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19/11/2014

Warm welcome to China free trade deal

The end of negotiations on a China-Australia Free Trade Agreement was marked with a ceremony at Parliament House and the signing of a Declaration of Intent by Andrew Robb, the Australian Trade and Investment Minister, and Gao Hucheng, the Chinese Commerce Minister. This formalised the conclusion of the negotiations and cemented the intent of both Australia and China to take the necessary steps towards bringing the Agreement into force.

The news has been warmly welcomed across the wine industry. Tariffs on Australian wine exports would be reduced to zero within four years. The tariff removal will allow Australia to be more competitive in the growing Chinese wine market, particularly with Chile and New Zealand who already have reduced or zero tariffs as a result of their own FTAs with China already in place.

Currently the tariff on Australian wine exports to China is 14 per cent for bottled and 20 per cent for bulk wine meaning the economic benefits to the wine sector as a result of this agreement are significant.

Andreas Clark, AGWA’s Acting CEO said, China continues to hold enormous potential for Australian wine exports and “after the recent contraction of the Chinese wine market and the impact of their government austerity measures, particularly on wine at higher price points, this is a very positive result for Australian wine”.

“The wine culture in China is still developing but more and more Chinese consumers are starting to discover and appreciate wine. This FTA means it will be that much easier for us to ensure that as these consumers learn more about wine, it’s Australian wine they’re drinking.”

Last year Australia exported close to 37 million litres of wine to China, valued at $210 million. Growth across the past five years has been eight per cent for volume and 17 per cent for value and Australia currently has the highest average-valued wine exports to China of the 10 largest bottled wine suppliers to that market.

AGWA’s marketing arm Wine Australia, has a dedicated office in Shanghai and executes an annual calendar of marketing activity in some of China’s largest cities and provinces. Wine Australia recently announced the winners of its second annual Wine Australia China Awards which recognises the efforts of those who have helped promote Australian wine in the Chinese market.

Tony D’Aloisio, the Winemakers’ Federation of Australia president, said the agreement was a significant breakthrough, which had the potential to add tens of millions of dollars to the Australian wine industry’s export earnings.

“Bilateral negotiations with China have been long and detailed,” D’Aloisio said. “Ending the import tariff in China has been high on our wish list for a number of years and the subject of many meetings and discussions with government, particularly in the face of the preferential trade terms enjoyed by some of our competitors,” he said.

“While we will need to see the finer details of the China trade deal, reducing the import tariff opens the door for market growth.

“As part of the deal, we expect the current import tariff of 14 per cent for bottled wine and 20 per cent for bulk wine to be phased down to zero over four years and I cannot stress the significance of this enough.

“Taking out the import tariff will put Australia on par with Chile which will be tariff free from next year and New Zealand which has had no tariff since 2012.

“This will be potentially a game changer for Australian wine exports to China. It will directly benefit commercial and bulk wine and present an opportunity for higher priced wine to re-engage with wine buyers and retailers.

“It will create a level playing field when it comes to price and value and in that environment the Australian wine producer stands out in the crowd every time.

“Following on from the Japan trade deal and the announced Korean-deal due to be ratified shortly, China gives us the winning trade trifecta for 2014.

Australian Agriculture Minister, Barnaby Joyce, said the announcement was an historic one. “This agreement provides our agriculture sector with significant advantages over major competitors like the United States and the European Union who don’t have free trade agreements with China,” Minister Joyce said. “It also closes the gap between Australia and those who do have agreements – like New Zealand, and Chile.

“The tariff reductions will increase our competitiveness in the market and increase returns to our producers. Importantly, the agreement has a built-in review process so that three years after it enters into force, Australia and China will discuss further market access.

“And it isn’t an endpoint – it’s a beginning of a new relationship with China and one which we will use to continue to press for improved market access for our producers and exporters.

“At the same time, we will have to work hard to capitalise on those opportunities from the FTA’s with China, Japan and Korea.”

Mike Stone, the Murray Valley Winegrowers chief executive, said the free trade deal will provide impetus to Australia’s marketing push into Asian markets, which is the fastest-growing segment for Australian wine.

“We have trade deals in place with South Korea, Japan and now China, which combined must be regarded as a breakthrough for an industry that’s been losing market share for the past few years,” Stone said. “Long-term, the free trade agreements and declining value of the Australian dollar should aid recovery of the winegrape sector.”

Stone said the free trade agreement with China is a breakthrough for the wine industry that offers growers some hope of recovering from years’ of unprofitable production by making Australia more competitive against the likes of France, Chile, Spain and United States.

The value of Australian wine exported to China is second only to France – in volume terms, Australia ranks fourth behind France, Chile and Spain.

 

Australian wine in China — quick facts:

  • In 2013–14, almost 37 million litres of Australian wine were exported to China, valued at $210 million;
  • The Chinese wine market represents 5.4 per cent of Australian wine exports valued at 11.8 per cent;
  • Growth across the past five years has been 8 per cent for volume and 17 per cent for value;
  • China is Australia’s third largest export market by value behind the US and the UK;
  • China is Australia’s largest export market by value for wine at a price point of more than A$7.50 (wholesale ex-Australia); and
  • Australian wine exported to China currently has a 14 per cent tariff on bottled wine and a 20 per cent tariff on bulk wine.

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