Australian wine producers are hoping to claw back revenue lost from China when the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) goes live later this month.
Wine exports to China dropped by 92 per cent to $21 million in the year ending September 30, due to COVID disruptions and Beijing slapping tariffs on Australian wines.
The AI-ECTA presents Australian wine producers with a “significant” opportunity to boost wine exports and sales, experts told The New Daily.
Under the AI-ECTA, which comes into effect on December 29, tariffs on imported Australian wines to India will be reduced from 150 per cent to 50 per cent over 10 years for bottles valued over $7.
For bottles valued over $22, tariffs will be reduced to 25 per cent over the next decade.
The trade agreement opens up a valuable market for Australian businesses and consumers.
“The free trade agreement will deliver tariff reductions across several major sectors crucial to Australia,” Ian Hall, professor of international relations at Griffith University, told TND.
“Some of these reductions are immediate, and some will happen over the next decade, but as they occur, they’ll open up a very substantial market for Australian goods and services.”
Snapshot – India
More than one-seventh of the world’s population lives in India. In 2020, the population was estimated to be 1.38 billion people, with India set to overtake China as the world’s largest population within 40 years.
Compared to other countries, it has a low median age (28.4 years) and a small proportion of older people. This, coupled with rising life expectancy, has resulted in rapid population growth.
Wine is increasingly popular in India, especially among the middle class.
According to Euromonitor’s Export Market Development Guidebook for India, wine consumption is expected to grow from 29.2 million litres in 2020 to 55.5 million litres by 2025.
Increasing urbanisation, a taste for imported wine, and a shift away from hard spirits are all driving consumption.
Some Indian states still remain “dry”, but traditional taboos around the consumption of alcohol are shifting.
“India’s young and increasingly wealthy population is driving increased demand for refined, premium imported products. Simultaneously, sensitivities around alcohol consumption are easing (particularly by women). Wine consumption is becoming a symbol of wealth and status,” Australian Grape and Wine chief executive, Lee McLean, said.
“As the economy grows and the middle class expands, consumers are tending to favour alternatives to hard spirits and beer – leading them to wine,” Mr McLean said.
“The benefits of the agreement will apply mostly to exporters of high-value wines. There will be opportunities for producers – large, medium or small – if they are exporting high-value wines.”
In the 2021 calendar year, India imported 5.6 million litres of wine, up 84 per cent from the previous year. Australia was the main contributor to this growth.
In the 12 months to the end of September, Australia exported 3.6 million litres of wine, valued at $16.2 million, to India. This was an increase of 41.5 per cent in volume and a 48 per cent increase in value on the previous year.
Other sectors
Other big winners from the trade agreement include sheep graziers and producers of barley, oats, peas, beans, fruits and nuts, who can look forward to tariff-free access within the next few years.
National Farmers’ Federation president Fiona Simpson told TND: “The trade agreement strengthens the agricultural sector’s push for market diversification, which in turn bolsters Australia’s economy.
“Australians will also benefit from potentially lower prices on goods imported from India because of the tariff reductions.”
Access will also open up for miners of coal and various metals, as well as so-called critical minerals like lithium and cobalt.
Seafood producers will benefit from substantial tariff reductions, too.
“Importantly, there will be an elimination of the 30 per cent tariff on entry in force for fresh rock lobsters and elimination of tariffs over seven years for other fresh, frozen and processed seafood products including Tasmanian Atlantic Salmon, tuna and frozen rock lobster,” Seafood Industry Australia CEO Veronica Papacosta said.
Future deals
Professor Hall says that the agreement represents a “diplomatic coup”.
“India has very few such agreements and Australia has succeeded in securing a deal well before competitors like the UK.
“I don’t think it will propel bilateral trade up to the levels we presently have with China or even Japan.
“But the agreement will assist us to build more resilience into Australian exports and should pave the way to a broader agreement encompassing services, which has the potential to have a much bigger effect.”
