Canada resolves wine dispute with Australia, but barriers to interprovincial alcohol trade remain
On May 12, Australia and Canada informed the World Trade Organization (“WTO”) That the dispute settlement body had reached a mutually agreed solution to the outstanding dispute in the panel initiated by Australia. In its panel request, Australia claimed that certain federal excise duties, as well as measures relating to the sale of wine in British Columbia, Ontario, Quebec and Nova Scotia, discriminated against wine imported in violation of Canada’s WTO obligations.
In accordance with the mutually agreed solution, Canada and the provinces agreed to remove the challenged measures identified as discriminatory by Australia, in exchange for withdrawing Australia’s legal request.
While this agreement will improve access to Canada’s wine markets for foreign producers, interprovincial restrictions on the sale and movement of wine and other alcoholic beverages will continue to significantly restrict the access of Canadian producers to provincial markets everywhere. in Canada.
Canada – Measures Governing the Sale of Wine (DS537)
In January 2018, Australia requested consultations with Canada at the WTO regarding certain federal excise duties and provincial government measures in British Columbia, Ontario, Quebec and Nova Scotia governing the sale of wine. Australia asserted that these measures accord more favorable treatment to domestically produced wines and, in turn, discriminate against imported wines.
Several other wine-exporting countries were allowed to participate in these consultations, including New Zealand, Argentina, the European Union, Chile and the United States.
Following unsuccessful consultations, Australia requested the establishment of a panel in August 2018.
Australia’s claims concerned various federal and provincial measures affecting the distribution and sale of wine, including product mark-ups, market access requirements, and wine duties and taxes. Specifically, Australia has identified the following measures:
- An exemption from federal excise duty for wine packaged in Canada where the wine was produced and composed entirely of agricultural or plant products grown in Canada;
- Exclusive access for BC wineries to BC grocery shelves;
- Preferential marketing and distribution rules for Ontario wines, including wines sold in grocery stores and wine shops;
- Preferential marketing and distribution rules for Quebec vineyards; and
- Preferential pricing in Nova Scotia for wineries in that province.
Australia claimed that these measures were inconsistent with several provisions of the General Agreement on Tariffs and Trade, 1994 (“GATT, 1994”).
First, Australia claimed that the duty and mark-up measures violate Articles III: 1 and III: 2 of the GATT 1994, as they impose internal taxes or charges on imports in excess of those applied to the original products. national.
Second, Australia claimed that the measures relating to market access requirements violated Article III: 4 of the GATT 1994, because certain provincial laws, regulations or requirements affecting the sale of wine treated imports less favorably. than similar products of national origin.
Third, Australia claimed that Canada failed to comply with its obligations under Article XXIV: 12 of the GATT 1994 because the federal government had “failed to take reasonable steps available to it to to ensure “that provinces comply with Canada’s obligations under GATT 1994.
Mutually agreed solution
Between April 2019 and May 2021, Australia and Canada entered into several settlement agreements regarding the aforementioned federal and provincial measures. Finally, on May 12, both parties notified the WTO Dispute Settlement Body that Australia had agreed to withdraw its legal request in exchange for Canada’s commitment to:
- Eliminate measures allowing the sale of BC wine only on regular grocery store shelves, which was completed in November 2019;
- Repeal the federal exemption from excise duties on wine no later than June 30, 2022;
- End Nova Scotia’s “Emerging Wine Regions Policy” by June 30, 2024;
- Subject small Quebec producers, who sell directly to grocery stores and convenience stores, to fees equivalent to the mark-up applied to wines sold by the provincial distribution network as of December 1, 2023;
- Phase out the Ontario tax differential between Ontario wine and non-Ontario wine by July 20, 2023;
- Change certain definitions in Ontario regulations between July 20, 2021 and July 20, 2023, which would increase the number of wines allowed to be sold in grocery stores by 50%, as well as reduce the number of wines allowed to be sold in grocery stores. shelf space dedicated to wines meeting specific criteria from 50% to no more than 40%; and
- Converted all of the Ontario Beer and Wine Restricted Authorizations, which limit the products allowed to be sold in grocery stores for an initial period of three years, to Beer and Wine Unlimited Authorizations, which was to be completed by by the end of August 2020.
Canadian Interprovincial Restrictions on Wine
In particular, many interprovincial trade barriers for wine, beer and spirits remain in place.
The Canadian mishmash of provincial alcohol monopolies restricts direct sales of products like wine to consumers across provincial borders. These provincial measures are trade barriers for Canadian producers trying to sell in other provincial markets.
While the provinces and the federal government negotiated a new trade agreement within Canada in 2017 (the Canada Free Trade Agreement), most provinces have explicitly excluded their regulation of the marketing and distribution of products. Alcohol Accord. In addition, following the Supreme Court of Canada’s assertion of the ability of provincial governments to restrict interprovincial trade in alcoholic beverages by R. v. Comeau, 2018 SCC 15, the Federal-Provincial-Territorial Action Plan was established to improve interprovincial trade in alcoholic beverages within the current regulatory framework. However, only four Canadian provinces currently allow consumers to order wine directly from another province: Nova Scotia, Manitoba, Saskatchewan and British Columbia.
For its part, the federal government has removed restrictions on the purchase and movement of alcoholic beverages interprovincially by amending the Importation of Intoxicating Liquors Act in 2019. Despite these changes, most provincial regulations restricting interprovincial shipments of alcoholic beverages remain in effect, limiting the ability of Canadian consumers to purchase or receive alcoholic beverages directly from Canadian producers in other provinces.
In December 2020, Private Members’ Bill C-260 was introduced in Parliament to amend the Canada Post Corporation Act require Canada Post to transport beer, wine or spirits from one province to another. Nonetheless, without additional provincial regulation, federal laws alone will do little to alleviate the complex regulatory regimes that largely block interprovincial trade in alcoholic beverages in Canada.
The wine dispute between Canada and Australia is an interesting case where the federal and provincial governments work together to reduce the barriers in the face of a challenge from a trading partner. However, despite Canada’s commitment to reduce protections, Canadian vineyards will not be left to wither on the vines. The Canadian government is already taking action to lessen the blow to Canadian wine producers, by earmarking $ 101 million in the 2021-2022 federal budget to support the wine industry from 2022-2023. The funding, which will provide two years of support to the Canadian wine industry, follows pressure from wine producers for an “Excise Exemption Replacement Program.” Provincial governments would also be working on other ways to support their wine industries.
The resolution of the wine dispute between Canada and Australia will result in a more open and competitive market for wines imported into Canada. However, there is no indication yet that this will be followed by additional measures to expand interprovincial trade in alcoholic beverages.