South Africa To Double Tax-Free Wine Exports To EU In Asymmetrical Deal

Written by Dana Sanchez

South Africa’s wine quota has doubled to its biggest export market — the European Union — thanks to a new agreement between the E.U. and the Southern African Customs Union (SACU).

The Economic Partnership Agreement will allow South Africa to export 110-million liters of wine tax free to Europe — up from the current annual duty-free quota of 48-million liters, BusinesDayLive reported.

South Africa ranks seventh among the biggest wine-producing countries in the world, according to the International Organisation of Vine and Wine, TopWine reported.

Almost 75 percent of its annual offshore sales go to the E.U., worth $329.5 million US. South Africa’s 247,105 acres of vineyards, mostly in the Western Cape near the coast, generate about 4.1 percent of the world’s wine production, according to International Organisation of Vine and Wine.

Under the trade agreement, the E.U. will guarantee Botswana, Lesotho, Mozambique, Namibia, and Swaziland 100 percent free access to its market and 98.7 percent of imports coming from South Africa, according to the European Commission. These six countries are part of the 15-member Southern African Development Community (SADC).

SACU member countries do not have to respond with the same level of market openness. Instead, they can keep tariffs on products sensitive to international competition — something known as asymmetric liberalization. SACU members remove customs duties on about 86 percent of imports from the E.U. (Mozambique, 74 percent). The E.U. has never agreed before to such a degree of asymmetry in any free trade agreement, according to its website.

South Africa this year risked losing its free trade status with the U.S. under the African Growth and Opportunity Act when SA blocked U.S. chicken exports. Unlike the new economic partnership agreement signed with the E.U., the African Growth and Opportunity Act (AGOA) is a reciprocal agreement. Chicken is a product considered sensitive to international competition.

Effective October 2016, the E.U. deal will give a much-needed boost to an industry hurt by drought and a tough global climate, said Michael Mokhoro, spokesman for South Africa’s wine and brandy industries. There are signs the harvest will be smaller in 2016, but the quality will be higher, said VinPro, the South African wine producers’ organization, BusinessDayLive reported.

Under the agreement, South African wine exports to the E.U. will increase by 1 million liters a year, Bloomberg reported.

“We hope to see winemakers capitalize on this (economic partnership agreement) opportunity to build Brand South Africa, as well as the reputation of their own brands. The deal offers an additional springboard for growing our credentials for excellence of quality and originality,” said Mokhoro.

The economic partnership agreement takes into account different levels of development of each member country, according to the E.U. Commission.

Other development-oriented free trade agreements could also soon be signed with West Africa and the East African Community, E.U. Trade Commissioner Cecilia Malmström said at the signing ceremony in Botswana.

The agreement increases the flexibility of Southern African producers to put together products from components from various countries, without the risk of losing their free access to the E.U. market.