Saturday 20 Oct 2018 | 00:31 | SYDNEY
Saturday 20 Oct 2018 | 00:31 | SYDNEY

Behind the Australia–Canada ‘wine war’

Vinyards in British Columbia, Canada, February 2016 (Photo: Prisma Bildagentur/Getty)

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19 January 2018 11:45

Australia has formally lodged a complaint against restrictions some Canadian provinces have placed on the sale of imported wine in grocery stores, in what has been described, somewhat dramatically, as a 'wine war'.

Australia's action was described in the Ottawa Sun under the headline 'Sour grapes?'. Although this may have been no more than an editor's catchy phrase, the suggestion is that Australia acted in retaliation after Canada's last-minute decision not to sign a revamped Trans-Pacific Partnership (TPP) agreement at the APEC Summit last November.

Australia's Trade Minister Steven Ciobo says the two events are unrelated. But when relations between countries sour, isn't everything somehow related?

Action by Australia in the WTO against Canada's restrictive measures on imported wine is not going to convince Canada to change its views on the TPP. Notwithstanding Australia and Japan's recent commitment to signing a new TPP agreement by March 2018, Canada remains the great unknown; its demands for cultural and automotive exceptions from any deal continue to be a stumbling block.

Australia may only be standing up in support of its wine exporters. But our trade minister and trade officials are human, and given Australia's severe disappointment and annoyance over Canadian Prime Minister Justin Trudeau's last-minute snub of other TPP leaders when he failed to show up to what was expected to be a signing ceremony, Ciobo probably had no hesitation, and some satisfaction, in lodging a WTO complaint against Canada.

In fact, if Canada had not played hardball over the TPP, it is questionable whether Australia would have taken Canada to the WTO over wine restrictions by the provinces. The measures are not new and the US had already lodged two complaints in the WTO against restrictions British Columbia had on imported wine sales. Furthermore, Australia had joined this complaint as a third party (that is Australia, while it was not a complainant, registered that it had a significant interest in the outcome of the dispute). Australia has not been a prolific user of the WTO's dispute resolution processes. It has initiated a complaint on only 8 occasions; in comparison, Canada has initiated 38 cases, the EU 97, South Korea 17, Japan 23, and the US 123.

The other motivation cited for Australia's WTO action against Canada is concern that under a renegotiated North American Free Trade Agreement (NAFTA), US winemakers may obtain the same advantages as Canadian producers. The US already exports significantly more wine to Canada than Australia does, and any advantages provided to US producers would likely eat into Australia's market share in Canada. Australia's concerns may be justified, given that the US Trade representative Robert Lighthizer suggested that the US dispute with Canada over wine could be resolved in the NAFTA negotiations, and that the Canadian Trade Minister François-Philippe Champagne has said he will stand fast in protecting the interests of Canadian winemakers.

As with most trade restrictions, the biggest losers in this 'wine war' are wine consumers in Canada. This trade dispute occurs against the background of a highly restrictive alcohol market in Canada, where many provinces have a monopoly on the wholesale and retail market. At the most basic level, neither monopolies nor a lack of competition are good for consumers.

The 'wine war' involves the restrictions some Canadian provinces are placing on the availability and price of imported wine, notwithstanding that Canadian winemakers supply less than 50% of the market and there are limits on the extent to which domestic production can be expanded to meet consumer demand. As usual when it comes to trade disputes, the interests of consumers are at the bottom of the pile.

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