Squeezed By Australia, Nova Scotia Walks Back Wine Policy
HALIFAX—Wines from Nova Scotia and other “emerging wine regions” will no longer receive special tax breaks from the Nova Scotia Liquor Corporation.
The Nova Scotia government will phase out its Emerging Wine Regions Policy over the next four years as it looks to avoid possible trouble from the World Trade Organization.
But while the province says the move will help preserve Canada’s relationship with an important trading partner, Nova Scotia’s winemakers say it’s a major blow to the local wine industry.
“We’re disappointed. It’s not an outcome we would have preferred,” Gerard Adams, the chair of the Winery Association of Nova Scotia told Huddle earlier this week.
A leg up in the market
The Emerging Wine Regions Policy effectively allows wineries from less-established wine regions to sell their products cheaper in Nova Scotia.
The NSLC charges a 100 percent tax (what it calls a markup) on most wine it sells. However, it lowers that markup to 43 percent on wines from “emerging” regions.
That means a $20 bottle of wine from Australia retails for $40, while a $20 bottle from Nova Scotia retails at $28.60.
While the policy doesn’t specifically target Nova Scotia wines, the province’s winemakers receive a significant leg up in the market as a result.
As Jürg Stutz, an Oenologist with Grand Pré Wines, told Huddle in an email, the policy has been “crucial to the growth of the Nova Scotia grape and wine industry.”
Adams explains that the reduced markup means Nova Scotia wines have been more attractive options for anyone browsing the wine aisle.
“What [the policy] allowed for was a lot of consumer trial, and that was the purpose… that people would be able to try products from emerging wine regions and hopefully like them and come back to them but that price wouldn’t be a barrier to the introduction to the consumer,” he said.
A bad year gets worse
Adams said it’s hard to know exactly how wineries will react to losing their price advantage in Nova Scotia, but said it could easily mean local wine will get more expensive here at home.
“Certainly, on its face and by itself, [the change] would result in very quick price increases at the retail level for Nova Scotia wines,” he said.
Losing their competitive advantage at home also comes at a particularly dire time for Nova Scotia’s wineries.
“We, as an industry, have been through a lot over the last number of years. We had a frost event in 2018, we had hurricane Dorian last fall, we had Covid-19… and how the WTO issue. It hasn’t been tremendously good news for a little while,” Adams said.
However, Adams does see a silver lining. The policy will be phased out over four years and he said he’s seen “every indication” the province is willing to work with industry to find a trade-compliant way to support the local wine industry.
He pointed out that policies propping up local wine exist in places like Europe and Australia but that those regions have found a way to do it without breaking international trade rules. A similar solution should be possible in Nova Scotia.
Australia’s WTO complaint
The Emerging Wine Regions Policy was part of a package of complaints Australia brought against Canada for what it claims are unfair trade practices related to the sale of wine in this country.
As part of the negotiations related to that complaint, the Canadian government reached an agreement with Australia to phase out the Nova Scotia policy.
Nova Scotia Minister of Trade Geoff MacLellan, said in a press release announcing the change that his government believes the Emerging Wine Regions Policy is “fully consistent with Canada’s international trade obligations.”
However, it chose to abandon the policy to “end years of litigation with an important trading partner.”
“Government takes its trade obligations seriously. We stand by our position that the Emerging Wine Regions Policy is origin neutral and, to date, no international body has ruled against the NSLC. That said, Australia is an important trading partner for Canada and prolonged litigation means uncertainty for our industry,” MacLellan said.