Wine Industry Escapes Tariffs

Congress passes omnibus appropriations bill, avoiding retaliation

by Peter Mitham
Canada’s International Trade Minister Chrystia Freeland had promised retaliatory tariffs would follow WTO authorization.
Washington, D.C.—Wineries that export to Canada and Mexico have escaped significant tariffs following lawmakers’ repeal of Country of Origin Labeling (COOL) for beef and pork in accordance with a recent World Trade Organization (WTO) ruling.

On Dec. 7, an arbitrator with the WTO reiterated decisions the international trade organization has delivered since 2011, deeming COOL requirements an undue regulatory burden on foreign meat producers and a potential cause of inaccurate labeling in stores.

Originally adopted in 2002, successive changes to COOL requirements have cost livestock producers in Canada and Mexico billions of dollars. The latest WTO decision marked the end of the road for U.S. appeals and opened the door to retaliatory tariffs on wine to the tune of approximately $1.25 billion per year.

“If the U.S. Senate does not take immediate action to repeal COOL for beef and pork, Canada will quickly take steps to retaliate,” threatened a statement issued by Canada’s ministers of agriculture and international trade following the WTO decision’s release.

Congress paid heed and nixed COOL requirements for pork and beef Dec. 18 as part of an omnibus appropriations bill that bundled together a number of measures as lawmakers prepared to adjourn for the holidays. (COOL provisions remain in place for lamb, goat, venison, fish and shellfish, fruits and vegetables, ginseng and various nuts.)

WineAmerica, which cheered a bid to effect the repeal of COOL last June, breathed a sigh of relief following the bill’s passage.

“We applaud the work of the Senate and the House to make sure the COOL rules were repealed, avoiding costly tariffs on American wine and host of other products,” Michael Kaiser, director of public affairs for WineAmerica, told Wines & Vines immediately following the bill’s passage. “This was an issue we never anticipated being involved with, but we worked to make sure we protected the business interests of American wineries.”

WTO authorization for retaliatory tariffs was due by Dec. 21, meaning passage of the omnibus bill came in the nick of time.

Speaking from the December WTO meeting in Nairobi, Kenya, Canada’s International Trade Minister Chrystia Freeland said that retaliatory tariffs would promptly follow receipt of authorization.

Tariffs would have meant a significant mark-up to the half-billion dollars worth of wine the United States ships to Canada and Mexico each year.

The markups levied by Canada’s various provincial liquor boards, which are layered on after duties, would have further compounded damage from the tariffs. A wine valued at $10 on one side of the border would have become a super-premium $40 bottle for consumers on the other (see “$10 Wine Would Cost $40-plus under COOL”).

Add in exchange rates, which have driven double-digit increases in the price of some foods in Canada during the past year, and U.S. wines would be even less competitive in Canada, the country’s most important export market.

The effect on California producers and the entire U.S. wine industry would reverse decades of efforts to boost market share, said Bobby Koch, president and CEO of California’s Wine Institute.

“Retaliation by Canada and Mexico would set our wine exports back decades and cost billions of dollars in lost sales over time,” he said prior to passage of the appropriations bill.

With the bill approved and heading to the White House for signature, his relief was palpable.

“Passage of the omnibus will once and for all lift the threat of potentially devastating tariffs on California wine and allow our producers to get back to focusing on growing their sales in these key markets,” he said.

Posted on 12.21.2015 - 11:26:14 PST
I am a wine drinker and in the wine business; however, I also eat -- and I care where my food comes from. Knowing where food is produced is essential for making healthy choices. Too bad that has been lost (at least for now). These kind of consumer protection losses are only the tip of the iceberg, should the TPP be adopted.