Austrialia complains to WTO on Canadian wine policies

[JDSJDS]

The Australian government has asked the WTO to rule on the Canadian wine legislation and policies. In Canada, the provinces are responsible for these policies.

"Canada is reported to be Australia's fourth-largest wine export market, with a value of about $197 million Cdn, putting it behind China, the United States and Britain.

Australia has seen exports of bottled wine to Canada almost halved between 2007 and 2016, although sales to Britain and the United States, once its top export markets, have fallen by even more.

"Australia has requested formal WTO consultations on measures discriminating against Australian wine imports that we consider to be clearly inconsistent with Canada's WTO commitments," the newspaper quoted Ciobo as saying".

Interesting that they are going after their #4 market...

[url]http://www.cbc.ca/news/business/australia-c ... -1.4489383[/url]

Edited URL

[Mahmoud Ali]

Australia has seen exports of bottled wine to Canada almost halved between 2007 and 2016, although sales to Britain and the United States, once its top export markets, have fallen by even more.

Since sales to the UK and the United States has dropped by a higher margin than it has in Canada during the same period, it suggests that either these countries are also discriminating against Australian wines or else there are other reasons for the overall decline in wine sales. If it is the former, then Australia should be making a WTO complaint against the UK and the United States. We know there are other reasons for the precipitous decline in the sales of Australian wine, particularly in the fine wine category and regular readers of this forum would be well aware of them so I probably need not elaborate.

Interesting that they are going after their #4 market...

This is because Australia isn't likely to go after either the UK and the United States but since the country is rather slavishly devoted to almost any position that the United States takes it is very easy to toady up and pile on.

The "grocery store" element has to do with a very recent decision of the Province of British Columbia to allow certain large supermarkets (Save-on-Foods) to sell only VQA wines inside their store. All other stand alone private wine stores are can sell anything they want. The effect of this decision was to allow Save-on-Foods to stock small and limited production Canadian wines with the VQA designation. The BC Liquor Board, with its numerous retail outlets all across the province, finds it difficult to buy and allocate these wines. This policy does discriminate against all imported and non-VQA wines but does help small production wines find a market. When I was in Kelowna last year I went to the largest Liquor Board store there and to my surprise could not find any of the several wines I was looking for and was told that they cannot stock those wines because production levels of these wines were too small to distribute across the province. [Edit: The staff then advised me to go to the Save-on-Food store to find the wines I was looking for].I hardly think this recent policy accounts for the large decrease in sales of Australian wines but it clearly does give a legup to the small, new, and upcoming wine producers.

Cheers ................ Mahmoud.

[Polymer]

I find it laughable anytime Australia complains about the protectionist policies of another country...

[TiggerK]

I find it laughable anytime Australia complains about the protectionist policies of another country...

Yes indeed, like whiney little kids... 'it's not fair', pot kettle. It could even come back to bite them, if media traction took hold after a negative spin.

Off the the cuff remark, but I would assume a big part of the issue is greedy price increases by some big name brands, combined with increasing lack of interest in their traditional 'old-school' styles.

[crusty2]

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[phillisc]

I find it laughable anytime Australia complains about the protectionist policies of another country...

Agreed Polymer sheer bloody greed is a big driver and equally governments who have a piss poor taxation strategy.
I simply laugh that many European car makers are finding it tough to sell cars (perhaps apart from Mercedes) and are having to sharpen their 'reality' pencils and equally an LCT designed to protect a car industry that we simply do not have

Go figure??
Cheers
Craig
PS...when the Chinese obsession falls over, perhaps some of these ego driven hyper inflated Australian wine companies might actually want our business

[JamieBahrain]

I'm guessing it has a lot more to do with wider trade issues in the Pacific than wine and is an opening shot. I'm not well read on the free trade agreements and how they are playing out but think of the big primary producing nations such as Canada, the US and Australia and the massive north Asian trade markets?

This is because Australia isn't likely to go after either the UK and the United States but since the country is rather slavishly devoted to almost any position that the United States takes it is very easy to toady up and pile on.

Cop-out statement.

Sometimes I think the Canadians forget they have a Pacific coast. Canada's contribution to Pacific security is underweight. Especially considering where it wants to trade and the basis of sea trade is security.

[felixp21]

the reason for the decline in Australian wine sales overseas doesn't have a lot to do with other Countries foreign policies.
it has, however, got plenty to do with the fact that Australian wines are rapidly pricing themselves out of competitiveness.
have a look at the cost of Aussie wines vs CPI over the past 20 years, and it is easy to see why our wines have lost their huge advantage.

[felixp21]

I find it laughable anytime Australia complains about the protectionist policies of another country...

