Wine and North America

THE UNITED STATES MARKET CONTINUES TO SHOW SIGNS OF WEAKNESS IN THE FACE OF DOMESTIC OVER-SUPPLY AND THE ON-GOING TRADE TENSIONS WITH CHINA AND EUROPE IMPACTING ON EXPORTS. ACCORDING TO WINE AUSTRALIA DURING THE LAST 12 MONTHS, EXPORT VOLUME OF AUSTRALIAN WINE DECLINED BY 14 PER CENT TO 138 MILLION LITRES (15.3 MILLION 9-LITRE CASE EQUIVALENTS), LEADING TO A 15 PER CENT INCREASE IN AVERAGE VALUE TO $3.05 PER LITRE FOB. EXPORTS TO THE UNITED STATES WERE $352 MILLION DURING THIS PERIOD – OUR THIRD MOST VALUABLE MARKET OVER CHINA AND THE UNITED KINGDOM. EXPORTS TO CANADA ALSO SUFFERED A DECLINE, FALLING 13 PERCENT IN VALUE TO $183 MILLION AND 25 PERCENT IN VOLUME TO 55 MILLION LITRES (6.1MILLION 9-LITRE CASE EQUIVALENTS). THE AVERAGE VALUE OF EXPORTS INCREASED BY 16 PERCENT TO $3.30 PER LITRE.

Words Tony Battaglene. Chief Executive, Australian Grape & Wine

Australia has invested heavily in in-market promotions in the United States over the past 12 months. Last year, Australia delivered its most significant promotional engagement in the USA, spending AU$8 million on the ‘Far From Ordinary’ campaign that targeted both trade and consumers in several key cities and culminated in the Australia Decanted event at Lake Tahoe.

‘Far From Ordinary’ was made possible with funding from the $50 million Export and Regional Wine Support Package, aiming to lift awareness and understanding of the quality and diversity of Australian wine.

On the trade war front, after finally concluding a phase one trade agreement with China, United States President Donald Trump is now turning his sights to Europe and is doubling down on his threat to levy more tariffs. While there was positive talk from both the United States and the European Union at the World Economic Forum, there are major obstacles to any agreement given the trade threats by President Trump and all his demands for striking a deal. These threats aim to decrease the trade deficit with Europe, shape policy on Iran, and negotiate a better deal.

A tit-for-tat trade war with Europe would have immediate and significant impacts on the United States with Europe their most important export market, bringing in some $469 million in 2018. Any disruption in that trade would place more pressure on producers and the domestic market.

Across the border in Canada there are also important trade developments. On 12 January 2018, Australia initiated World Trade Organization (WTO) consultations with Canada concerning measures maintained by the Canadian Government within the Canadian provinces of British Columbia, Ontario, Quebec, and Nova Scotia governing the sale of wine. This request for consultations follows earlier WTO requests for consultations submitted by the United States pertaining to measures maintained by the Canadian province of British Columbia governing the sale of wine in grocery stores.

The WTO panel for Australia’s case was established in March 2019 and two hearing have since been held. The dispute proceedings are on-going and we expect the Panel to consider and make recommendations in its report closer to the middle of the year. We also understand that there has been some discussion in the Canadian Parliament in January following the publication of an “open letter” to the Canadian Minister of Small Business, Export Promotion and International Trade, calling for a negotiated outcome with Australia.

However, we are not aware that this has resulted in renewed engagement from the Canadian Government, although the Australian Government has always made clear it is open to engaging bilaterally with Canada in an effort to resolve our dispute.

Exports to the United States were $352 million during this period – our third most valuable market over China and the United Kingdom.