Speech to the Winemakers' Federation of Australia Board Dinner

ANZAC Hall, Australian War Memorial, Canberra, 17 September 2008

Thank you, David [David S Clarke AO, President WFA ], for that kind introduction. And I'd also like to thank you and your fellow members of the Board for so generously inviting me to join you tonight.

I'd like to take this opportunity to outline briefly for you how this Government is working to promote your interests, as producers and exporters of some of the world's finest wines.

And how we're working to help all Australian exporters in the agricultural sector.

The wines you and your members produce--some of which are on show here tonight--are of course remarkable for their quality.

They have made Australia a byword for excellence among consumers in over 100 countries worldwide, and they're part of the New World wine revolution that has completely changed the way wine is produced, marketed and appreciated.

Year after year, we scoop huge medal hauls at the most prestigious international wine shows, like London's International Wine Challenge—where Australians have also been named Red Winemaker of the Year for the last two years.

The contribution you make to Australia's agricultural exports and to our employment, both in the industry and in related sectors, is immensely important. Wine was our third largest agricultural export in 2007-08.

I know only too well – having in a previous incarnation served as Minister for Primary Industries – that yours can be a hard business.

Despite the technical skill, the resilience, the creative flair and the sheer hard work you bring to the business, you can be hit by setbacks.

It's not just the weather, which always guides your fortunes, including by affecting output.

It's competition from other producers, and exchange rates, and the vagaries of consumer demand.

And then there are foreign tariffs and labelling requirements and a host of other unwelcome variables.

In spite of these difficulties, your skills and your rigorous quality control have helped produce some remarkable statistics.

Although we only produce some 5 per cent of the world's wine, we're the third largest wine exporter.

Over 60 per cent of what the Australian wine industry produces is shipped overseas.

In 2007-08, that equates to $2.7 billion worth of exports.

And these figures were down on the previous year's figure, largely because of exchange rates, stiff competition, drought and faltering demand.

Let's remember where we've come from.

When I was Minister for Primary Industries I spoke of the important role the EU-Australia wine agreement – which we negotiated with the support of the industry – would make to our wine exports.

In 1992-93 our exports to the twenty-seven countries that today are in the EU were valued at A$171 million.

I said at the time we should aim for exports of $1 billion to this important market.

Today, fifteen years later, we have reached exports to the EU of $1.3 billion in 2007-08.

This is a seven-fold increase – or 16 per cent average annual growth.

This didn't just happen by accident.

You worked hard to develop this market and to bring fine quality wines and branding to the Europeans.

The Government also worked hard with the industry at the time to secure improved access to the EU, and we produced an approach built on the specific needs of the sector – an approach that allowed for mutual recognition of wine-making practices and facilitated our exports through a host of other measures.

As you know the 1994 Agreement is currently being revised in close consultation with the industry to ensure it is relevant to today's needs.

These achievements were built on a partnership with the industry – built on knowledge of the industry's needs.

I want to resume that partnership.

Continuing to build on the strong performance of the wine industry is going to require us to take an integrated approach.

This is the approach we've brought to trade policy since coming to office – the twin pillars approach.

We're committed to securing a more liberal international trade environment, so that exporters like you get better market access, and to implementing a program of domestic reforms that places our companies in the best possible position to compete.

Here in Australia, we've focused on getting the domestic settings right.

To respond to these imperatives we've embarked on a policy of close coordination between Federal and State governments, to produce more coherent strategic responses to critical issues like infrastructure, investment facilitation and skills development.

And we've brought the Invest Australia and Global Opportunities programs back into the Trade portfolio to ensure we can fully service the needs of Australian business operating overseas.

It's a real Whole of Governments response.

And we are working in close partnership with you, in the industry, to help address the obstacles you face, at home and abroad.

I thank you for your (joint AWBC/Winemakers' Federation) submission to the Mortimer Review of export policies and programs. I am considering the review's recommendations and expect to release it for public scrutiny shortly.

Trade liberalisation through the WTO

With respect to expanding and facilitating access to your overseas export markets, the Government believes that multilateral trade liberalisation still offers the best means of securing across-the-board gains.

You all know that the latest Doha Round negotiations in Geneva in July did not produce the breakthrough we'd hoped and worked for.

But a great deal was achieved, and we're determined to hang on to those gains.

Over 80 per cent of the negotiating agenda was effectively settled.

What is on the table constitutes remarkable progress for Australia and other agricultural exporters.

Your submission to the Mortimer Review made the valuable point that the WTO's dispute settlement machinery provides a valuable process for achieving liberalising outcomes.

But the Doha Round would have a significant impact on your sector.

The deal in prospect would cut US agricultural subsidies to US$14.5 billion – a level the United States has exceeded in eight of the past 10 years.

Subsidies in the European Union – including for wine – would be cut significantly and strict product limits would have been imposed. The EU's budget for wine subsidies is currently 1.3 billion euros.

This figure represents a sum approximately half of the value of Australia's wine production.

Of course, agricultural tariffs in the EU, the US and Japan would be cut by up to 70 per cent, while tariff quotas for agriculture would be boosted to allow, in some cases, hundreds of thousands of tonnes of new market access in developed countries.

And export subsidies in agriculture would be eliminated forever – which would guarantee that we will never again face this distortion to world wine markets.