Agreed Polymer sheer bloody greed is a big driver and equally governments who have a piss poor taxation strategy.
I simply laugh that many European car makers are finding it tough to sell cars (perhaps apart from Mercedes) and are having to sharpen their 'reality' pencils and equally an LCT designed to protect a car industry that we simply do not have

Go figure??
Cheers
Craig
PS...when the Chinese obsession falls over, perhaps some of these ego driven hyper inflated Australian wine companies might actually want our business

would love to know about this "obsession" everybody is talking about. As a wine lover who has lived in China for many years, I am struggling to see where all the Aussie wines are being sold. Honestly, I just wonder if our winemakers are copying those loveable Bordelaise, and trying to create the aura of scarcity secondary to the gigantic consumption by the big red dragon.

[JamieBahrain]

the reason for the decline in Australian wine sales overseas doesn't have a lot to do with other Countries foreign policies.

I hope your not suggesting that's my point? I'm saying there's a lot more going on with Canada and Australia at the moment and I suspect wine is the opening shot.

Chatting with a HKG grey marketeer who would send truckloads of Pennies over the border, he says Penfolds have taken over all the distribution channels in China. I'm unsure what there strategy is but there is one. Grey marketeer is struggling to get hold of Penfolds now.

[phillisc]

the reason for the decline in Australian wine sales overseas doesn't have a lot to do with other Countries foreign policies.

I hope your not suggesting that's my point? I'm saying there's a lot more going on with Canada and Australia at the moment and I suspect wine is the opening shot.

Chatting with a HKG grey marketeer who would send truckloads of Pennies over the border, he says Penfolds have taken over all the distribution channels in China. I'm unsure what there strategy is but there is one. Grey marketeer is struggling to get hold of Penfolds now.

I would say that the above comment reflects the 'obsession'
Cheers Craig

[JamieBahrain]

Pennies demand in China was insatiable according to these guys in the trade .

Is that an obsession? IDK. I’m sure these new distribution means will take demand and supply somewhere they don’t expect

[Rossco]

slightly off topic, but does anybody remember a time when certain wine companies were shouting from the rooftops
how good the US market was, how it was going to be the 'saviour' of the Australian wine industry.... and how all their attention
was focused on this US market with strong growth and even stronger sales............... then a couple of years later.... massive write downs of stock/inventory and massive discounts to US retailers and to top it off apparently tens of thousands of bottles of wine being 'poured down the drain'.

Cant help but feel a sense of deja vu with 'the big red dragon' here. I guess only time will tell.

back on topic, it may have been a currency issue a few years ago when $AUD was above $1 US, and only if consumers were being passed
on the price rise....which im not sure even happened. I remember Casella going through a lot of pain during this time because they bore the fluctuations, not sure of others though, but currency is surely not the issue now.

I do see the irony of price increases based on 'strong' demand from china... then in the same breath lobbying the government to make a formal
complaint about Canada. I agree with others I think it has to do with the fact we have simply priced ourselves out of the market. They have focused so much on the 'premium' part of the market (which surely is only a small %) chasing greater profits, that have neglected the 'average joe' that drives
brand awareness.

Let me tell you, its not from a 'closed or regulated' market that I have stopped buying certain wines. Its simply the fact those wines no longer
represent any value for me. Not even in luxury or special occasion terms.... and perhaps the Canadians (and others) have come to the same conclusion.

dont even get me started on the car industry!

[Ozzie W]

Seems to me that the issues Australia is complaining about also apply to wines imported from other countries. So while wines from the Canadian domestic market have an advantage, imports from other countries have a level playing field. Furthermore, due to the Canadian climate, I wouldn't think their local wines compete much against imports -- the styles would be so different. Looking at the wine import statistics, USA, Italy and France are doing well. They're obviously offering something we aren't.

[Sean]

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[felixp21]

Pennies demand in China was insatiable according to these guys in the trade .

Is that an obsession? IDK. I’m sure these new distribution means will take demand and supply somewhere they don’t expect

which trade? I drink wine regularly with a large wine merchant in Shenzhen (China's richest city) and he doesn't have any demand for Pennies outside Grange and 707. Indeed, he ordered Bin 9 (I think, I can't remember, could be wrong, but I think he said Bin 9, if that is even a wine) and it stood basically unsold for the year before re-orders. Outside the two wines mentioned, he NEVER gets requests for Pennies stuff.

[JamieBahrain]

The grey market- come smuggling route over the border. The trucks come into HKG with cigarettes and return with Penfolds.

I actually do not get the Chinese wine market. So damned expensive. Years ago I'd kill time in secondary Chinese cities perusing the wine scene and it seemed all for show with little demand. Now there's 1.4 billion people so it doesn't take much to create demand but I never got it. Fruens in the HKG industry do make a lot of money from mainland markets so I'll be a more attentive ear- Georgia is doing very well.

I'm off to Beijing tomorrow and catching up with friends so will bring some tax free Pennies along with me.

[JamieBahrain]

Sean thanks for taking the considerable time to explain some of the deeper issues I was alluding to. All's fair in love and trade wars !

[odyssey]

This is a can of worms, but it is really more about Canada than Australia.

First, the sale and transport of wine in Canada is controlled by various province liquor control authorities. Each of them have their own rules, which makes it quite difficult for even Canadian wine to be sold throughout the country.

