U.S. Adds Wine to Its Growing List of Trade Disputes With Canada

(Bloomberg) -- Donald Trump is pairing a fresh trade challenge over Canadian wine with his administration's ongoing dairy dispute.

The U.S. filed a second complaint Monday with the World Trade Organization against Canada over British Columbia's restrictions on wine sales. The U.S. alleges the province's regulations discriminate against imports by only allowing B.C. wine to be sold on regular grocery store shelves and has requested WTO consultations on the matter, the trade organization said in a statement.

The wine dispute -- initiated in the last days of the previous administration -- comes as negotiators from the U.S., Canada and Mexico try to hash out a revamp of the North American Free Trade Agreement. In the lead-up to those talks, which intensified during a third round last week in Ottawa, the president took issue with Canada's dairy industry and promised U.S. farmers his administration would intervene to restore exports of American milk.

“We're not sure why they're picking on B.C.,” said Miles Prodan, president and chief executive officer of the Kelowna-based British Columbia Wine Institute. “The Americans have got a huge foothold in the Canadian wine sector.”

The Pacific-coast province changed its rules in 2015 to allow grocery stores to sell local wine on regular shelves. Other wines and spirits are sold in a“store-within-a-store” through separate cashiers.

Read more about what to expect from Nafta renegotiations

Wine is expected to arise during Nafta talks and the timing of the WTO request may signal the U.S. is trying to put pressure on Canada, Prodan said. To date, less than 20 of the province's 1,300 retail outlets have shelves where only locally produced wine is sold, he said. American wine producers currently have about 14 percent of the Canadian market, while B.C. producers account for roughly 10 percent, Prodan said.

The U.S. has grown a significant wine trade surplus of C$450.6 million ($360.2 million) with Canada since free trade was negotiated in 1989, according to the Canadian Vintners Association.

“I suspect it's a bargaining position,” Prodan said by telephone.

Former President Barack Obama's administration filed an initial trade complaint in January over British Columbia's rules, which it claimed limit sales opportunities for U.S. producers and provide a substantial competitive advantage for B.C. wine, according to a January statement.

To contact the reporter on this story: Jen Skerritt in Winnipeg at jskerritt1@bloomberg.net.

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Stephen Wicary, Chris Fournier