It turns out Washington state and British Columbia are now engaged in what Canada’s leading newspaper calls a “wine war.”
We interrupt our coverage of the rapidly intensifying multifront trade fight between this nation and Canada, Mexico and the European Union to bring you a bulletin from the northern border: It turns out Washington state and British Columbia are now engaged in what Canada’s leading newspaper calls a “wine war.”
Actually it’s not just this state, or this nation — wine producers from Australia to Europe are steamed that when British Columbia “liberalized” its alcohol laws in 2015 to allow grocery sales, it effectively corked foreign imports to favor its own producers. As B.C.’s Cascadia neighbor, and the # 2 premium wine producer in the U.S., Washington state may have a special stake in the matter.
The weird little trick our provincial neighbor to the north uses to protect its local wine industry is this:
Canadian wines now can be sold on B.C. grocery shelves from Chilliwack to Kitimat, but grocers can only stock imported wines if they set up a “store within a store” that is physically separated and has its own cash registers. Not surprisingly, according to the U.S. Trade Representative, “we are not aware of any grocery stores selling wine pursuant to the more costly ‘store within a store’ option.”
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Just days before the Trump administration unilaterally slapped 25 percent tariffs on steel and 10 percent on aluminum from our North American neighbors and Europe, the U.S. Trade Representative took the more traditional, less incendiary approach to this wine standoff.
USTR Robert Lighthizer and Secretary of Agriculture Sonny Perdue filed a complaint with the World Trade Organization, asking it to establish a dispute settlement panel to investigate B.C.’s restrictions.
Canada now buys only about $10 million in Washington wine, yet that makes it the largest export market for the $1.8 billion industry.
British Columbia is Canada’s second-largest wine and grape producer, after Ontario. But in B.C., “if you want imported wines you have to make a tremendous effort,” says Josh McDonald, executive director of the Washington Wine Institute, the lobbying arm of the state’s industry. “B.C. is our closest neighbor and would seem to be a tremendous market if it was a free market.”
This is not the only “wine war” B.C. is fighting, by the way. The province’s strong opposition to the Trans Mountain pipeline in February prompted neighboring Alberta’s premier, Rachel Notley, to “ban” the import of B.C. wines.
Despite B.C.’s barriers, reports the USTR, U.S. wine exports to B.C. totaled $56 million last year, and U.S. wine had a 10 percent share of the B.C. market.
Heather Bradshaw, communications director for the Washington State Wine Commission, says sales in restaurants and B.C.’s government-run liquor stores account for the bulk of that. Those government sales are subject to a 125 percent markup, she says, while “B.C. wineries have open access to the Washington state market with a significantly smaller markup.”
Readers of this paper will know that the WTO dispute resolution process is the sort of thing that gives “process” a bad name. Boeing and Airbus have been battling over government subsidy programs for 15 years, and only now is the prospect of resolution even on the horizon.
McDonald says the state’s wine industry was hopeful the B.C. wine situation would be resolved more expeditiously in the Trump administration’s negotiations over rewriting the North American Free Trade Agreement.
Of course, those talks have gone nowhere. And it’s likely that this matter is a small item on an agenda that, alongside steel and aluminum, included long-simmering disputes over Canadian lumber and milk.
It’s hard to know, says McDonald. “They have just been so tight-lipped on what’s been going on in those negotiations.”
He declines speculate on whether the tariffs imposed on steel and aluminum, and the tit-for-tat trade battle that now appears to be building, will impede any resolution of the “wine war.”
But he does offer this: “We want to take the avenue that’s the most solution-oriented, amicable … wanting to create a positive, equal trade situation rather than one that is contentious and can lead to more harm than good.”
He adds: “We’ll be patient but we want this to get resolved.”
The wine question did bring a rare moment of concurrence between the Trump administration and Sen. Maria Cantwell, who endorsed the USTR’s call for a WTO investigation as “an important step forward.”
Washington’s Congressional delegation has largely opposed Trump’s tariff threats, saying they jeopardize the state’s exports, from Boeing on down. This week, responding to the metal tariffs, Mexico — the largest export market for Washington apples — said those fruits would be one of its targets for retaliatory tariffs.
It’s unlikely the USTR’s callout to the WTO will bring any quick progress on the wine fight. On the other hand, it won’t trigger a quick escalation either.