Australian Government announces formal WTO dispute settlement action against Canada

January 17 2018

World Trade Organisation (WTO) Submission to Canada  – Measures governing the sale of wine – Request for consultations by Australia (PDF)

Today the Australian Government announced that it has initiated formal World Trade Organisation (WTO) dispute settlement action against Canada’s discriminatory measures affecting Australian wine.

This is the first step in commencing formal consultations with Canada regarding measures Australia believes impose arbitrary and disadvantageous restrictions on the sale of imported wine in Canadian grocery stores, inconsistent with Canada’s WTO obligations. This step responds to concerns from WFA regarding the Canadian measures, which negatively impact trade with Australia’s fourth largest export market for wine, currently valued at $A185 million.

This action is critical, as the United States were also negotiating a settlement under NAFTA (North America Free Trade Agreement) which could have provided them with preferential access to the Canadian market in line with that provided to the domestic industry.

Background

There are a number of issues, which we and other foreign wine producers face, in importing wine into Canada. Local provincial liquor control boards control Canadian alcohol sales. As a result the laws and regulations governing the sale of alcohol differ across the provinces similarly to our states. In recent years there have been a number of laws or regulations imposed across the provinces, which discriminate in favour of locally produced Canadian wine and disadvantage imports.

Key issues affecting sales of Australian wine in Canada include:

• Liquor board mark-ups and other associated fees, levies and or taxes applied differently to the advantage of local wines.
• Different arrangements for the conditions upon which retail outlets can sell imported wines, sometimes making it impractical to sell them at all.
• Different arrangements for types of outlets (e.g. farmers markets) which can sell imported wines as well as exclusive sales channels for local wines.
• Supplier rebates applied unevenly – dependant on proportionate sales of 100% grown Canadian wine.
• Advantages for shelf space, placement and funded merchandising costs/advertisement for local products
• Liquor Control boards absorbing the cost of transportation for 100% local wines.
• Container deposit scheme – The liquor boards paying handling fees for containers that are commercialized through private wine outlets. In other words, they are paying the handling fees bills of Canadian wine producers for products that may not have even gone through their retail channel.
• Annual laboratory tests are required from the wine suppliers. Liquor control boards provide local wines free laboratory and quality assurance services.
• Light weighting of glass – container weight restrictions imposed by the boards do not apply to all retail outlets such as those sold through private outlet sales.

Background of WTO wine action against Canada

As a result these issues the United States in January 2017 launched trade enforcement action against Canada at the World Trade Organization (WTO).   The action focused on laws which were being applied in the province of British Columbia in relation to measures applied to grocery stores which discriminate against the sale of U.S. wine in stores. WFA had been encouraging the Australian Government to join the US challenge as a co-complainant and expand the scope of the challenge to include a range of other provincial laws which disadvantage our producers.

In February 2017 The Australian Government joined the US WTO action as a third party observer along with the EU, New Zealand and Argentina. As Australia was only a third party observer, there was no opportunity to influence the scope of the action.

Later in 2017 North American FTA (NAFTA) negotiations commenced and there was a risk that the issues could be resolved though NAFTA, which would leave Australia and other observers outside of any negotiated arrangements which would only apply to the US. We again sent a letter to the Trade Minister’s office advising that we strongly recommend action be taken to ensure Australian wine doesn’t miss out.

New Australian WTO action

In December 2017 the Australian Government contacted us and advised that Australia had decided to launch a new trade enforcement action against Canada and were seeking our support. Over December and Early January WFA have been providing advice in relation to the laws and regulations which are considered to be disadvantaging us in Canada. The new Australian-led action will address the same concerns that were lodged by the US trade action earlier in 2017 regarding discriminatory regulations, which restrict trade of foreign wines in retail outlets in British Colombia. In addition, the Australian action will also address regulations considered discriminatory in the provinces of Quebec, Ontario and Nova Scotia. It challenges over 25 laws and regulations in the provinces and will involve an extensive legal undertaking. This is the first time since 2003 (15 years) that Australia has initiated its own WTO action.

The WTO dispute stages

The WTO provides a rules based system that is vital to ensuring countries around the world ensure their regulations are fair and non-discriminatory. If members feel that another Country’s regulations are discriminatory they can launch formal dispute action against them. The process can take 3 years to complete and involves:

1. Consultation sage (60 Days) – where the Country’s attempt to resolve their issues bilaterally
2. Panel Stage (9 to 12 months potentially longer) – if nothing is resolved bilaterally a formal WTO Dispute Panel can be formed to hear and resolve the dispute.
3. Appeal Stage (90 -120 days)  – Either party then has the right to appeal the panels legal findings
4. Compliance Stage (up to 15 months but can be longer in certain circumstances) – If the panel finds in favour of the complainant then the country will be given a transition period to ensure compliance. Rarely more than 15months.
5. Retaliation Stage (can be sought up to 30 days after the compliance deadline ends) – If a Member does not comply with the findings of the dispute, the complaining party can seek authorisation from the Dispute Settlement Body (all WTO Members) for the imposition of limited trade sanctions (retaliation).

WFA is very happy the Australian Government has decided to take our advice, and actively taking steps to resolve numerous trade barriers in support of the sales of Australian wines in Canada.