Swift response by Canada is appropriate

For international trade, and wine aficionados, the operationally relevant part of the LCBO letter and the CFIA directive was the call to vendors to stop importing or selling wine from the West Bank.

Is that from the West Bank?  (photo credit: REUTERS)
Is that from the West Bank?
(photo credit: REUTERS)
Last week, the Canadian government weighed in heavily on the Palestinian-Israeli conflict: “(i) recognizing all territories captured by Israel in the Six Day War as formally occupied and (ii) determining that importing or selling products from the West Bank labeled ‘Made in Israel’ is unlawful.”
These positions were expressed in a July 11, 2017, letter from the Liquor Control Board of Ontario (“LCBO”) – an Ontario government enterprise – informing wine vendors that the LCBO had received a directive from the Canadian Food Inspection Agency (“CFIA”) clarifying that “Made in Israel would not be an acceptable country of origin declaration for wine products... from...the West Bank occupied territory.”
The letter accused two named Israeli wineries of mislabeling and directed vendors to avoid unlawful conduct by “discontinu[ing] any importation or sales of products labelled as ‘Products of Israel’ from wineries named above (or other located in the same regions.)” The letter began making rounds on July 12 on social media. Its political brazenness and the considerable legal exposure it created for Canada under international trade raised suspicion that it was fabricated or, at the very least, published without full authorization from the Canadian government. However, media reports later in the week validated the letter, but also clarified that in response to push-back from the Israeli government and advocacy groups, the CFIA backtracked on it and revoked the directive.
Specifically, the CFIA explained that it had failed to “fully consider the Canada-Israel Free Trade Agreement (CIFTA)” and that wines produced by Israelis in the West Bank and labeled “Made in Israel” are not mislabeled and may be imported and sold in Canada without issue.
In publicly reversing course, the CFIA mitigated some of the damage the letter caused to the Canadian-Israel relationship and helped reduce Canada’s legal exposure for international law violations inherent in such a politically prejudicial labeling requirement.
However, the insidiousness of the letter and the CFIA directive requires a more forceful response than offered so far by CFIA. Senior Canadian officials should disavow the LCBO letter and the CFIA directive in the clearest of terms, reaffirm their trade commitments to Israel and sanction those complicit in the letter and the directive’s publication and dissemination. Canadian wine vendors and Israeli wineries should also carefully consider pursuing a cause of action against the relevant LCBO and CFIA personnel for their interference in legitimate business relationships.
To begin with, the letter stated that “The Government of Canada does not recognize Israel’s sovereignty over the territories occupied in 1967 (the Golan Heights, the West Bank, East Jerusalem and the Gaza Strip).” Grouping these territories together is odd. It implies that Canada views Israel as continuing to occupy the Gaza Strip, despite not a single Israeli being present there (other than Hamas captives) and despite the region sharing a border with Egypt. It also oddly distinguishes east Jerusalem from the West Bank, despite east Jerusalem forming a part of the West Bank.
Even the LCBO letter’s use of the definitive article “the” (i.e., “over the territories occupied in 1967”) is highly contentious, as it indicates that the Government of Canada does not recognize large parts of Jerusalem, including the Old City and the Western Wall, where the US president visited last May, as part of sovereign Israel. By employing the seemingly innocent word “the,” Canada went far further than UN Security Council Resolution 242, the major UN resolution adopted in the aftermath of the Six Day War in 1967, and last year’s dramatic Resolution 2234, adopted pursuant to former US ambassador to the UN Samantha Power’s abstention.
Those UN resolutions were careful not to brand all territories captured by Israel in 1967 as occupied and requiring withdrawal, prudently leaving delimitation decisions to negotiations between Palestinians and Israelis.
By contrast, the letter penned by LCBO, in accordance with the CFIA directive, shirked caution, employing instead the politically charged definitive article “the” and implying that all territories captured in the Six Day War are formally occupied and require Israel’s withdrawal.
For international trade, and wine aficionados, the more operationally relevant part of the LCBO letter and the CFIA directive was the call, later reversed, to vendors to stop importing or selling wine from the West Bank labeled “Made in Israel.”
While the labeling directive was couched in formalistic consumer protection, country of origin and import rules, it is in fact patently political.
In its retraction of the letter, the CFIA pointed to the Canada-Israel Free Trade Agreement, under which labeling products from the West Bank as “Made in Israel” is permitted. However, the CFIA directive would not only have violated Canada-Israel bilateral trade terms, but Canada’s international obligations under the World Trade Organization. This is a point worth stressing, lest other WTO members consider imposing similarly illicit labeling requirements targeting Israel (such as EU members contemplating implementation of EU labeling directives that single out Israel).
Specifically, the “Technical Barriers to Trade Agreement” protects politics-free global trade by limiting the labeling restrictions WTO members can impose on imports.
The agreement requires that WTO members afford no less favorable import rules to fellow members (such as Israel) than they afford to other countries importing like products.
Thus, in the case of the CFIA directive, a violation would have existed unless Canada could have demonstrated that it applies the draconian labeling restrictions in a consistent and non-discriminatory manner across the hundreds of other political conflicts worldwide; this would require de-shelving products labeled “Made in Russia, China, Turkey, Morocco or other countries,” whenever those products originate in the many regions embroiled in territorial disputes.
The WTO agreement further limits trade-restrictive measures to legitimate government objectives, provided the measure is the least restrictive means of obtaining that objective. However, the CFIA ban on importation and sale of the wine products would not have been the least restrictive means of obtaining the letter’s stated objective, namely, preventing consumers from being misled.
This objective is illegitimate because encapsulating political positions within country of origin marking rules is not a legitimate matter of consumer protection.
Moreover, consumers who care about these issues are simply not at risk of being misled; wine bottles almost always have addresses on them or other markings indicating where the wine is actually produced.
In fact, the specific wineries targeted in the LCBO letter are named after the West Bank regions where their vineyards are located and the wine bottles themselves are typically labeled to proudly exhibit that the wine originates in the West Bank.
However, even if, arguendo, the objective of the measure was deemed to be legitimate, the measure still fails to pass muster because banning imports and sales is very clearly not the least restrictive means of fulfilling the professed consumer protection objective. A less restrictive measure would be to simply require vendors to notify consumers of where the wine was actually produced, such as by placing stickers on the bottles to indicate that the wine originates in disputed territories.
In light of just how politically aggressive the letter was, and because of the CFIA directive’s violations of the Canada-Israel Free Trade Agreement and the WTO Technical Barriers to Trade Agreement, a strong and swift response by Canada is appropriate. Senior Canadian officials should disavow the letter and the underlying labeling directive and should strongly reaffirm their trade commitments with Israel. At the same time, the CFIA and LCBO officials should be sanctioned appropriately. Finally, Canadian vendors and Israeli exporters should carefully consider what legal rights they have for the interference the letter and the CFIA directive caused to their business relationships.
The author is an international trade attorney in Washington, DC, and frequently writes on international trade law dimensions of the Arab-Israeli conflict.