B.C. Resolute in U.S. Wine Trade Spat

U.S. trade official requests WTO intercede in dispute concerning wines sold in grocery stores

by Peter Mitham
Unlike in this supermarket in the province of New Brunswick, most British Columbia grocers can’t sell foreign wines alongside domestic product.

Victoria, British Columbia—The threat of World Trade Organization (WTO) intervention shows that three years of criticism and even a change in government has failed to dampen British Columbia’s resolve in allowing only its own wine to be sold on grocery store shelves.

U.S. Trade Representative Robert Lighthizer made good on those threats May 25 with a formal request to the WTO for a dispute settlement panel after formal complaints and consultations with Canada last year failed to resolve the issue.

“Discriminatory regulations implemented by British Columbia are unfairly keeping U.S. wine off of grocery store shelves, and that is unacceptable,” Lighthizer said in announcing the request. “Canada and all Canadian provinces, including B.C., must play by the rules.

Argentina, Chile, Australia and Europe support the U.S. challenge, meaning the B.C. industry faces a world of opposition.

B.C. first announced details of its plans to let wine be sold in grocery stores in December 2014, drawing sharp criticism from California’s Wine Institute. The plans called for allowing only wines made entirely from B.C. grapes and bearing the BC Vintners Quality Alliance (BC VQA) designation to be sold alongside groceries in the province’s food outlets. All other wines would be sold via a store-in-store model that required a separate check-out. To date, approximately 27 grocery stores have won licenses to sell wine.

An outcry from California
Tom LaFaille, then vice-president and international trade counsel with the Wine Institute, took issue with the provisions in a letter to the province’s premier of the day, Premier Christy Clark. LaFaille’s letter asked that, “the initiative be withdrawn or modified to allow for equal access of all wines at B.C. grocery stores” (see Wines & Vines headline “California Wineries Talk Tough to Canada,” February 2015).

The proposal even drew stiff criticism from lawmakers with B.C.’s New Democratic Party, the official opposition to the government in the province’s legislature

David Eby, who oversaw liquor policy for the party and now serves as the province’s attorney general with a portfolio that includes liquor sales, said at the time the program wasn’t well thought out. “Anybody with an even passing familiarity with trade law knew there was a problem here,” he told Wines & Vines.

Eby initiated a review of provincial liquor laws in late 2017 chaired by Vancouver lawyer Mark Hicken. Hicken delivered his recommendations last month, but they haven’t been made public. Eby’s office directed queries regarding the trade challenge to provincial trade minister Bruce Ralston.

Ralston doubled down on supporting wine sales in grocery stores, upholding the previous government’s line that the North American Free Trade Agreement allows some private wine outlets to sell only B.C. wine. “What we’re interested in is supporting the B.C. wineries and the jobs and markets that they create,” he said. “Those are our priorities in the dispute and we'll work with the federal government to achieve a resolution.”

There was no response to a request for comment from federal trade officials. However, provincial officials indicate a meeting regarding the matter could take place June 22.

‘Puzzled’ by alleged harm
Miles Prodan, president and CEO of the B.C. Wine Institute, whose mandate includes the promotion of B.C. VQA-designated wines, expressed puzzlement over the ongoing U.S. concerns.

“We remain puzzled how they have been harmed,” he said. “Still, we need to take their concerns seriously and we have been proactive in working with all levels of government to address the concerns of this, and other trade issues.”

Prodan, who once confessed his organization’s biggest fear was a grocery store holding a license to sell wine, declined further comment to Wines & Vines.

Prodan and others, including Bert Hick, principal of liquor license consultancy Rising Tide Consultants Ltd. in Vancouver, say allowing grocery store sales to sell whatever wines they want would damage the B.C. industry because listings would tend to be from high-volume wineries selling more affordable bottles.

“If the decision is, as a result of this, that imported products have to be there as well, it’s very difficult for the B.C. wine industry to compete with the likes of Gallo,” Hick said. “The Gallo winery in California is larger than our entire industry.”

But contrary to Prodan, Hick doesn’t feel the previous government’s approach to creating space for wine in supermarkets was the right one. It’s also tough for government to backtrack now, given the number of licenses it has issued, and the millions of dollars retailers have spent to establish the channel. “They’ve got an egg that’s going to be very difficult to unscramble,” he said.

The result could be could also be a dramatic reshaping of wine retailing in B.C., which currently occurs through government stores, private liquor stores, private wine stores, stores licensed to sell BC VQA wines, winery stores as well as the wineries themselves, and now grocery stores. “It would be nice if we could have more of a streamlined approach, but I am really concerned,” Hick said. “I don’t think we’re on strong ground at all.”

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