VANCOUVER - British Columbia's decision to sell only B.C. wines in grocery stores appears to have left a bitter aftertaste in the United States, which is launching an international trade complaint on the policy.
The U.S. challenge filed Wednesday alleges B.C.-only wine sales is a breach of Canada's commitments to the World Trade Organization.
U.S. Trade Representative Michael Froman said the province's regulations provide a substantial competitive advantage for B.C. wines.
"American winemakers produce some of the highest-quality, most popular wines in the world," Froman said in a news release. "When U.S. wine producers have a fair shot at competing on a level playing field, they can compete and win in markets around the globe."
The U.S. has sent a letter to the Canadian government asking for consultations as a first step toward resolving the dispute. If that fails, the U.S. said it may request the WTO establish a dispute settlement panel.
The B.C. government said it is confident the province is complying with international trade obligations
"Trade agreements such as NAFTA allow for a number of private wine outlets that sell only B.C. wine, and we are confident in the approach we have taken," Shirley Bond, the minister of jobs, tourism and skills training, said in a news release.
She said the number of liquor stores selling imported alcohol has increased significantly since 1987, from 344 to about 1,100 today.
Canadian trade expert Peter Clark said the U.S. complaint is serious and "definitely worth fighting."
He said Canada has several counter-arguments to the U.S. complaint, including that many small wine producers in the U.S. are granted subsidies to stay in business. Those subsidies can make up to 90 per cent of their volume sales.
But Clark said he's concerned the U.S. action could result in widespread changes to Canadian wine sales and distribution. The action could also see international wines, and not just wines from California, end up in Canadian grocery stores.
"If you get (a ruling) for the U.S., it's going to be there for Europe," Clark said in a telephone interview from Ottawa. "It's going to be there for everybody because the WTO operates on a non-discriminatory basis. It's something to take very seriously."
B.C. amended legislation in April 2015 to allow wine sales in grocery stories and held an auction for licences about a year later.
A news release from the executive office of U.S. President Barack Obama said the regulations implemented by B.C. intentionally undermine free and fair competition.
"Canada and all Canadian provinces must play by the rules," Froman said.
Acting U.S. Agriculture Secretary Michael Scuse said in B.C., local wines get an unfair advantage because they can be sold on grocery store shelves, while U.S. wines cannot.
"The United States simply seeks equal opportunities to market our wines, consistent with Canada's international obligations."
B.C. New Democrat David Eby said the dispute could have a huge impact on B.C.'s wine industry.
"It was so obvious this was going to happen and that the trade challenge would be successful against this plan," he added.