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Meeting of the Committee on Wines and Spirits

January 25-26, 2022 (by videoconference)

Report

The fourth meeting of the CETA Joint Committee on Wine and Spirits was held on January 25-26, 2022. As in previous meeting, the EU welcomed the attendance of representatives of provincial authorities as observers to the meeting.

Performance of bilateral trade

The parties exchanged views on bilateral trade in alcoholic beverages. Canada acknowledged the healthy trade relationship that CETA has fostered with respect to the wine and spirits sector. To this effect, Canada provided the committee with a document highlighting the positive performance of bilateral trade in wines and spirits since CETA’s provisional application, showing that CETA continues to deliver great benefit. Canada concluded its presentation by indicating that it will make the document public on its website.

Joint progress review under the CETA Joint Declaration on Wines and Spirits

The parties discussed the CETA Joint declaration on wines and spirits (Annex 30-C) and their commitment to review progress achieved in the first five years of the provisional application of the agreement.  To that affect, parties agreed to start working on the Joint Progress Report as soon as possible so that it is ready for the meeting of the CETA Joint Committee in the fall of 2022. The parties further agreed that Canada would share an initial draft in March 2022.

Implementation of changes previously announced by Canada

Canada provided an update regarding the implementation of policy changes previously announced including the repeal of the federal excise duty exemption, as well changes to several provincial measures in Nova Scotia, Quebec, and Ontario. Canada informed the EU that the federal government and the provinces remain on track to meet their commitments in this regard. In regards to Ontario’s definition of small wineries in the context of the reserved shelf space in grocery stores, Canada confirmed that Ontario Regulations 232/16 has been amended to reflect Ontario’s commitments regarding increasing the annual sales cap in order for a winery to be classified a “small winery”, as well as lowering the amount of dedicated shelf space from 50% to 40%. The EU welcomed these updates and invited Canada to also provide information on the respective shares of EU and domestic wine producers who benefit from the scheme and how that figure evolves with the changes. Canada explained that it does not have access to the EU production data and couldn’t provide data on eligible producers in the EU, however Canada explained that EU producers could seek to identify themselves to the Liquor Control Board of Ontario (LCBO), and suggested that the EU inform their small wine producers of the increased sales cap to ensure they are aware of this new opportunity.

Other distribution, retail and commercial practice in Canada

The EU raised concerns with a range of measures maintained by the provinces, including small producer rates and direct delivery access,Footnote 1 and reiterated its call to work toward the full elimination of discriminatory practices without delay. The EU stressed that the elimination of mark up differentials remains a top priority for the EU industry. The EU noted that the commercial impact of each individual measure has no bearing on the consistency of the measures with CETA commitments. The EU also considered that the cumulative effect of the measures is economically important and creates impediment for the European industry in the Canadian market.

Canada clarified that mark-up differentials for small producers in Saskatchewan, Manitoba, and Newfoundland and Labrador are origin neutral and agreed to provide additional documentation to this effect. As regards the reduced mark-up rates in Nova Scotia, and reduced tax rates reduced tax rates in Quebec, which apply exclusively to in-province producers, Canada confirmed that sector consultations were ongoing in Quebec and Nova Scotia, and invited the EU to submit their comments. Canada agreed to seek clarity on mark-up rates applicable to certain products of EU origin in Quebec, as well as the policies, or similar documentation, governing a number of measures raised by the EU.

Recalling the EU’s letter expressing concerns over Ontario’s call for bag-in-box wines, Canada confirmed that Ontario is expanding its assortment of imported bag-in-box wines.  The latest product call, issued on December 6, 2021, was for up to eight new bag-in-box products, included up to six imported products. Canada also assured the EU that Ontario has since moved away from this approach and in the future, the LCBO will manage bag-in-box products as it would for other product formats. This includes working closely with producers to ensure sales targets are being met and making assortment changes in response to consumer demand.

The EU expressed concerns with the lightweight glass policies in Ontario and Quebec and asked whether those policies apply to all domestic products, including those marketed under direct delivery programmes. Canada committed to provide information on this after the meeting.

Support programmes for the Canadian wine sector

The EU inquired as to wine support programs at the federal and provincial levels. Canada confirmed that, as part of Budget 2021,CAD $101 million  over two years, starting in 2022-23, for Agriculture and Agri-Food Canada to implement a program that will support wineries in adapting to ongoing and emerging challenges. The EU welcomed the update, asked Canada to provide more details on the programme when they become available, and expressed its hope that any new wine support programs would meet Canada’s trade obligations. As regards support programmes by Provinces, Canada offered to collect the information from the provinces and provide information after the meeting.

