Exports are vital to the growth of U.S. agriculture. Since 2000, around 20 percent of annual agricultural production in the United States has been exported. Still, it’s difficult to conceptualize the real impact of free trade agreements until you talk to the people who have directly benefitted from them. In April, I had the pleasure of meeting with a group of winegrowers from Oregon – among them Tom Gerrie, president of Cristom Vineyards in Salem, who was kind enough to share with me his personal experience in exporting.
Cristom Vineyards is a family-run craft winery producing around 15,000 cases of wine per year. Founded in 1992 by Gerrie’s father, Paul, the company decided that in order to build global brand recognition of Oregon’s fine wines, it would need to target high-end restaurants both in the United States and abroad. In 1994, it shipped its first cases to New York, Chicago, London and Tokyo. Since then, Cristom Vineyards has expanded its exports to 48 states and 18 countries, including South Korea. More than 15 percent of Cristom’s total sales now come from exports.
Gerrie notes that exporting is not easy, but that free trade agreements have helped immensely. As a wine exporter, he constantly grapples with concerns over payment terms, shipping costs, storage conditions and, most notably, the need to discount wines to remain competitive in countries with high tariff rates. This was particularly true in South Korea, where his products faced a 15-percent tariff. But the U.S.-Korea Trade Agreement (KORUS), which entered into force in 2012, reduced those tariffs to zero. Yes, zero.
As a result, Cristom Vineyards saw a 300-percent leap in sales to South Korea. And not only did the tariff elimination improve sales, it also allowed Cristom to capture market share from competitors in Australia, New Zealand, Chile and South Africa, which are still subject to the 15-percent tariff. The tariff elimination also enabled Cristom to begin selling its higher-end wines in Korea, which previously had been cost-prohibitive. This has further enhanced the Cristom brand in Korea and helped increase demand for all the wines it sells there.
Following Cristom’s success in South Korea, Gerrie is now looking to expand elsewhere in Asia. For this reason, he is supportive of trade agreements such as Trans-Pacific Partnership (TPP). Under the TPP, tariffs on wine products will be eliminated by all member countries. This means that Japan’s tariff of 15 percent and Vietnam’s tariffs – which range as high as 35 percent – will come down to zero. TPP also contains a special annex for wine and spirits labelling which guarantees that U.S. wine companies will not have their exports discriminated against because they use words like “chateau,” “reserve,” “classic” or “vintage,” which some other countries have tried to claim for themselves.
For Cristom Vineyards, these tariff reductions and labelling agreements have a real impact on the company’s bottom line. The removal of a tariff can make the difference between breaking into a new market and standing on the outside looking in. Furthermore, in the absence of agreements like the TPP, U.S. wine exporters face a clear disadvantage against competitors from Australia and Chile that already receive preferential treatment in markets such as Japan. Failing to ratify the TPP means Cristom Vineyards and countless other producers would lose potential sales in lucrative overseas markets. We must do everything we can to ensure that our exporters are best positioned to succeed in the global marketplace – and entering into, and enforcing, free trade agreements is a key part of that effort.
For more information about the TPP and its benefits to U.S. agriculture, visit www.fas.usda.gov/tpp.