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Opinion: Australian wine trade looks on at a slow, painful, car crash Brexit
As if drought, forest fires, the ravages of the coronavirus pandemic on sales and being caught up in the crossfire of a diplomatic and tariff war with China were not enough, Australian wine exporters are looking down the barrel of yet another disaster: Brexit.
Their trade with the European mainland is under threat in a matter of weeks and whatever they do, they cannot now avoid what one producer has called a “car crash”.
It’s not just Australians facing a nightmare on New Year’s Day. Anyone who sends wine in bulk for bottling in the UK and then re-exports to the European Union will be hit, including the Americans, whose government has already slapped punitive duties on wines from the continent. The Aussies, however, face the biggest problem because of the size of their trade.
In their latest financial year Australian producers sold wine worth £212 million to the UK, their largest collective export market, and a further £117m to the other 27 EU member states. But 80% of that wine is shipped in bulk to Britain where it is bottled, labelled and then distributed to the UK and the Continent.
When Britain’s transitional agreement with the European Union ends on December 31, Australia’s producers will not be able to comply with the EU’s labelling and shipping documentation even if Boris Johnson’s government strikes a last-minute trade deal with Brussels. Time has run out already.
At present wine sent in bulk to Britain and then bottled here for onward shipment can carry the same label for the British and EU markets. But from January 1 EU law stipulates that wine imported to the 27-member states must bear the name of an EU importer on its labels.
It will not accept a “dual” label, showing a UK importer as well.
The EU 27 heads of government are meeting on Thursday to consider their final negotiating stance with Britain, but even if an eleventh-hour trade agreement is struck by the end of this month, as some hope, it will still be too late to avert the problem.
It is a mirror image for EU growers shipping to Britain. Their labels will need to show a UK importer’s name and address, although it is expected that Westminster will allow a period of grace for adjustment, but that is unlikely to include wines shipped into Northern Ireland. And there is no indication of how long that interim waiver might last.
The impact of the uncertainty is that Australian and other producers whose wine is bottled in Britain, face a triple burden of new compliance costs, extra red tape and losing the flexibility to switch bottled consignments between Britain and Europe quickly as market conditions and demand require.
There is even uncertainty whether any third country wine bottled in the UK will be allowed across the Channel from 1 January. Even if the EU grants an unlikely grace period on documentation and labelling, consignments are likely to be held up at the ports.
Brussels is adamant that it will not accept a temporary solution, for instance over sticking labels to name a UK distributor and another in Europe. And even such a short-term fix would cut the flexibility to quickly switch products between markets.
Wines that do not comply with EU regulations could be recalled for re-labelling at a time when one producer says margins are “incredibly thin”.
Over-sticking labels is labour intensive and expensive. Typically it can take up to two years to change permanent labelling for a widely distributed line. Nobody has heard of it being done in less than three months.
One large Australian producer is quoted as saying anonymously: “It’s incredibly complicated and incredibly expensive, if you have to separate your SKUs (bar codes) for different markets.”
And to accompany the labelling uncertainty comes at least a doubling of red tape and compliance costs. The EU’s Form VI-1, which certifies the wine has been produced to specific standards and is safe to drink, will eventually have a new British equivalent.
But nobody knows yet what information will be needed on it and there is considerable doubt about when it will be ready for distribution to producers and shippers. To rush new labelling into production for the UK market without being certain that it meets as yet unspecified regulations would be a major cost risk.
Miles Beale, chief executive of the Wine and Spirits Association, told the cross-party Parliamentary select committee on trade at the end of September: “We are still unclear about how to label our products. To have labels ready for January 1, companies need to have a label ready now. They don’t. We have no clarity.”
Since then, nothing has changed.
On a British certification form he told the MPs: “It is impossible now to get it up in time for January 1.”
And even if Johnson’s team pulls a surprise trade agreement out of the hat with Brussels, conditions for the trans-shipment of wine across the Channel will be somewhere in a very long line of details to be settled, not at the top of the list.
So who are you saying is to blame for this?
Last year Barnier said the EU would grant us a Canada style deal. Britain said fine, that is what we want. Then Barnier said, actually you can’t have that after all because we have just noticed the UK is “closer” to Europe than Canada!!!!!
We should have had a free trade deal agreed by now but we haven’t because the EU is more interested (as Francois Hollande stated) in “ punishing “ the UK for excercising democracy. If Mike Beale is really interested in getting a deal he should be actively lobbying Brussels!
It’s blatantly clear who is to blame. The politicians who lied to the public and the public that believed them. All while shouting “Project Fear”. The EU made no such promises and are not making outrageous demands. They are merely asking for similar arrangements to those the UK has just agreed with Japan while recognising the UK is on its doorstep. A Canada type deal is wholly unsuited to the UK anyway because it doesn’t have integrated supply chains any where near as complex. Even if a deal was struck, the EU would likely have insisted that wine is imported into the EU by an EU importer. It is a clear example of why Brussels is making the demands they are, to prevent the UK from flooding the EU with third country products. In the end, however, if you want British industry to lobby the EU, perhaps the you shouldn’t have voted to leave.
We realise that our Australian friends and colleagues are suffering from the Brexit uncertainty, as are USA producers, home producers and many UK partners alike. I believe that our Brexit negotiating team are doing the right things but if they give in to outrageous European demands then we all lose. Boris Johnson needs to show that he means business and that does mean that many of us may be faced with legislative and label changes at the last minute but that will hopefully be better for all in the long run. Let’s not forget that we were active members of the EU for 40 years but still many details had not been harmonised. So, sorry as we are guys, this is a painfully drawn out process. The EU and the rest of our world partners need to recognise this.
Oh, my Brexity friends. This is all completely self inflicted. The UK chose to leave the EU.
The EU doesn’t owe anything to the UK once the dues are paid, and transition period is over. No-one from the EU promised anything to the UK about a future relationship. However, those that ran the leave campaign promised everything to the UK.
You voted for this. You own it. Thank you for putting another nail in the coffin of our Trade.
Is there potential to have the wine bottled in Northern Ireland instead (part of the UK), given that they will be treated differently from the rest of the UK so as to avoid a border for goods with the Republic of Ireland? This is to allow goods to travel across the border with Ireland, ie into the EU without any disruption. Northern Ireland is for the purposes of free movement of goods across the border, staying within the EU trading system. Might be worth looking into.
I’m guessing neither Roy or Peter work in the trade looking at the ignorance in their comments. We were having these discussions internally this time last year & we’re literally no further along due to the rank incompetence of our poor excuse for a government. Brexit exceptionalism is bringing this country to it’s knees, death by a thousand cuts & all that…
There really is not point in bleating about this and I don’t know why the Drinks Industry is trawling around looking for negative comments.
I would imagine that for every one Australian producer who worries about a bit of extra label complication, there are 10 who are rubbing their hands with glee about the prospect of a No Deal Brexit.
The Chileans, South Africans, Georgians, Israelis, Swiss and Lebanese, who will be trading under FTAs and thus with an advantage over EU countries, must be positively ecstatic. (Not to mention the GB fizz Industry of course).
If we leave now without a deal it could well be a few years before one is put in place, furthermore it is almost certain that Trade agreements will be struck quicly with Australia, New Zealand, Canada Moldova and Uruguay. Members of the trade should bear this all in mind when making strategic decisions.