Wineries call for more government support as Chinese tariffs roll on

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Australia’s wine industry is calling for the federal government to provide more help in finding new export markets and for a fairer playing field for grape growers as the sector waits for Canberra to strike a deal with Beijing that would remove harsh tariffs of over 200 per cent.

Lee McLean, chief executive of national industry association Australian Grape & Wine, said he would keep speaking with the government about ways to support the struggling industry, which is grappling with a two-year red-wine oversupply.

“We really do need some co-investment with government around trying to build new markets around the world,” McLean said. “That really does need to keep going over the foreseeable future because I think all agriculture would benefit from that approach, and certainly we would.”

Rotting chardonnay grapes in 2005: Australia is once again grappling with a wine glut.Credit: Mark Dadswell/Getty Images

Recent announcements that China had removed tariffs on barley and hay have sparked optimism that the same will happen for wine. The heavy import duties came into effect in March 2021 and cut access to an export market worth $1.3 billion virtually overnight, crippling many wine producers and grape growers, particularly those from the warmer inland areas of the Riverina, Riverland and Murray Darling, which produce bulk red wine. Many have left the industry altogether.

The federal government has introduced a number of grant programs, including the cellar door grant, the wine tourism grant and export market development grants.

A spokesperson for Agriculture Minister Murray Watt said the government had supported more than 200 wine businesses with $50 million through these grants in the past five years and provided a further $15.3 million in the 2021 financial year for research and development.

“The government recognises the Australian grape and wine sector is facing challenges, including an oversupply of red wine grapes in some parts of the country,” the spokesperson said. “The government is committed to working with industry to expand market access, diversify trade and grow demand for Australian wine.

“Through our trade diversification agenda, the government is actively seeking greater regional trade opportunities and pursuing free trade agreements [FTAs] to grow and improve our market access and remove barriers to trade.”

Shadow minister for agriculture David Littleproud, who was the agriculture minister in the Morrison government when Beijing imposed its tariffs, said the current government needed to continue to support the wine industry, which he said had suffered the “harshest brunt” of China’s trade actions during that period.

“I think it’s beholden on the government to work through constructively as we did when it first hit. But this has lingered on for far beyond what was foreseen.”

Nationals leader David Littleproud was minister for agriculture when the tariffs were imposed.Credit: Alex Ellinghausen

Asked whether his government had done enough, he said, “We did everything the industry asked us to.”

“So if the industry is now saying that, if we can get back into that market … we need to respect that, we need to work with industry about what gets them to that point.”

The Department of Foreign Affairs and Trade is continuing talks with Chinese counterparts to negotiate a resolution to the wine dispute. Late last month, Watt batted away a reported package deal proposal from Beijing in exchange for better treatment of wind towers, railway wheels and stainless-steel sinks.

Watt told the ABC’s Insiders program that they were “entirely separate matters” and the government would pursue its World Trade Organisation case against China’s wine tariffs but hoped the matter would be resolved by dialogue.

In April, Beijing and Canberra requested the WTO suspend the case on barley in order for Beijing to conduct an expedited review of its tariffs, which were lifted in early August. Five days ago, China removed its ban on Australian hay.

“We are working hard to secure a similarly positive outcome for our wine producers, engaging actively with China towards a mutually agreed resolution of our wine dispute. A full resumption of trade would benefit both Australia and China,” a DFAT spokesperson said.

“Pending that negotiated outcome, we are continuing to pursue our wine case at the WTO, confident in a positive outcome.”

Closer to home, Riverina Winegrape Growers chair Bruno Brombal is hoping to arrange a meeting with the competition watchdog to move towards legislating the industry’s code of conduct, which is voluntary and means wineries are not being held to the same standards.

“We’ve got wineries that have signed, and a lot of them haven’t signed. It’s a different kettle of fish, how they work with growers,” Brombal said. “At least if we’ve got the mandatory code, every grower will be treated exactly the same between one winery to another winery, and we want growers to be treated pretty well equal.”

Bruno Brombal.Credit: Kate Geraghty

A mandatory code would mean an independent arbitrator would be able to mediate disputes between growers and wineries and shorter payment terms. Some grape growers have been forced to wait more than two years for payment.

The Australian Competition and Consumer Commission expressed concerns about delayed payment times in a 2019 wine grape market study report and a follow-up report in 2021.

“Australia’s current fair trading laws prohibit a range of conduct, such as misleading or deceptive conduct, unconscionable conduct, and unfair contract terms. Delayed payments terms may be unfair contract terms under the Australian Consumer Law where they are in standard form contracts,” said an ACCC spokesperson.

Stronger laws about unfair contract terms, which include higher penalties for businesses that include unfair terms, will come into effect next month.

“The implementation of a mandatory code of conduct or other policy reforms is a decision for government,” an ACCC spokesperson said.

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