Wine and tourism to benefit

BOTH Western Australia’s wine and tourism industries are emerging as big winners from the Australia US Free Trade Agreement negotiations.

The resources sector also could benefit from a substantial hike in current foreign investment constraints as well as the elimination of tariffs on metals and mineral exports into the US.

Leeuwin Estate winery founder Denis Horgan told a WA Business News forum on the Australia US Free Trade Agreement earlier this week that it was a “godsend” for quality WA wine producers.

Mr Horgan, who is a past president of the WA Wine Industry Association and sits on the board of the Winemakers’ Federation of Australia, said quality WA wine producers were focusing on the American market because high domestic taxes and competition with much larger eastern States producers were pricing them out of the local market.

“Therefore the little blokes are carrying an excessive burden, whereas that does not apply to export and that is why quality Australian producers have been focusing on the American market,” he said.

The US is currently the largest importer of Australian wine. Last year $870 million worth of wine was exported there.

If the FTA is ratified, tariffs of 6 cents a litre to 20 cents a litre on wine into the US, will be phased out over 11 years – something the Winemakers’ Federation of Australia estimates will reduce costs by $30 million a year.

Mr Horgan said besides lowering wine producers’ costs of going into the US market, the FTA would also add a degree of certainty. 

“It costs you a lot of money to establish particularly in percentage terms if you are a small producer in any country, let alone America which operates like 48 countries because of peculiar interstate regulations,” he said

As a result of the FTA, Mr Horgan said the US market should become even more of a prime target for WA wine.

“If you look at Western Australia’s perspective we have to increase our exports about seven times just to absorb the volume of wine that is coming through the system,” he said.

WA Tourism Commission CEO Richard Muirhead said the local tourism industry would benefit from FTA spin-offs such as wine through an increase in trade activity between the two countries.

The US is WA’s third or fourth largest international tourism market with long visitation periods and a high yield.

“The benefits are secondary – the spin off – but I think they are very much there,” Mr Muirhead said.

He also said it was hoped the relaxation of Australia’s Foreign Investment Review Board’s US investment threshold would encourage more US investment in WA tourism products.

“WA and Australia are sadly lacking in foreign investment in tourism,” Mr Muirhead said.

The resources sector is also an area that could benefit from this move. The FIRB’s previous limit on foreign investment was $50 million, however, under the FTA that will increase to $850 million – with an exception on sensitive investments such as telecommunications and urban property.

For US greenfield investment there will be no threshold.