Shipping wine from one province to another had been prohibited by a federal law - the Importation of Intoxicating Liquors Act. It was Prohibition era thinking maybe, but in effect it was an important boon for the provinces that could each impose tariffs on wine.

Another argument for it was that it encouraged locals to drink local wines.

In any case, it was amended in 2012 by Bill C-311 that allowed personal use exemptions although still subject to relevant provincial laws. The change came into effect in 2014. By then however a number of provinces were already coming up with ways to stymie the intention of the amendment by creating various barriers to direct to consumer shipments.

Depending on which province you live in, the laws (and tariffs) can vary widely and it is a confusing maze I would have thought even for savvy Canadians trying to ship Canadian wine for their own personal use from one province to another.

This issue is being tested in the Canadian Supreme Court as recently as December 2017. Might be no coincidence the timing of the challenge from Australian exporters then, especially if they are hoping that bigger changes could be in the wind.

For Australian wine exporters, all this creates a distribution problem as well as the obvious hassle of dealing with many different, smaller markets rather than one national market.

That is because the importation of wine across the national border has to get authorisation from the provincial liquor board responsible for selling liquor in that province.

This is very different to the Australian experience where there are no state tariffs or excises since the Australian Constitution banned that when the federation was created. Like any law, it has been subject to fun and games by constitutional lawyers. However Section 92 of the constitution allows free trade of goods between the states - which in effect is not the case in Canada for wine.

The other aspect to this is the wider debate about free trade. Australia has entered into a number of free trade agreements with its major trading partners. In recent times FTA deals with China, South Korea and Japan are already having significant rewards for those able to take advantage of them.

This opportunity has been missed with Canada (and the USA), although apparently things are still being negotiated.

Australia and Canada are both big exporters of agricultural products and mining. Both countries rely on what they grow and dig up to sell to the rest of the world. Both are also members of the WTO, which actually dates back to an earlier 1947 trade agreement. The idea is that it gives members a forum to settle disputes in an open and rules-based setting.

That is what is currently happening because Australian wine exporters are finding obstacles to selling their products in Canada. The kinds of restrictions put on imported wines in Canadian supermarkets might be in breach of Canada’s WTO obligations.

Obviously if the sale of wine is being controlled by provincial liquor boards, including using various ways to restrict the sale of foreign wines, it is a problem for Canada as a trading partner especially when free trade thinking is the modus operandi now.

The current dispute has a history of its own dating back to the United States launching its own WTO action against Canada regarding “Measures Governing the Sale of Wine in Grocery Stores” in January 2017, which Australia joined as a third-party observer. So it is not just Australia with an axe to grind.

Not that anyone is truly squeaky clean in these kind of matters, everyone has dirt on their hands after all.

Also even this dispute could be simply a testing moment in the midst of a much bigger trade issue. Australia and Canada meet at G20 meetings as well as OECD and APEC conferences. Issues like this come up there and during one to one meetings between trade (and other) officials from both countries.

But the doozie of them all is the Trans-Pacific Partnership Agreement. In February 2016 Australia and Canada, and ten other countries, signed the TPPA with a view to work on domestic “processes” to get it in place down the track.

Notably the new US President, Donald Trump, doesn’t want anything to do with it. Then at the last TPPA meeting in November 2017 the Canadian PM, Justin Trudeau, walked out without making any further commitment to it.

I think at the time “domestic” issues was given as the reason. So this could well be an example of one of those many issues making it difficult to get Canada on board with the TPPA.

[url]http://www.abc.net.au/news/2017-11-10/tpp-t ... up/9140250[/url]

Keep in mind though that much the same hurdles are faced in the USA. Transport of wine across state borders are a legal and protectionist minefield, and OP states that sales have fallen even more there. Yet you don't see Australia complaining about the USA to the WTO. Funny that!

[Sean]

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[odyssey]

My comment was aimed more at the fact that every state has different import regulations, there are very strict controls brtween states, and whilst much of it started from a prohibition mindset all those years ago, nowadays it is driven heavily by protectionism.

[Sean]

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[Polymer]

Sean,

I can't be bothered reading the whole thing but do those agreements change any of the other taxes for US products? Like WET or LCT? I'd assume no because that is not on imports specifically...and yet they're all types of protectionism...WET does that (Rebate, value that is used to calculate WET on imports is not the same)...LCT did that because AU didn't really make any Luxury Cars...

[Sean]

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[Sean]

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[Polymer]

Except imported goods aren't treated the same as they are domestically..in the case of WET, for example..

The goods are taxed as the total cost to bring them in (shipping and other costs included), without any consideration of wholesale price (or half retail) which is only advantageous to domestic producers. They're also not eligible for a WET Rebate.

Just another way you pay the Aussie tax...

[Sean]

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[Ozzie W]

New Zealand has now followed Australia’s lead in joining the WTO complaint against Canada.

[url]https://www.newsroom.co.nz/2018/01/17/75775/ ... nst-canada[/url]