A 44% lift in the grape harvest has provided a sorely needed boost to supply lines, with winery stocks at "rock-bottom levels" after a low yielding 2021.
While the final text has yet to be signed, we understand the agreement, in a dedicated wine annex, will address a number of the EU wine trade issues we have been concerned about for many years.
The EU FTA announcement comes on the heels of the UK FTA deal earlier in the year. Together these two deals will improve access into markets where wineries sell around $600 million of wines each year, or a little over 30% of total exports - that has got to be good news for exporters.
Exactly when the two agreements will come into force is not yet clear. Our current understanding is that the UK deal will become operative later this year, while the EU arrangement is on a longer track, possibly 2024. These new deals are further milestones in our long-running quest to improve access for our wines into global markets. This access underpins the ability of our growers and winemakers to grow grapes and make wine in New Zealand, for sale all around the world. Given the importance of these deals it is worth taking a moment to reflect on the journey to date, and what the future may hold.
Our market access journey
The starting point for this journey was the realisation in the early-mid 1980s that to prosper the industry needed to be competitive on the global stage. That meant the New Zealand industry believing in, and supporting, open and competitive markets, and as part of that accepting imports were going to be part of that accepting imports were going to be part of the wine landscape in our own domestic market. The key step taken at the time was the Closer Economic Relations (CER) trade agreement with Australia, which just like the new EU FTA, contained a specific wine annex governing, in this case, the future trade in wine between Australia and New Zealand.
The next major step in the 1990s was the development of the joint Food Standards Code between New Zealand and Australia. That process enabled us to develop a modern and permissive set of rules governing the sale of wine in New Zealand and Australia that may have been produced anywhere in the world. The philosophy was that if we had an open, modern and permissive wine regulatory system, this would permit and encourage innovation in our sector, enhancing and supporting our goal to be globally competitive.
Next, was taking those new trans-Tasman wine standards and seeking mutual acceptance for them with like-minded countries. That goal culminated in the Agreement on Mutual Acceptance of Oenological Practices (MAA) signed by New Zealand in 2001 with other members of the World Wine Trade Group (WWTG). The arrangement, which is still in force today, enables New Zealand winemakers to produce wine in New Zealand according to our own winemaking rules, and then sell those wines in countries such as Australia, USA and Canada - there is no need to comply with the winemaking rules of those countries, rather each Treaty signatory mutually accepts the winemaking rules of all the other parties. This landmark arrangement greatly simplifies winemaking requirements and rules for exporters; it provides real certainty for our producers.
The final step has been to take that modern, permissive approach to winemaking rules and imbed both the principles and the detail into FTAs. This is the approach we took to the China FTA over a decade ago, and to the more recent CPTPP, EU and UK negotiations. While we haven't been able to obtain mutual acceptance arrangements in FTAs, our push has always been for modern and permissive winemaking rules, that do not create technical trade barriers (for no good reason) nor excessive certification/labelling requirements, and that support innovation in our sector.
When the new UK and EU FTAs become operative, over $1.1 billion of New Zealand wine exports will be to countries with whom New Zealand has an FTA. Of our major export markets, only the USA will not have an FTA in place, but while we don't have tariff free access to that market, fortunately we do have the MAA which provides certainty and flexibility on winemaking rules when exporting there.
So, what is next on the market access road? It is important to remember that such agreements take a very long time to negotiate, so we need to look into the future. Along the way there will be the need to upgrade existing FTAs (as achieved recently with China), and there would be benefits from a deal with the USA, our largest market by some margin.
The likes of India and Brazil are long-term market prospects, while improved access into markets such a Switzerland would also be beneficial. We also need to be wary of the tendency of countries to introduce new and different trade barriers even when there are agreements in place, so we definitey need to keep a watching brief on those matters. It is also possible that other countries may join the WWTG and sign the MAA, which would provide benefits separate from an FTA.
With our global reputation for distinctive, premium quality and sustainable wines, we have always been confident that New Zealand wines can compete well in any market if they get the opportunity to do so on a free and fair basis. FTAs are about providing that opportunity to exporters. On that basis we should all warmly welcome the new UK and EU deals, and look forward to more and even better arrangements in the future.