U.S. Files Trade Challenge Against Canada Over Wine
January 18 2017 - 2:05PM
Dow Jones News
By Paul Vieira and William Mauldin
The Obama administration on Wednesday launched a trade challenge
against Canada's treatment of U.S. wines, arguing the rules in
place undermine fair competition.
The row emerges at a time of growing economic unease among
Canadian officials over the economic ramifications President-elect
Donald Trump and his eventual changes to trade policy might have on
growth.
U.S. Trade Representative Michael Froman said the complaint
filed with the World Trade Organization focuses on regulations in
the Canadian province of British Columbia. Mr. Froman said British
Columbia's rules "effectively deny" the sale of U.S. wine on
grocery-store shelves, and as a result gives that province's
winemakers an unfair advantage.
The rules as set out by British Columbia "appear to breach
Canada's commitments as a WTO member," Mr. Froman said. "Canada and
all Canadian provinces...must play by the rules."
A spokesman for Canada's foreign minister said it is aware of
the complaint and would give it serious consideration.
For weeks now, Canadian Prime Minister Justin Trudeau has vowed
to work with the incoming Trump administration about changes Mr.
Trump and his team want to make to the North American Free Trade
Agreement, or Nafta. Any change to Nafta would affect Canada, but
most of the Trump team's public pressure to date has been on Mexico
and its growing auto industry.
The new administration's pick for commerce secretary, Wilbur
Ross, on Wednesday emphasized the "rules of origin" for the
automobile industry as a focus of trade negotiations. Tighter rules
of origin could force auto makers to produce more parts in North
America.
Mr. Ross said it is "not an accident" that the Mexican peso and
even the Canadian dollar have come under pressure since Mr. Trump
was elected, because it alerted investors that changes to trade
policy are coming.
The case over wine also underscores how trade relations between
Ottawa and Washington have deteriorated since the two countries
signed the 12-nation Trans-Pacific Partnership, a major trade
agreement that failed to win a vote in the U.S. Congress after Mr.
Trump was elected in November. Two-way trade between the U.S. and
Canada is among the largest trading relationships in the world,
totaling $474.4 billion during the first three quarters of 2016,
according to data from the U.S. Bureau of Economic Analysis.
U.S. lawmakers have complained about Canadian softwood lumber
policy, part of a longstanding dispute between the two countries.
Efforts by Mr. Trudeau and President Barack Obama to find a
resolution over lumber trade have fallen short. The Commerce
Department and International Trade Commission are now investigating
Canadian lumber imports, and the commission issued a preliminary
finding earlier this month against Canada. U.S. lawmakers have also
complained about Canada's support for its dairy industry, which
makes U.S. products less competitive there.
Earlier Wednesday, Bank of Canada Gov. Stephen Poloz warned any
material change in U.S. trade policy could bring a potential
negative shock to the Canadian economy. Canada's economy is relying
on nonenergy exports to help lead a recovery following a deep hit
from lower commodity prices.
"While the precise trade policy measures to be taken by the
incoming U.S. administration remain to be determined, the
protectionist tilt is already evident," the central bank said in an
updated economic outlook, released at same time as a decision to
keep its policy rate unchanged at 0.5%.
Negative effects for Canada are possible if Washington makes
material changes to trade policy, the central bank said. As a
result, the Bank of Canada's current economic outlook is "more
conditional than usual," Mr. Poloz told reporters at a press
conference.
Write to Paul Vieira at paul.vieira@wsj.com and William Mauldin
at william.mauldin@wsj.com
(END) Dow Jones Newswires
January 18, 2017 14:50 ET (19:50 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.