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Australia challenges Canadian provinces' wine sales at WTO

Australia alleges that measures 'appear to discriminate' against imported wine.

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Australia is taking on Canada at the World Trade Organization over the sale of wine in British Columbia, Ontario, Quebec and Nova Scotia, alleging that a variety of measures "appear to discriminate" against imported wine.

The complaint follows an existing case filed by the United States last year at the WTO that specifically takes on B.C., where the rules allow only B.C. wine to be sold on the shelves of the province's grocery stores. Australia, New Zealand, Argentina and the European Union have all joined the United States in that complaint, one that is currently in process.

The new Australian complaint includes the B.C. grocery-store issue and expands on the U.S. case to also claim that imported wine in B.C. is "subject to a wide range of mark-ups, fees and taxes." Australia further argues that measures around the sale of wine in Ontario grocery stores appear to favour Canadian wine. Quebec and Nova Scotia are also alleged to have measures in place to favour wine from those provinces.

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The broader backdrop to the trade dispute is the larger question of the proposed Trans-Pacific Partnership trade deal. The original agreement was made in 2016 but the United States pulled out. Of the remaining 11 countries, Canada now stands as a holdout, after contentious meetings in November in which the other countries, including Australia, were ready to push ahead.

Canada is balancing the TPP talks with the negotiations over the future of the North American free-trade agreement with the United States and Mexico.

Canadians buy about $7-billion of wine each year, according to Statistics Canada. B.C. residents account for about $1-billion, while Ontarians spend the most, at $2.4-billion.

Of the total, Canadians spend $5-billion on imported wine and $2-billion on domestic wine.

Australia exports about $2-billion of wine a year. A 10th – $200-million or so – goes to Canada, according to trade group Wine Australia.

British Columbia will work closely with Ottawa "to defend B.C.'s interests" as the WTO process unfolds, Bruce Ralston, the B.C. minister in charge of trade, said in a written statement.

When David Eby, now B.C.'s Attorney-General, was in Opposition, he said that British Columbia would likely lose the WTO case the United States had filed. The NDP MLA made the comments in early 2017 and blamed the then-Liberal provincial government for "the mess their policy created."

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If Australia prevails, B.C. grocery stores could see imported wines on their shelves, competing with B.C. wines, and other purported advantages in the other provinces could be reduced, giving imports a leg up.

Ottawa on Tuesday noted the wine issue falls under provincial authority, and Global Affairs Canada spokeswoman Natasha Nystrom said Ottawa works with the provinces to ensure policies around the sale of alcohol "are consistent with our international trade commitments."

Australia's Trade Minister Steven Ciobo, in an interview with The Australian newspaper, said: "I want to make sure we stand up for our producers and not allow other countries to discriminate against us, costing us export income and potentially jobs."

Australian wine would benefit from the broader TPP deal, said Peter Clark, a trade expert who is president of Ottawa-based consultancy Grey Clark Shih. The WTO complaint "shows that they're irritated with Canada," he said.

The specific question of B.C. wine in B.C. grocery stores is somewhat narrow. The provincial government several years ago introduced rules to allow for the sale of wine in grocery stores but they were convoluted. As of mid-2017, there were only 21 grocery stores that sold B.C. wine on their shelves. None of them are in Vancouver, where city council has chosen the "store within a store" concept. In this model, which is an option across B.C., all alcohol can be sold, including imported wine, but grocery stores do not favour it because of space requirements and other restrictions.

Both Australia and United States allege that limiting imported wine to a liquor store within a grocery store is discriminatory.

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