What many see as an honest attempt last week to boost Ontario’s wine and grape industry others view as an insidious attempt to block foreign competition.“This is going to be one of those x’s against Canada of a protectionist measure that we have put in place in the economic times,” says Cyndee Todgham Cherniak, a Lang Michener LLP international trade lawyer.
“We’re telling countries not to put in protectionist measures, not to engage in this type of behaviour. Well, this is an example of a protectionist measure that Ontario is taking.”
Her comments relate to Consumer Services Minister Ted McMeekin’s announcement that the province is changing its approach to the Vintners Quality Alliance appellation system, which distinguishes wines made with 100-per-cent Ontario grapes from blended wines using foreign grapes.
The plan calls for clearer labelling and signage for Ontario wines, an increased levy on blended wines, and a short-term increase in wines advertising the “cellared in Canada” label to contain 40-per-cent Ontario grapes, up from 30 per cent.
McMeekin said the moves will ensure “our wine and grape industry continues to succeed in the years ahead.”
He said they would help consumers understand the difference between wines produced only with Ontario grapes and those blended with fruit grown abroad in places like Chile and the United States.
But Todgham Cherniak suggests what is behind the plan is an attempt to keep foreign grapes out of the province and give preference to domestically grown grapes.
“That sounds kind of protectionist,” she says.
“It sounds like a disguised restriction on trade, and who do we get our grapes from? We get our grapes from the United States and we get our grapes from Chile and we have the NAFTA.
So we have a free-trade agreement with the United States. We’ve got a free-trade agreement with Chile. So this seems to be problematic from a trade perspective.”
But not everyone agrees with Todgham Cherniak’s view.
Cassels Brock & Blackwell LLP lawyer Lawrence Herman, who once led the economic and treaty law section at the External Affairs Department, doesn’t view the boost to grape growers as a trade issue. He says the moves are consistent with World Trade Organization requirements.
“Countries are allowed to apply labelling requirements like this. They’re not discriminating against foreign wines.
They’re just saying that if you want to be labelled as a VQA wine or a cellared in [Canada] wine, you have to meet certain requirements, and we’re going to strengthen the requirements that you have to meet. That’s quite all right.”
Todgham Cherniak, however, believes the government is making a mistake with its efforts to aid the grape growers. She points to British Columbia’s approach as more benign.
That province simply gives wines produced there preference on store shelves, an approach Todgham Cherniak says is more in line with trade agreements.
She speculates that Ontario’s tactic could be challenged at the WTO and also points to the potential hypocrisy of the Ontario wine labelling strategy.
That’s because Canada recently brought a case against the United States to the WTO based on similar country-of-origin labelling laws for meat products. Ottawa claims the U.S. law gives American beef and hog producers an advantage over Canadian competitors.
“So we’re doing something that we’re complaining to the WTO about that the U.S. is doing as a protectionist measure,” she says, adding she finds the move “very bizarre, unless Ontario is copying exactly what they’re doing and saying, ‘Well, you’re saying it’s OK, so it must be OK, so we’ll do it.’”
Todgham Cherniak also argues the move by Ontario was poorly timed given that it came during a week when representatives from the European Union visited Ottawa to discuss closer trade relations.
Part of the challenge for Ontario grape growers, however, is the fact that their product isn’t being purchased by local wineries because foreign grapes are sold at a lower price.
As a result, some of the bigger players in the Canadian wine industry are buying large quantities and negotiating price, thereby causing a dive in profit, says Todgham Cherniak.
“There are issues out there,” she says. “Whether or not it is at the Competition Bureau, I don’t know. If you go to Niagara-on-the-Lake for a weekend or [to] Beamsville, you hear rumblings of this issue that haven’t got much press. But I believe it stems from that - local grapes aren’t being used to the extent that they should be, so that there is a surplus of local grapes. So that’s one problem that the Ontario government is trying to solve.”