What does the Trans-Pacific Partnership mean for the drinks industry? - Focus

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Drinks industry associations have welcomed the conclusion of negotiations for a Trans-Pacific Partnership (TPP) agreement on Monday that will reduce barriers to trade between 12 Asia-Pacific countries. The Europeans, however, have concerns.

The Trans-Pacific Partnership deal was secured earlier this week

The Trans-Pacific Partnership deal was secured earlier this week

The US, Canada, Australia, Japan, Mexico, New Zealand, Singapore, Malaysia, Vietnam, Peru, Chile and Brunei have signed the deal, which goes far beyond the usual tariff-reduction goals of traditional trade deals. Additional measures include greater transparency and liberalisation in foreign investment rules. This includes provision for neutral and transparent international arbitration of investment disputes.

There are also commitments on trade facilitation, with TPP countries agreeing to publish their customs laws and regulations, and to release goods without unnecessary delays. They also intend to consult openly on proposals for technical regulations and will open immigration procedures for temporary business visitors. Importantly, the TPP includes annexes promoting common regulatory approaches across the region, which includes one on wine and distilled spirits. This is expected to include guidance on bottling, canning and labelling; there are also annexes on additives and organic agricultural products.

One long-term goal, especially for the US, has ben to create a deal with sufficient critical mass - signatories account for around 40% of the world economy - to create a status quo for trading regulations within the Asia-Pacific region.

Many of the key drinks exporters within the region have welcomed the deal. In the US, the California-based Wine Institute has highlighted how the deal will eliminate tariffs, remove non-tariff barriers and set enforceable rules for trade. "Strong and market-opening trade agreements grow the US economy and create and support well-paying US jobs," said the institute’s president & CEO, Robert Koch. "We believe that TPP will deliver these results." He noted California wine represents 90% of US wine production and 90% of the country's wine exports. Last year, US wineries shipped around US$641m of wine to TPP countries, which represent 40% of total US wine exports.

The Kentucky Distillers’ Association is hopeful that the TPP will boost the Bourbon industry, noting gains from past free trade agreements. “The Kentucky Distillers’ Association supports the expansion of free and fair trade," Eric Gregory, the association’s president, told just-drinks. "Recent free-trade agreements have levelled the playing field for Kentucky Bourbon by reducing unfair tariffs and regulations. This has helped propel our signature industry into an unprecedented renaissance by creating new global market opportunities."

A similar response came from Canada’s growing wine industry and niche ice wine sector. Dan Paszkowski, president & CEO of the Canadian Vintners Association, stressed that TPP member countries already account for 98% of Canada’s current wine exports, worth CAD41.5m (US$31.9m) per year. According to Paszkowski, the agreement “will offer immediate and tangible benefits to the Canadian wine industry, reducing costly tariffs on wine, providing greater protection for authentic icewine, streamlining complex technical and administrative barriers and tackling other barriers to wine exports that unfairly limit access to markets”. If Canada had not joined the TPP, these exports would have faced renewed competition from Australia, Chile, New Zealand and the US, he maintains. Paszkowski said Japan's wine (including icewine) duties of up to JPY182 (US$1.51) per litre will be scrapped within seven years; Australia and New Zealand's 5% duties will disappear upon ratification; Vietnam’s 59% maximum duties will go within 11 years and Malaysian duties of up to MYR23 (US$5.47) will be go within 15 years.

In Australasia, Philip Gregan, CEO of New Zealand Winegrowers, said: “Finalising the TPP is strategically very important for our export future as the TPP countries already account for over 60% of New Zealand wine exports.” He predicts the TPP will help the New Zealand wine industry reach its goal of NZD2bn (US$1.3bn) of annual exports by 2020, through improved TPP market access “and a secure rules-based system…”

Outside the TPP region, however, there is some concern. Sylvain Naulin, external trade adviser to the Comité Européen des Enterprises Vins, told just-drinks: “We are trying to have a really in-depth look at this, because there are many complex implications. Our main concern, of course, is tariffs. We are at a crossroads here. We have to look at trade deals between the European Union and Australia and Japan. There is a variable situation on tariffs.

“One consequence for us could be loss of competitiveness in the Asia-Pacific market and, in particular, in Japan, one of the main markets of the region and a very significant and mature market for wine. There has been a lack of progress on EU negotiations with Asia-Pacific countries. In two to five years, we could really be facing a situation of competitive disadvantage.”

Naulin notes that trade deals already struck between the EU and South Korea and Chile are examples of the type agreements that might help European drinks producers respond to the challenges posed by TPP.

Carole Brigaudeau, head of communications at SpiritsEurope, said: “We are looking at this in detail right now. It is extremely important and of great interest to us. We need to look to see if there are exemptions for certain sectors and find out the detail.

“This agreement has potentially very serious consequences. We will be encouraging the European Commission to make progress on talks with countries like they have already with Vietnam – exclusive deals that offer the best relationships for European producers to redress the balance."

Brigaudeau welcomes some aspects of the TPP deal, including the regulatory harmonisation annexes. “(These are) important so that companies don’t have to change their bottling for each country, for example. We need harmonisation on health, harm reduction and so on.”

In the UK, the Scotch Whisky Association (SWA) stressed that the agreement of the TPP underlined the importance of agreeing the EU-US Transatlantic Trade & Investment Partnership (TTIP), “so that we are not placed at a competitive disadvantage, as well as the EU pursuing its own ambitious set of Free Trade Agreements", said Rosemary Gallagher, the SWA's head of communications. She also welcomes the TPP regulatory annex for spirits, saying it mirrors discussions for the TTIP, offering “the chance to secure improved regulatory coherence, setting globally-relevant rules for labelling, certification and testing of spirit drinks”.

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