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California wine hopes to uncork Canada's alcohol policies in new trade agreement

California wine hopes to uncork Canada's alcohol policies in new trade agreement
The U.S. exported $1.5 billion in wine last year, 97% of it from California. (George Rose / Getty Images)

Wine exporters in California and other states will get equal treatment for their bottles on the grocery shelves of Canada’s westernmost province under the terms of the renegotiated United States-Mexico-Canada Agreement.

The California-dominated wine industry has spent four years fighting a policy allowing grocery stores in British Columbia to favor domestically produced wine over imports.

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In a side letter that was part of the new trade agreement announced last weekend, the Canadian government agreed to end that policy by next year, and the U.S. said it would halt its complaint before the World Trade Organization.

The U.S. exported $1.5 billion in wine last year, 97% of it from California. Canada was the biggest single-country destination, buying $444 million worth last year, second only to the 28-member European Union, which purchased $553 million in U.S. wine, according to the Wine Institute, a San Francisco-based association representing California winemakers.

Canada has gradually been relaxing its policies on alcohol sales, allowing wine to move onto grocery shelves. But as in the U.S., Canadian provinces can set their own sales policies.

British Columbia opted for a local-only approach, effectively segregating U.S. bottles to a store within a store at 29 grocery outlets licensed to sell alcoholic beverages.

Grocery sales are by far the biggest market drivers in retail wine, so the move has been welcomed in California’s wine region, said Charles Jefferson, vice president of federal and international public policy for the Wine Institute.

Still, the new pact does not alter discriminatory sales practices in Ontario, a market four times the size of British Columbia’s. Those practices predate the original North American Free Trade Agreement and were left intact both in that accord and the new agreement.

In addition, the new agreement allows Quebec to limit sales to wines bottled in the province, according to the draft of the accord released Monday.

Ottawa’s concession on British Columbia policy could be a wedge to pry open markets in larger provinces, particularly Ontario, which is set to expand wine sales to convenience stores, Jefferson said.

“We think it sends a clear message to other provinces that discriminatory policies are not the way to go,” Jefferson said.

Reaction from Canada was less enthusiastic. Miles Prodan, head of British Columbia’s Wine Institute, told the Vancouver Sun that the majority of the 29 retail licenses at grocery stores are “grandfathered” and won’t have to comply with the new regulations.

The new trilateral deal among the U.S., Canada and Mexico rejiggers NAFTA to include more protection for the U.S. auto industry, additional protections for intellectual property rights and wider access to the highly controlled Canadian dairy sector. It will have to be ratified by all three countries. Congress probably won't act until next year, after midterm elections that could shift one or more branches toward Democrats.

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