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Industry welcomes UK’s free trade deal with Australia

The WSTA has welcomed the free trade deal that the UK has signed with Australia, which will see tariffs on wine  and other goods wound down over a 15 year period. 

Australia wooden sign with winery background

Currently wines imported from Australia and New Zealand into the UK are subject to a tariff which works out at about 10-12p on a bottle of still wine and 22p on sparkling wine, according to stats from the WSTA, while British spirits – primarily gin and Scotch – being exported down under see an extra 5% of the value of their products slapped on top.

The WSTA described it as a “political moment” that showed the headline parametres had been agreed, although the finer details would not yet be available. The FTA will need to be ratified by each country’s Parliament, towards the end of the year, and as a result, the earliest tarrifs are likely to be removed is halfway through 2022.

The deal is the first free-trade agreement signed by the UK since it left the EU (other agreements have purely rolled over the existing EU legislation).

According to analysis of HMRC figures by the Food and Drink Federation (FDF), wine is Australia’s second largest import to the UK (after gold) and in 2020 the equivalent of 230 million bottles were sold in UK shops and supermarkets, worth £1.5 billion in sales. Meanwhile Australia and New Zealand import more spirits from the UK than any other country, with Scotch sales worth around £113m in 2020 (down -3.17% from £117m in 2019) and around £27m worth of British gin to Australia (one of the few markets to continue growing during the pandemic).

The WSTA’s chief executive Miles Beale said the benefits of a tariff-free, quota-free UK-Australia trade deal was great news for British producers exporting English wine and spirts to Australia, as well as good news for importers. Currently, around 80% of Australian wine arriving in bulk, thereby supporting a huge industry including bottling plants and logistics networks, marketing and promotion services.

Removing the tariffs and cutting unnecessary regulatory barriers will therefore support a wide range of jobs across the UK’s wine industry.

“It will enhance the UK as a global hub for wine trading, and will ultimately benefit UK consumers too,” he said. ”

Julian Dyer, chief operating officer for Australian Vintage Ltd, said the signing came as both nations embark on their respective post-COVID economic recovery and would provide “huge benefits” to both the Australian wine industry and the British consumer.

“The deal will allow Australian business like ours to compete and innovate more successfully, which will ultimately reduce the cost and increase the number of higher-quality wines for British drinkers,” he said.

Simon Lawson, General Manager of Casella Family brands, Australia’s largest family-owned wine company, said the deal would  further strengthen UK consumers love affair with Australian wine by removing unnecessary tariffs.

“As a family run business with an eye on the long term, this deal will renew our commitment to investing in the UK for our leading brand [yellow tail], our premium wines and our hub for the wider European market,” he said.

Prior to the deal Australian wine imported to the UK was subject to hefty tariffs which cost UK wine businesses an estimated £16 million. The tariffs plus VAT translate to an added burden of 10p to 11p per bottle, depending on ABV.

Re-exporting wine bottled in the UK means that total wine exports from the UK were worth £646 million in 2019, helping to explain why wine was the UK’s sixth largest food and drink export in that same year.

In 2019, total sales of Australian wine contributed £770m in duty and VAT to the Exchequer.

Speaking to db ahead of the signing, a spokesperson for the SWA said that that Australia was an important market for Scotch Whisky – by value, the 8th largest in the world.

“Over the past decade, exports of Scotch Whisky to Australia have almost doubled in value, but remain subject to a tariff. This puts Scotch Whisky at a disadvantage compared to other spirits, like US whiskey, which do not face a tariff. The industry would welcome a UK-Australia FTA as an opportunity to eliminate tariffs on both sides, strengthen legal protection for Scotch Whisky and as a stepping stone to the UK joining CPTPP [The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a trade agreement among Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam],” she said.

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