Australian food, wine firms reach out to Chinese market

Australian food and wine companies will showcase their products to potential Chinese buyers this week as they seize upon opportunities presented by the impending free-trade agreement between the two nations.

The weeklong roadshow, organized by the Australian Trade Commission and HSBC Bank Australia Ltd, of 25 companies including meat, seafood, dairy and wine producers began in Beijing on Monday and will move on to Xiamen, Fujian province, and Kunming, Yunnan province.

"With the FTA, comes greater confidence and an improved competitive position, making Australia even better placed to meet the requirements of increasingly discerning Chinese consumers who are demanding safe, high-quality and nutritious agriculture and food produce," said Susan Corbisiero, Australian trade commissioner, at the Beijing leg of the event.

The FTA, agreed upon by President Xi Jinping and Australian Prime Minister Tony Abbott last November, is set to benefit Australian agricultural producers and place them on an even footing with other agricultural nations that already have an FTA with China, such as New Zealand and Chile.

The deal is widely expected to be signed and come into effect later this year, which will see agriculture tariffs gradually phased out at different speeds, depending on product.

Beef, Australia's largest agricultural export to China valued at A$722 million ($551 million) in 2013, will have its current tariffs of 12-25 percent abolished within nine years.

Paul Edgar, HSBC Australia's head of mid-market and business banking, said that while China's importance to the Australian economy cannot be overstated and the FTA provides further opportunities, there are still challenges to realizing its potential.

A recent HSBC report showed that only 19 percent of Australian companies make use of existing FTAs with other countries.

"Companies say FTAs are too difficult to understand and the benefits are not always clear, so there is still a lot of work to do collectively to educate our customers and the markets of the benefits," said Edgar.

As for China, it is perceived to be a challenging and overwhelming market by Australians but events such as this roadshow help to break it down and build trust and relationships, according to Edgar.

If the FTA goes as planned, it would have very immediate benefits for producers and consumers.

According to Corbisiero, tariffs will undergo "equal phase down", reducing by the same amount each year, starting from when the FTA is signed and with further reductions going into effect at the start of each calendar year.

That means products like wine or seafood, scheduled for zero tariffs within four years, will have undergone two reductions by next year - once when the FTA is signed and once at the start of next year – resulting in their tariffs being halved.

Richard Buller, CEO of Richard Buller Wines Ltd which has sold wines to the China market for 15 years, said cheaper wines do not necessarily translate into higher sales.

"Australian wines have become steadily cheaper for Chinese consumers as a result of the depreciating dollar over the last year but we haven't seen a corresponding rise in sales. The biggest factor for us is consumer spending appetite that is determined by the macro-economic environment in China," said Buller.

China is Australia's third-largest wine export market, worth A$217 million in 2013.