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NAFTA Renegotiation – Spirits

3-6-2017

Bernadette Wiltz, SUSTA
In collaboration with World Perspectives, Inc.

The North American Free Trade Agreement (NAFTA) was first approved by the U.S., Mexico, and Canada in 1993. NAFTA was implemented over the course of 15 years – coming into full force in 2008 – and is now nearing a decade as the primary blueprint for trade rules among the three countries. The new Trump Administration intends to revisit the terms negotiated under NAFTA.

NAFTA is an important trade agreement for SUSTA companies and other small- to medium-sized exporters across the U.S. Canada and Mexico are the number one and two, respectively, importers of U.S. high value and consumer oriented food products.

Mexico has already started its own internal process to prepare for the negotiations, and President Trump and Canadian Prime Minister Justin Trudeau recently met at the White House to discuss trade and other matters. Both acknowledged that there were “tweaks” to the laws governing bilateral trade between the U.S. and Canada that would likely be pursued.

One such area the U.S. is seeking to “tweak” is the barriers to U.S. wine, beer and spirited beverages, a priority listed on the National Trade Estimates Report published by the Office of the U.S. Trade Representative. SUSTA region wines have great potential to be promoted for export under the Market Access Program (MAP) 50% Cost Share and Global Events activities, and Canada is a very logical destination for future exports. Indeed, SUSTA member states Florida, Kentucky, North Carolina, Texas, and Virginia all now produce more than one million gallons of wine per year – a volume that could add meaningfully to Southern exports. There are numerous emerging quality craft beer brewers in the region as well.

Canada, however, restricts access for U.S. wine and beer through empowering provincial liquor control boards as the monopoly sellers of wine, beer and spirits. These boards have the authority to establish all distribution policies, labeling requirements, and determine which products may be wholesaled in the provinces. Moreover, the boards may establish mandatory price mark-ups; the maximum price that may be paid for imported wine and beer; minimum prices by which imports may be sold; and even force rebates from the vintners and brewers.

The U.S. exports approximately $18 billion worth of high value and consumer oriented products to Canada annually. This value does include beer and wine, but those products account for only around three percent of total exports. Streamlining the Canadian control board process through trade negotiations could provide an important opportunity to the growing number of small- and medium-sized vintners in the Southern U.S.

Here’s to toasting a successful NAFTA negotiation with a glass of fine SUSTA region wine or a hearty craft brew!