Amid brewing trade war, U.S. enters a battle over wine sales in Canada

Amid tariffs and retaliation, the United States has added wine sales in Canada to its list of international trade battles.

U.S. Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue announced this week that the Trump administration has requested that the World Trade Organization establish a dispute settlement panel “to examine unfair regulations governing the sale of wine in grocery stores in the Canadian province of British Columbia.”

The Office of the United States Trade Representative (USTR) is challenging BC regulations that it says discriminate against U.S. and other imported wine by allowing only British Columbian wine to be sold on regular grocery store shelves.

“Canada is an important market for U.S. winemakers,” Lighthizer said. “Discriminatory regulations implemented by BC are unfairly keeping U.S. wine off grocery store shelves, and that is unacceptable. Canada and all Canadian provinces, including BC, must play by the rules. The Trump administration will continue to hold our trading partners accountable by vigorously enforcing U.S. rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO.”

“We want customers in BC to have the opportunity to buy our great American wine. The practice of discriminating against U.S. wine is unfair and cannot be tolerated any longer. Our wine producers rely on export markets and they deserve fair treatment, especially by our northern neighbors in British Columbia,” Perdue added.

The BC regulations exclude all imported wine from grocery store shelves, a new and growing retail channel for wine sales in BC. According to the WTO complaint, such discriminatory measures “limit sales opportunities for U.S. wine producers and provide a substantial competitive advantage for BC wine.” 

“These regulations appear to breach Canada’s WTO commitments and have adversely affected U.S. wine producers,” the U.S. adds.

The U.S. is challenging BC regulations that were amended in April 2015 to permit the sale of wine in grocery stores. The amended regulations provide two options for grocery stores to sell wine. Under the “wine on shelf” option, a grocery store may sell wine anywhere within the grocery store, but only BC wine may be sold on grocery store shelves.

Imported wine may only be sold in grocery stores under a “store within a store” option. Under that option, wine sales must be conducted in a “wine store” that is physically separated from the grocery store, has controlled access, and has separate cash registers from the grocery store’s cash registers. As a “store within a store”, a grocery store may sell both BC wine and imported wine.

In 2017, U.S. wine exports to BC totaled $56 million, and U.S. wine had a 10 percent share of the BC market, the U.S. Commerce Department says. “A number of grocery stores are already selling BC wine on their shelves under the ‘wine on shelf’ option,” the WTO complaint says. “However, we are not aware of any grocery stores selling wine pursuant to the more costly “store within a store” option. BC’s regulations limit choices and raise costs for Canadian consumers.”

The U.S. held consultations with Canada in 2017, but those consultations did not resolve the dispute, U.S. officials said. Requesting the establishment of a panel is the next step in the WTO dispute settlement process.