The Nova Scotia government is phasing out a program intended to help wine producers from the province and other small regions rather than risk running afoul of the World Trade Organization.
The province announced Monday that it reached an agreement with Australia to end the emerging wine region policy following a complaint by Australia to the World Trade Organization that the policy violated trade rules.
Although the government continues to maintain the policy is trade compliant, Agriculture Minister Keith Colwell said the province did not want to risk a prolonged legal battle — the challenge was launched in 2018 — and especially did not want to risk having the WTO rule against Nova Scotia.
"They could have come back and said, 'You have to implement this in six months,'" he said in a telephone interview. "Then we would have had a major problem on our hands."
'A very good spot overall'
An unfavourable ruling by the WTO could have also led to some countries no longer buying wine from the province, said Colwell. He said the risk was simply too great to the industry to continue defending the policy.
"At the end of the day, it's not where I'd like to be or the industry would like to be or our government would like to be, but I think, considering where we are and what the possibilities were, I think we're in a very good spot overall."
As part of the agreement, Nova Scotia has four years to phase out the policy.
Under the policy, the markup by the Nova Scotia Liquor Corporation is only 43 per cent on a bottle of wine, compared to 100 per cent for companies that exceeded the policy threshold. For a $10 bottle of wine, that means the difference between a retail price of $14.30 for regions covered by the policy versus $20 for those that are not.
Gerard Adams, chair of the Winery Association of Nova Scotia, said the policy has helped regions such as Nova Scotia, Ontario and Quebec gain favour with customers in the NSLC as wineries in those areas develop and grow.
Working on new support tools
Considering the difference in industry size, he said it was confusing that Australia would take such a hard stance on the policy.
"From Australia's point of view, clearly, they're still selling quite well in Nova Scotia, doing quite well in Nova Scotia," said Adams. "It was a bit disappointing, I guess, that they would be complaining in the first place."
It's difficult to know what effect removing the policy will have, and Adams said it will be up to the industry and province now to work over the next four years to find new ways to support the industry while remaining trade compliant and helping wineries continue to grow.
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