves, have been very good for the wine industry. It allowed for increased exposure. Having to make way for some import wine will mean less room for B.C. wine.”
Allowing wine in grocery stores was billed as a breakthrough for B.C. consumers, who had not previously been able to purchase liquor along with their groceries. But by limiting those sales to BC VQA wines (Vintners Quality Alliance), the province opened itself up to a series of international trade disputes.
Bruce Ralston, the B.C. minister responsible for trade, said Monday his government will move to comply with the agreement.
“It will end exclusivity of B.C. wines,” Mr. Ralston said.
The United States launched a complaint to the World Trade Organization in 2017, claiming that the exclusive sale of B.C. wines in grocery stores was harmful to its California wine industry. Australia, New Zealand, Chile, Argentina and the European Union have all filed similar complaints.
Mr. Ralston said he expects the changes will also open up sales of wines from those other wine-producing countries that had challenged the policy. The side letter to the USMCA agreement states that "B.C. shall eliminate the measures which allow only B.C. wine to be sold on regular grocery store shelves while imported wine may be sold in grocery stores only through a so-called ‘store within a store,’ and such contested measures shall not be replicated.”
There are 28 grocery stores in the province that currently sell wine under the B.C.-only rules that will now be able to offer wine from other countries. Those 28 stores sell less than 1 per cent of all wine sales, by volume, in the province. Mr. Prodan said he believes the trade complaints are based on a “misconception” about limits on the sale of wine imports in B.C., noting that most stores do offer wine from other jurisdictions.
"We’re going to have to give up shelf space to import wines that have access in all 1,100 channels [for liquor sales] across this province.”
The sale of B.C.-only wine on the shelves in groceries stores was approved three years ago, as part of an overhaul of the province’s liquor laws. Mr. Ralston said it was clear at the time that that the policy was offside with international trade law – he said the then-Liberal provincial government ignored legal advice that restricting sales to B.C. wines would draw fire from other wine-producing jurisdictions.
“Everyone knew it was a problem,” he said. However, the BC NDP government, which has been in power now for 15 months, also allowed the trade dispute to linger. Last May, Mr. Ralston stood by the policy, saying it “certainly is good for B.C. wine industry and we support the B.C. wine industry."
On Monday, he said his government did not act earlier because Canada was in the midst of trade negotiations.
The B.C. Wine Institute says the industry is worth $2.8-billion to the economy, based on 2015 figures.
Justine Hunter