California’s wine industry landed a major success after the revised NAFTA deal extended with Canada. The deal will enable wider access in a country that was previously accused of “discriminatory” trade practices.
The NAFTA deal comes after the Trump administration requested the help of the World Trade Organization to settle a wine dispute with Canada regarding grocery store shelf access in May. During summer of 2018, a WTO dispute panel was set up to rule on the matter.
About 90 percent of American wine that is exported comes from California vineyards, while Canada is the largest single country market for United States wine. Canada’s retail sales were nearly $1.1 billion last year.
According to the American wine industry executives, United States trade negotiations with Canada produced great progress in diminishing some protectionist policies, specifically in the province of British Columbia. The new trade pact was announced late Sunday and is known as the United States-Mexico-Canada Agreement, meaning the Canadian federal government agreed to find a solution to the grocery store access issue in B.C. with the assistance of provincial leaders.
Australia also filed its own WTO complaint against Canada earlier this year, accusing B.C. of discriminating against imported wines and also citing barriers in other provinces, including Ontario and Quebec. CNBC reports that the U.S., Chile and New Zealand are among other countries that reserved third-party rights in the Australia-Canada dispute.
The new USMCA will not affect the Australian complaint, and as a result, the United States wine industry officials say they will continue to work towards progress on access issues in Quebec and Ontario.
However, the North American trade deals comes right as the American wine industry is being slammed by the latest round of retaliatory Chinese tariffs on $60 billion worth of U.S. imports. Beijing too, impacts table grapes grown in the U.S. with its tariffs, as California produces about 99 percent of the table grapes grown domestically, according to the California Farm Bureau.
“China’s new tariffs make the playing field unlevel and make it difficult for California wine to compete with other wine regions from around the world because we’re more expensive on a relative basis because of this incremental tariff,” said Linsey Gallagher, vice president of international marketing for the Wine Institute, a San Francisco-based wine trade group.China continues to be a growing market for California wines, but the additional tariff of 10 percent now equals a total of 79 percent in taxes. In April, Beijing hit U.S. wine, nuts and fruits with a 15 percent tariff. The Chinese government followed in July with additional duties on similar products.
“Our share is in the single digits of that market,” said Gallagher. “But it’s still the fifth-largest export market for California wines.” According to Gallagher, California wine sales to mainland China are up over 300 percent over the last 10 years. The fundamentals for China’s wine market was “fantastic up until April, and now it’s just a more difficult situation for us,” she says.
