EU & Canada: EU seeks WTO talks with Canada over 'discriminatory' new wine and beer tax

The European Union said Wednesday, November 29th, it will seek World Trade Organization (WTO) talks over Canada's "discriminatory" wine and beer tax that it claims punishes European imports while giving Canadian drinks a free ride, according to Canadian Press and Associated Press.

"This measure is unfair and I urge Canada to end this discrimination against our products," said EU Farm Commissioner Mariann Fischer Boel. "European wines and beers are second to none. We can compete with anyone as long as we have a level playing field on which to operate."

Beginning July 1, Canada has given excise tax relief to its own wine and beer while leaving intact rates on EU imports such as French wines and Belgian beer.

The new tax rules are due to be formally adopted next month - after Parliament gives its backing - and applied retroactively from July, although in practice the measures are already in place.

The European Commission said it hoped it could find a solution at the WTO, saying it had already "expressed its concern" to Ottawa in recent months.

Dan Paszkowski, president and CEO of the Canadian Vintners Association, said he was surprised "that the European Union would be challenging us for such a minor measure that was provided to the Canadian wine industry."

"I honestly believe the European Union doesn't quite understand what was provided in the federal budget," he said.

"The benefit to Canadian wine was only provided to a very, very small proportion of wine produced - the vast majority of wines produced in Canada face the exact same tax regime as imported wines."

Given that imported wines are sold at a higher price point on average than Canadian wines, he added, "the economic impact on Canadian wines was greater, even including the excise exemption than it was on imported wine."

The exemption applies only to 100 per cent Canadian wine - that is, wine made completely from Canadian grapes - but 85 per cent of Canadian wine is blended, Paszkowski said.

Trade Minister David Emerson said he too was taken aback by the attack, since "the excise tax changes that are proposed in Canada were reviewed and we think they're consistent with what's done in a number of other countries."

"We believe in our domestic beer and wine industries and we're going to do what we can to make sure they're successful."

Paszkowski said the Vintners Association will be entering into discussions with the federal government, so it can prepare its position to move into the WTO discussion process that's been requested.

The EU made a similar move against India earlier this month over its high tariffs and taxes on wine and spirits imports. Wine sales in Europe have been hit by falling consumption and increased competition from wines from producers in countries such as the U.S., Chile and Australia.

The EU exported wine worth 446 million euros (US$586 million) and beer valued at 110 million euros ($145 million) last year. The WTO talks form the first stage of legal action under global trade rules.

If the two sides don't reach a deal within 60 days, the EU can ask for the WTO to set up a panel to rule whether Canada is acting legally - which could ultimately force it to drop the tax exemption.

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