U.S. wine makers are keeping close tabs on the Ontario election campaign for any signs that politicians plan to give local vintners an unfair leg up over foreign rivals through the possible reform of alcohol sales.
The San Francisco-based Wine Institute, an advocacy group that represents more than 1,000 California wineries and related businesses, said it would file a complaint under the North American free-trade agreement if the province were to open boutique stores that sell only Ontario wines.
In particular, the Wine Institute's trade experts are paying close attention to public musings from Conservative Leader Tim Hudak about increasing market access for Ontario's Vintners Quality Alliance (VQA) wines, which are made from 100-per-cent Ontario grapes.
Currently in Ontario, wines can be sold only at Liquor Control Board of Ontario outlets, at onsite winery stores and at a limited number of stores owned by some larger vintners that were issued licences to sell their products in off-site outlets, such as those located in some grocery stores, before NAFTA took effect in 1994.
Although Mr. Hudak has yet to commit to any specific measures he would bring in if he were to become premier in the October election, he has hinted that he remains open to the idea of introducing VQA-only wine stores like those that exist in British Columbia. It is a proposal that he has championed vigorously in the past, including through a failed private member's bill in 2005. His riding of Niagara West-Glanbrook is home to many top Canadian wineries.
"I do think we need more options. More opportunities for consumers to get access to wine, beer, liquor," Mr. Hudak said. "Coming from the Niagara area, our wineries are limited in what they can sell to. You get your own shop at the winery and hope and pray to the LCBO gods that you get some space on the shelves … We need to have choice alongside the LCBO."
A trade consultant for the Wine Institute, however, said introducing Ontario VQA-only stores would breach NAFTA rules because they would give preference to local producers. (The only exceptions are off-site winery outlets, such the Wine Rack, which were grandfathered under the agreement.)
Ontario VQA-only stores "would clearly be a violation of our agreement and we would probably ask for a dispute resolution panel under the NAFTA rules with the Canadian government over that," said Jim Clawson, chief executive officer of JBClawson International, who has served as the U.S. industry's top trade consultant since the early 1980s.
Tom LaFaille, director of international trade policy with the Wine Institute, stressed that U.S. wine makers have a co-operative relationship with Canadian industry stakeholders and is keen to maintain that goodwill. After all, Canada is the second-biggest export market for U.S. wines behind the European Union.
Last year, about $308-million (U.S.) worth of U.S. wine, most of it from California, was shipped to Canada, marking a 27-per-cent increase over 2009.
The Office of the United States Trade Representative notes on its website that "market access barriers" in several provinces hamper exports of U.S. wine and spirits to Canada. "These include 'cost of service' mark-ups, listings, reference prices, and discounting distribution and warehousing policies," it said in a report.
Mr. Clawson said there have been informal grumblings about the 21 existing VQA-only stores in British Columbia. That province introduced its VQA wine store program in 1995 in response to industry requests for additional marketing opportunities. A B.C. government spokesperson said there have been no complaints from NAFTA partners about the VQA stores.
The Wine Council of Ontario wants the province to allow private wine stores to operate in parallel with the LCBO. "We're more than happy to offer our products with any other wine from around the world," said council president Hillary Dawson.
Ontario wines make up about 44 per cent of wine sales in the province, while imports make up the rest, according to the Grape Growers of Ontario. In comparison, California vintners hold a 63-per-cent share of their home market.
If Ontario wants to boost market share for local winemakers, then it should simply privatize alcohol sales and give fair treatment to all vintners, Mr. Clawson said. "You make it awfully difficult for consumers to buy a bottle of wine in Canada."