Trade Gurus & Public Affairs Mavens

WTO wine challenge shows up U.S. double-standard on trade

My views on the U.S. challenge of B.C. wine in grocery store rules.

Twenty-five years ago we challenged U.S. practices at the General Agreement on Tariffs and Trade (GATT). U.S. lost on federal excise tax discrimination, as well as measures in 41 states and two territories.

GATT dispute settlement had no teeth – the WTO does. Time to re-do the challenges.

WTO wine challenge shows up U.S. double-standard on trade – Opinion
By Peter Clark
Wednesday, January 18th, 2017

The Obama administration has launched a World Trade Organization challenge over how imported wines are denied access to B.C. grocery store shelves.

This challenge was expected to come early in the Trump administration. But the principal U.S. senators driving the bus are Democrats (no doubt they want the credit). A second challenge — of Quebec’s retail system for wine — is reportedly in the works.

This is not a simple regional complaint. It has very broad implications. It is about all U.S. wines, not only those from California. Senator Ron Wyden (D-Oregon) and Senator Patty Murray (D-Washington State) have supported the complaint.

Should the complaint succeed, improved access to U.S. wines would be extended to all imported wines, as required by the WTO Most-Favoured Nation obligation. At a minimum, I would expect to see the EU, Australia, New Zealand and perhaps Chile will join the parade as third party participants.

I was part of the Canadian team defending against EU and U.S. General Agreement on Tariffs and Trade (GATT) challenges of provincial beer and wine purchasing, mark-up and distribution practices. These disputes resulted in major changes to Canadian and provincial liquor board practices.

The U.S. does not come to the WTO with clean hands on wine distribution and taxation. In 1991, Canada brought a GATT challenge of U.S. excise tax discrimination and alcoholic beverage taxation and distribution at the state level. Canada won resoundingly. The GATT found against federal excise tax discrimination in favour of small wineries and a variety of measures in 41 states and two territories.

The U.S. declined to implement the findings because they were not prepared to engage state governments to change GATT-illegal practices.

The U.S. has a double standard when it comes to sub-national government trade practices. Washington finds it virtually impossible to regulate state practices. Thus, in practice, U.S. states have few (or no) real WTO obligations. ‘Buy American’ policies are the most egregious examples. At the same time, the U.S. insists on full compliance by Canadian provinces with Canada’s NAFTA and WTO obligations.

Don’t expect the double standard to change under the next U.S. administration. Indeed, we should expect, within NAFTA, different standards for the U.S., Canada and Mexico.

If the leaks from the transition team are accurate and the U.S. is successful in achieving some of its extreme initiatives, the implications of NAFTA re-negotiation will be broad and deep. Don’t count on Canada’s special relationship with the U.S. saving us from extreme disruption; that relationship no longer exists.

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