Canada Free Trade Agreement – Working Group on Alcoholic Beverages

Canada provided an update on the work of the Alcoholic Beverages Working Group created pursuant to the Canadian Free Trade Agreement. The Working Group is tasked with identifying specific opportunities and recommendations to further enhance trade in alcoholic beverages within Canada, while being mindful of social responsibility and international trade obligations. Canada confirmed that several Canadian jurisdictions have been collaborating on a working group to explore feasible models for interprovincial direct-to-consumer (DTC) sales of alcoholic beverages for personal consumption. Those jurisdictions are now prepared to accelerate this work and form an implementation taskforce in the coming months. The EU encouraged all Provinces and Territories to abide by Canada’s international obligations and, in particular, align their approaches to the National Treatment principle.

Amendment to Annexes I, III and IV to the 2003 Agreement on trade in wines and spirit drinks

Canada and the EU both expressed their willingness to amend the annexes of the 2003 Agreement between the European Community and Canada on trade in wines and spirits drinks (hereinafter the 2003 Agreement), incorporated into CETA, with regard to geographical indications (GIs) and oenological practices. The amendment would be pursued by way of a Decision of the Joint Committee established under the 2003 Agreement. Through that amendment, the Parties intend, inter alia, to add to the relevant annexes the GIs from the European Union where a request has been made directly with the Canadian Intellectual Property Office (CIPO) and protected in Canada by the date indicated below. More specifically, for EU GI terms that are not currently protected in Canada, the amendment will be undertaken following this process:

Should that approach be successfully implemented, the Parties may consider subsequent updates following a similar approach.

Geographical indications

The EU called upon Canada to amend two pieces of regulations regulating the terms “méthode champenoise” and “cidre champagne” to align rules to practice with respect to the protected geographical indication “Champagne”. Canada confirmed that Quebec does not allow the marketing of products whose labels use the term “Champagne Method/ méthode champenoise” in the province and that the Québec government committed to amend the province’s regulation, which refers to “méthode champenoise” at the opportune moment, which owing to the ongoing pandemic has been difficult. In regards to the federal regulation, Canada informed the EU that the Canadian Food Inspection Agency’s Forward Regulatory Plan (2021-2023) to amend the Food and Drug Regulations (creating an agile framework for compositional standards), is projected to be pre-published in the Canada Gazette, Part I this fall. A public comment period will be available for Canadians and other interested parties to provide feedback on the regulatory proposal.

Canada provided positive updates on GI enforcement, including successful cases of the removal of terms alleged to infringe GI rights in the Canadian market, and a recap from the successful meeting with Irish stakeholders on January 22, 2021, where Irish stakeholders appreciated better understanding Canada's GI system and the presentations from Canadian officials. With regards to Canada's questions on the protection of Irish Whisky and Scotch whisky post-Brexit, the EU confirmed both these GIs are protected in the EU, the main difference being that Scotch whisky is protected under the EU as a third-party GI.

Health policy developments - Ingredient and nutritional labelling for wine and spirits

Canada provided a presentation on the updates to the national low-risk drinking guidelines and standard drink information which are currently being reviewed by the Canadian Centre for Substance Use and Addiction. The results of the study are expected later this year, with a public consultation expected this spring.

The EU provided a presentation on the EU’s Beating Cancer Plan. The plan aims inter alia to reduce harmful alcohol consumption in line with the UN Sustainable Development Goals and, in that context, envisages action on the nutritional and energy labelling obligations for all alcoholic beverages, as well as taxation and marketing.

The EU confirmed that, as a result of the CAP reform, the obligation to provide nutritional information and the list of ingredients for wine and aromatised wine products will become applicable at the end of 2023. Those rules allow the provision of the nutrition declaration and ingredients list online, as long as the energy value (in KJ and Cal) and allergens appear on the physical label. The European wine and spirits industry associations have collaborated to create an online platform called “U-Label” that any producers (EU or non-EU) may use to implement the upcoming information requirements via a QR code. The EU confirmed also that, in line with the EU’s Beating Cancer Plan, a public consultation with regard to nutritional information for all alcoholic beverages (list of ingredients and nutritional information) was open for comment until 7 March.  Canada sought clarification on the consultation process in an effort to reduce any potential trade barriers.

