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Spotlight: California wineries take a hit from U.S.-China trade disputes

www.xinhuanet.com by Peter Mertz02/05/2018  

SACRAMENTO, the United States, May 1 (Xinhua) -- Vineyards in the U.S. state of California are already losing contracts, projecting losses, and anticipating billions in lost revenue from trade disputes ignited by the Trump administration.

"It will spiral downward -- more of (President Donald) Trump's self-destructive trade tactics, a sign of his economic ignorance and bad news for America," said Benjamin Vandermollen, a wine grower north of Sacramento, capital city of the Golden State on the U.S. west coast.

Vandermollen, educated in agriculture at the University of Iowa, told Xinhua Monday that the president's trade war plans with China will end up crushing California's opportunities to reap untold future profits from a wide-open Chinese market.

"We know anecdotally a number of farmers have already lost contracts for wine," said Brian Kuehl with the bipartisan, nonprofit group Farmers for Free Trade (FFT).

Kuehl's group issued a statement last week confirming the heat is on and that California's lucrative wine industry, reeling in part by devastating wildfires in 2017, may get torched again if China ups the ante on more wine tariffs.

He believed that Chinese economic leaders are in stand-by mode, awaiting Trump's imminent China tariffs, which are expected to trigger more return jabs from Asia's most powerful economy.

Industry experts told Xinhua that Chinese tariffs will "slam the brakes on billions in future revenue" and will become worse when Trump pulls the trigger on an expected 25 percent hike on Chinese exports of aluminum and steel to the United States expected in May.

"California obviously exports a huge amount of wine, a lot of it destined for China," Kuehl said. "We understand that some of those wine contracts have already been throttled back."

California's wines, considered some of the finest in the world, are about to be put on the back shelf in the world's most populous nation, a market that is thirsty for expensive Western products.

Viking Beer, a light pilsner from Iceland, sells for 12 U.S. dollars a bottle on the streets of Guangzhou, a city in southern China, importer Ben Vogl told Xinhua on Monday.

The market for wine is "limitless," said the American businessman who knows China's beer and wine market well. "The potential revenues of millions of dollars are vanishing with the tariff exchanges."

With an emerging middle class of 300 million people, no American exporter is taking China off the top of their list of dream markets.

The Wine Institute, the public policy advocacy association of California wineries, said last month that taxes on a bottle of U.S. wine entering China will now jump from 48.2 percent to 67.7 percent, opening the door for countries like Chile, Georgia, and New Zealand to grab a significant market share.

Also jumping into the China market with frenzy will be wine giant Australia, enjoying tariff-free status in 2019, according to the group representing over 1,000 wineries throughout California.

"Consumption of imported wine has increased 2.5 times in the last five years on the Chinese Mainland," said Christopher Beros, Wine Institute Trade Director for China and Pacific Rim.

"America is going to miss the boat on this one," San Francisco businessman Glenn Nemhauser told Xinhua. "It doesn't just hurt California, it hurts the entire country."

The value of California wine exports to China alone have increased 450 percent in the past decade, the Wine Institute data showed, noting that China is one of the fastest growing wine markets in the world and will soon be second only to the United States in value.

Even though China imported some 2.37 billion U.S. dollars worth of wine in 2016, most of them came from the European Union and only 76 million dollars, or 2.2 percent, were American.

If combining the exports to Hong Kong, the value increased 10 percent in 2017 to 197 million dollars with a share of about 5 percent in China's market. It was still called "miniscule" by Vandemollen compared with what the United States could export.

While the vast majority of U.S. wine is consumed domestically, about 10 percent is shipped overseas, USDA data shows.

In 2017, the U.S. exported 380 million liters of wine, worth 1.46 billion dollars. Canada was the top destination, importing 28 percent of the total, followed by the United Kingdom at 15 percent.

"China is an important and growing market for California wines," said Robert P. "Bobby" Koch, President and CEO of the Wine Institute, in a statement. "We are disappointed by the implementation of these additional tariffs."

"Over the last decade, we have made tremendous progress in developing a loyal and enthusiastic base of Chinese consumers who enjoy California wines and appreciate their quality," Koch said.

Koch and other industry leaders urged the Trump Administration to change course in the nascent trade war. With bated breath, they are waiting for news from this week's planned visit of an official U.S. delegation to China for trade talks and say they hope detente and free trade will prevail.

"These tariffs put our products at a price disadvantage and we urge swift resolution of this issue before long-term disruptions are felt," FTT's Kuehl said.

Kuehl cautioned, "once you lose an export market it doesn't come back immediately," another economic loss variable.

"So if you're an apple grower and you're exporting your apples to China and you lose a contract to sell your apples to China... you may not see that revenue come back for a year, two years, five years after these tariffs go away," Kuehl noted.

"So this can be a very long term impact on U.S. agriculture," he said.