THE Australia-US Free Trade Agreement is crucial to small and medium WA wine producers, who rely on export markets to remain commercially viable.
That’s the message from the Wine Industry Association of Western Australia, which says the local industry will suffer if increased exports are not realised in the short term, due to the effects of a limited domestic market and the Wine Equalisation Tax.
WA Wine Industry Association president, and Leeuwin Estate chairman, Denis Horgan said an Australia-US Free Trade Agreement would bring important benefits to the WA wine industry through increased market access.
“It [the AUSFTA] is good for the industry as a whole, but particularly for small and medium wine producers,” he said.
“The benefits from tariff relief are not significant. It is the retention and possible improvement in market access where the benefits are.
“There are 20 companies in Australia that produce 95 per cent of the wine and account for 98 per cent of wine exports, and there are a further 1581 small and medium wineries that produce 5 per cent of Australian wine and account for 2 per cent of wine exports.
“The small wineries in Australia are being locked out of the domestic market due the Wine Equalisation Tax, which results in the small and medium wineries paying two and a half times the tax, per litre, that the 20 majors, which account for the 95 per cent of the domestic wine sales, do. They therefore have no alternative, in order to remain commercially viable, but to export their wines to overseas markets.
“The US represents the largest market in value terms for Australian and Western Australian wine producers.
“It will be disastrous if we don’t have access to the US markets, particularly for the small and medium wine producers who rely so heavily on the export market.
“In the case of WA, we export 30 per cent of our wine to America at $11.56 per litre, against $8.01 to other countries, which is well above the national average for Australian wine exports of $4.70 per litre.
“These figures reflect the quality and added value that goes into wine produced in WA.
“America is incredibly important and we do not need any impediment for the small and medium wineries to access to the US market.”
Mr Horgan said the Western Australian wine market needed a significant short-term increase in exports in order to remain viable.
“In the case of WA, we must increase our export five times within the next five years if we are to avoid a surplus in the domestic market and for producers to remain financially viable,” he said.
Wine Association of Western Australia CEO Sarah Dent said the US market was becoming an even more significant market for Western Australian wine producers.
“We see the AUSFTA as a crucial step in allowing us to grow our exports,” she said.
“In the past 12 months the US has taken over from the UK as the largest market for WA premium wine in terms of value.
Ms Dent said the three key areas in which the WA wine industry would like to see changes were tariff reduction, wine labelling and distribution.
In the case of tariff removal, she said, the industry would want to ensure the tariff removal process was implemented immediately, as opposed to the the situation with the US-Chile FTA, which took 12 years to remove tariffs
Ms Dent said labelling was another area of concern. Under the current system only one region can be quoted on Australian wine labels entering the US, compared with a blend of three regions under Australia’s domestic legislation.
She said the WA industry would seek, through the AUSFTA, for the US to permit declarations of multiple geographic regions on labels to save the cost and inconvenience of relabelling wine destined for the US.
Ms Dent said this was also the case on vintage, with all other international markets, including Europe, accepting wine blended to 85 per cent of vintage except the US, which requires 95 per cent.
Also of concern was the US’s Public Security and Bioterrorism Preparedness Response Act, which was passed in June 2002.
Ms Dent said that while the act has not yet been implemented, it would require increased paperwork on the part of wine producers who exported to the US, regardless of quantity, and that the US government would have the power to seize any product deemed suspicious.
She said there were also issues with distribution of wine in the US that required resolution.
“[With] mail order and distribution in 26 US States, it’s not legal to send wine from outside the State directly to a consumer in that State, however I can order a case of wine from the US and have it delivered to my door,” Ms Dent said.
“From an industry perspective these draconian distribution laws severely hamper our ability to sell wine to the US.
“Our whole focus is to increase exports from 10 per cent of current production to 70 per cent of production by 2007 and we need to ensure that there are no trade impediments to exports.”
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