Unfortunately the July talks broke down over the issue of the developing country special safeguard mechanism for agriculture.

But the progress we made and the fact we are so close to a deal offer real hope that WTO members can quickly return to the table and finish the job.

This will require a combination of strong political will and the right kind of technical ingenuity to secure a breakthrough.

Since the talks broke down, we've been getting some strong support in our efforts to get back to the table, and senior officials from Australia and other countries started to re-engage in Geneva from last week.

We will continue to do all we can to lock in the benefits that the Doha Round would bring to world trade and to our agriculture sector.

Pursuing parallel gains through FTAs

Meanwhile, our commitment to the multilateral trading system is complemented by our efforts to negotiate free trade agreements, FTAs, which can enhance that system.

We recognise that FTAs can deliver market access gains deeper and faster than might otherwise be possible in multilateral talks.

In May I concluded negotiations for an FTA with Chile, another New World wine producer, which is the most comprehensive bilateral trade agreement Australia has ever entered into. We are aiming to have the agreement in force by January next year.

This FTA with Chile covers all merchandise goods. It will eliminate tariffs on 97 per cent of bilateral trade on entering into force and eliminate virtually all the rest by 2015.

Australian exports likely to benefit from this tariff reduction include all agriculture products, including wine.

Chile is not currently an export market for Australian wine, of course, but we have a lot in common and both of us could benefit from closer cooperation –into third markets.

Last month, we concluded negotiations for the region-wide ASEAN-Australia-New Zealand Free Trade Agreement.

This is the largest FTA Australia has ever negotiated. ASEAN countries account for 16 per cent of Australia's trade in goods and services, worth $71 billion in 2007.

Under the agreement, we've achieved market access gains in a wide range of sectors, including agriculture, in a region of 570 million people with a combined GDP of over $1 trillion.

The majority of ASEAN countries have high and sometimes prohibitive tariffs on wine – this is not surprising in ASEAN countries with primarily Muslim populations.

Nevertheless, we expect that our FTA with ASEAN will ultimately lead to substantial tariff reductions or duty-free access on wine into some ASEAN countries.

Our forward agenda is ambitious. We are currently negotiating further FTAs with Japan, China, the Gulf Cooperation Council and Malaysia.

And we're looking at starting negotiations with Korea, and are currently undertaking FTA feasibility studies with Indonesia and India.

As I said earlier, our trade policy is intended to help our exporters become more competitive.

So we enter into FTAs with a view to improving access to those markets.

Many of the fastest growing markets are in the Asia-Pacific region, now witnessing remarkable levels of growth.

The World Bank says that whereas there are currently about 200 million 'middle class' in East Asia and Pacific, by 2030, there will be about 700 million people in this category.

I was in China last month to host the Australian Government's trade and investment promotion program for the Olympic Games and saw at first hand this emerging and dynamic market.

I know that the AWBC, working in partnership with Austrade, has recently launched its Wine Australia China Market Program to expand Australia's market share in the young Chinese wine market.

Sales to China were up by 24 per cent in the past year to $61 million.

Hong Kong has also emerged as a rising star for Australian exporters. The increase in our wines sales there partly reflects the removal of wine and beer duties that Australia's intense negotiating effort helped bring about.

Of course, our combined marketing efforts aren't only focused on Asia.

For example, Austrade is working with exporters in a wide variety of markets, from Denmark to Poland and Brazil.

As your submission to the Mortimer Review makes clear, market access these days is about much more than tariffs and subsidies. Increasingly it's about a whole range of barriers like standards and technical regulations.

To address issues like these, and to help boost your exports, the Government is working closely with the wine industry in the ‘World Wine Trade Group' of New World producers.

We will continue to take a lead through the WWTG on efforts to remove impediments to trade and increase the competitiveness of Australia's wine exports.

We aim to ensure that different winemaking practices don't impede member states' access to each other's markets, and to develop common approaches on labelling requirements.

The World Wine Trade Group has also been working with APEC economies to encourage them to endorse these principles when they are introducing or amending regulatory arrangements relating to wine.

Responding to Climate Change

Your industry, like others in Australia, has to confront the challenge of climate change. I know a lot of research is being done to assist your collective response.

The University of Adelaide's Australian Wine 2030 initiative, for example, brings together a coalition of researchers groups working on responses to the implications of climate change, water constraints and shifts in supply and demand. The Government is, as you know, fully committed to meeting Australia's emissions reduction targets and supporting an effective global response to climate change.

At the same time, we will provide transitional assistance for those households and firms most affected by our Carbon Pollution Reduction Scheme.

The Government will help Australian agriculture with the adjustment process – including through the $130 million ‘Australia's Farming Future' initiative, designed to help primary producers adapt and respond to climate change.

Facing up to the twin challenge of uncertain international market conditions and our rapidly changing climate will not be easy.

But I want to assure you that the Government will do all it can to help you, and other exporters, as you respond to that challenge.

Conclusion

The skills and expertise of our trade promotion experts and our trade negotiators are focused on getting more of your exceptional product to the international consumer.

Government has a significant role in helping you promote your product, and opening doors to its export success.

You've fought long and hard to secure Australia's place in the international wine league tables.

We'll do all we can to help you keep it there. Thank you.