By Amrietha Nellan
There are many reasons to love living in the Bay area-- the nearly year-round perfect weather, great outdoors, and of course, weekend trips to California’s wine country. But you don’t have to live in the area to get a taste of California wine. Today, bottles of Sonoma and Napa Valley wine are conveniently available in basically any grocery store and at price points for any budget. This unfortunately, is not the case outside the U.S. In most major international markets, California wine drinkers pay over 20 percent more simply due to tariffs imposed on U.S. wine exports to their country. Other non-tariff barriers hike prices even further. But passing the Trans-Pacific Partnership (TPP) will provide better access to California wine to nearly 500 million consumers in the Asia-Pacific.
TPP cuts tariffs on U.S. wine to zero in all six new free trade agreement (FTA) partners. Most notably, TPP cuts tariffs in both emerging markets like Vietnam, which imposes a 55% tariff, and established markets like Japan, already the fourth largest market for California wine. New access to both emerging and established markets provides opportunity for immediate and long term growth, as exemplified by the increase in California wine exports to Singapore (10% since 2013) and South Korea (40% since 2012) after U.S. bilateral FTAs cut tariffs.
Moreover, the TPP is important for California winemakers to keep their competitive edge in Japan. Top rivals, Chile and Australia, already negotiated agreements with Japan to cut all tariffs on their wine exports. Without TPP’s tariff cut, U.S. wines will be comparatively more expensive in Japan, facing weaker demand and losing market share. This price advantage cannot be overstated. Recently, Chilean wine has used lower prices to eat away at French market share in Japan, to become the top wine exporter to Japan. TPP is absolutely vital for California wine to continue its upward trend in Japan.
TPP also breaks new ground by cutting non-tariff barriers to wine exports. Labelling rules and certification account for a large portion of costs that uniquely hinder small business exporters, and TPP’s Annex 8-A makes significant improvements. This is important for the wine industry, because virtually all U.S. wine producers are small- or medium-sized businesses, and fewer than 5% of U.S. wine producers currently export. There is significant opportunity for growth, and TPP removal of trade barriers is key to unlocking that potential.
TPP solves critical problems facing our wine exporters. California wine producers can expand their market share abroad, support local jobs, and grow an iconic American industry. And for consumers living in TPP countries, it will be that much easier to taste the California lifestyle.