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British Columbia U.S. wine institute says B.C.'s proposed liquor law changes may violate NAFTA

Pierre Ruiz, manager of Liberty Wine Merchants on Granville Island, inspects an international wine on January 27, 2015 in Vancouver, B.C.

Jimmy Jeong/The Globe and Mail

Some of British Columbia's liquor policy changes violate Canada's international trade obligations, such as the North American free-trade agreement, says a U.S. wine industry group.

The Wine Institute, which represents more than 1,000 California wineries and associated businesses, has sent a letter to B.C. Premier Christy Clark requesting that the revisions be withdrawn or modified.

The institute says the changes, announced last month, will further disadvantage imported wines. It says B.C. Vintners Quality Alliance wines will be available on regular shelves in grocery stores, while imported wines will be located elsewhere, in a store-within-a-store model.

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The institute says the plan "imposes an additional burden on our consumers and, as a result, does not provide the same type of revenue opportunity for import products that VQA wines would enjoy."

Since the opportunities available to VQA wines will not be extended to imported wines, the institute says, the province will be violating NAFTA and other trade agreements on wine sales.

The letter, sent to the Premier on Jan. 21, is signed by Tom LaFaille, the institute's vice-president and international trade counsel.

The letter notes California represents more than 90 per cent of U.S. wine production and 95 per cent of U.S. wine exports. It adds that U.S. wine is the largest import in the B.C. market.

The B.C. government released its review of liquor policy in January, 2014.

It has since introduced several changes, some relatively minor (fencing barriers removed for family friendly festivals) and some more significant (the introduction of happy hour).

Justice Minister Suzanne Anton, under whose portfolio the review fell, indicated Tuesday that the institute's letter would not yield immediate change.

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"International trade agreements recognize that products should be treated equally and fairly," she wrote in a statement. "Our intention with our changes to allow liquor in grocery stores is to find a balance that meets these requirements and also promotes the quality local products that are made and bottled in B.C."

Ms. Anton last month announced that grocery stores would be able to stock 100 per cent B.C. wine on their shelves as soon as April. She also announced that existing VQA and independent wine stores would be able to transfer their licences to eligible grocery stores, as long as the licence was used only to sell B.C. wine. The minister added that a limited number of new licences would be made available specifically for those involved with 100-per-cent B.C. wine.

Max Cameron, a political science professor at the University of British Columbia who has also written a book on NAFTA, said in an interview that the Wine Institute appears to have a point.

"This looks like a classic example of a non-tariff barrier that would essentially discriminate against a product from another NAFTA member. And, I think on the face of it, it looks to me like they've got a pretty compelling case," said Prof. Cameron, author of The Making of NAFTA: How the Deal Was Done.

Prof. Cameron said outside wine producers could pursue a complaint under NAFTA and potentially have that brought before an arbitration panel.

Robert Simpson, general manager of Liberty Wines, which has six locations in the Vancouver area, said the institute's letter was "no surprise."

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He wondered why the province would give preferential treatment to B.C. wines, "knowing there is other legislation that overrides those decisions."

Mr. Simpson said some of the liquor policy changes B.C. has announced, such as a simpler licensing process for special events, have been positive. He added, however, that more reform is needed, and questioned why the government is involved in the distribution of alcohol through the Liquor Distribution Branch.

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