The EU confirmed that health warnings on alcoholic beverages are currently not covered by EU rules on food labelling and may thus still fall under the authority of EU Member States. Canada expressed concern with the lack of harmonized approach for health, nutritional, and energy labeling for wines and spirits, and sought assurance that the EU would seek a harmonized approach so as to minimize further impacts to trade.

EU product environmental footprint

Canada continues to seek additional information on the Product Environmental Footprint Rules for Wine (PEFCR) which expired on December 31, 2021. The EU confirmed that the wine PEFCR secretariat had not informed the Commission of their intention to update to PEFCR by the end of the pilot phase. Canada referred to a letter from the World Wine Trade Group expressing concerns with the EU’s Product Environmental Footprint.

EU sustainable packaging measures for wine and spirits

The EU informed Canada that it is currently reviewing the Packaging and Packaging Waste directive, with a view to stimulate reuse and waste prevention with possible new targets. The Commission carried out an open consultation in 2020-2021 and is currently assessing policy options. Canada evoked the problems with a lack of harmonized approach and shared its concern that these sort of competing systems will effectively become barriers to trade.

Common Agricultural Policy reform: implications for wine

The EU provided an update on CAP reform implications for the EU wine sector. New CAP rules stipulate that each Member States must prepare a CAP strategic plan, to be approved by the European Commission, and is required to allocate at least one action and minimum 5% of the EU support to meet the objectives in favour of protection of environment, adaptation to climate change, improving sustainability of production systems and processes, reduction of environmental impact of the Union wine sector, energy savings and improving global energy efficiency in the wine sector. As part of the CAP reform, Regulation 2021/2117 also introduced various changes to the Common market organisation regulation (Regulation 1308/2013) as regards the wine sector. Canada sought assurances that industry support provided by the EU respect international trade obligations.

Excise duties in the European Union

The EU updated Canada on recent developments in the EU excise tax regime, notably in regards to changes introduced by Council Directive (EU) 2020/1151, which Canada highlighted during the 2020 meeting, introducing the possibility for Member States to apply reduced excise rates in the EU. The EU assured Canada that whenever EU Member States choose to apply reduced excise duty rates to independent small producers, the reduced rate will equally be applied to foreign independent small producers. The EU confirmed that non-EU producers can benefit from the reduced rate via self-certification, provided that they comply with the criteria established in Council Directive 92/83/EEC. The EU agreed to provide additional links and details regarding self-certification for independent small independent producers following the meeting.

Canada reiterated its concerns related to reduced excise duties applied in France, Portugal and Greece regarding traditional alcoholic beverages. Specifically, for rum from French outermost regions, the EU explained that the reduced excise duty rates regime remains authorised until 2027. The EU informed Canada that, before the renewal of the authorisation in 2020, the Commission had commissioned an independent study, which found that the regime was indeed economically and commercially important for the regions, while having a negligible impact on international trade. The EU committed to sharing the publicly available reports with Canada. Canada welcomed the EU’s openness and considered that these sorts of measure are not dissimilar to some measures found in Canadian jurisdictions.  Finally, Canada underscored that, the benefit of these measures applies to up to 153. 000 hl of pure alcohol per year, a volume Canada considers as very significant and greater than the volume of the measures of concerns identified by EU.

Time and venue of next meeting

Both Parties agreed that, in light of the ongoing pandemic, it was premature to agree upon a time and place for the next committee meeting, however it was notionally agreed that early in 2023 would be suitable.

Participants

Canada

Co-chair: Deputy Director, Technical Barriers and Regulations Division, Global Affairs Canada
Global Affairs Canada: Technical Barriers to Trade, Intellectual Property Trade Policy, Trade Agreements Secretariat, Mission of Canada to the EU

Agriculture and Agri-Food Canada: Technical Trade Policy
Canadian Food Inspection Agency: International Affairs Branch
Privy Council Office: Intergovernmental Affairs
Health Canada: Office of Drug Policy and Science

Provincial authorities: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, Nunavut

European Union

Co-chair: European Commission, DG Agriculture and Rural Development, Head of unit The Americas
European Commission services: DG Agriculture and Rural Development, DG Trade, DG Taxation and Fiscal Union, DG Environment, Delegation of the European Union to Canada

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