Wine, Wheels Wend Way to the U.S. From Down Under

By DAVID GREENBERG

Staff Reporter

Cars and wine are among the key areas to be affected by a free trade agreement the United States signed with Australia last month.

The pact will make it feasible for Australia to deliver the first major shipments of its Holden cars, and is expected to spur the country to surpass Italy as the U.S.’s top source of wine within a year.

Australia will also ship more meat, dairy and agricultural products while the United States will be exporting more farm vehicles, auto parts, motorcycles, plastics and electrical machinery there.

For the United States, plagued with trade deficits in many parts of the world, Australia is a happy anomaly: last year there was an $8.6 billion trade surplus Down Under, with exports comprising roughly two-thirds of all business between the two countries.

Once Congress and the Australian Parliament approve the pact later this year, it will add $3.1 billion in annual bilateral trade to the existing $23.1 billion-per-year base, according to the American-Australian Free Trade Agreement Coalition, a group of private and public sector business leaders from both countries.

“What the free trade agreement means in the broadest sense is that a great number of barriers and impediments many of them unnecessary have been removed,” said Robert Hunt, senior investment commissioner for the North American division of Invest Australia, a trade agency under the Australian Department of Industry.

The agreement will eliminate customs duties on most automotive products, including the highly restrictive 25 percent U.S. customs tariff on pickup trucks. (Most other imports to the U.S., including cars, have a tariff of 5 percent or less.)

Holden, which is a division of General Motors Corp., and Japan’s Mitsubishi Corp., is making American-style muscle cars in preparation for an escalated invasion into the U.S. market.

GM, which opened its Holden operation more than five decades ago, has dug the Pontiac GTO brand out of its graveyard and attached it to Holden’s 3-year-old Monaro model for cars that entered the U.S. market in December.

The Web site touting the vehicle makes no mention that the GTO model was built by Holden. “It’s quite possible that people who buy this don’t want to know that it’s made overseas,” said Hunt.

Plans call for as many as 18,000 GTOs to be shipped to the U.S. annually. The car will be marketed as a contemporary version of the classic GTO model, known for its V-8 engine and rear wheel drive during an 11-year production run that ended in 1974.

“There is an entire generation of people out there who may have heard of the GTO but certainly don’t have firsthand experience with it,” said Jim Hopson, communications manager for Pontiac-GMC. “We hope the car will appeal to the lovers of classic muscle cars but also will have a set of customers who may never have considered a Pontiac.”

Limited capacity

There are limits, though, to the GTO’s potential success. The 18,000-vehicle import limit is based on Holden’s production capabilities it has only one assembly plant as opposed to anticipated consumer demand.

Late last month, Holden also introduced its SST pickup truck, which is expected to enter the U.S. market if increased production is possible. The SST has a distinctive American look and is designed with a eye to breaking the speed record for pickups held by DaimlerChrysler’s Dodge Ram SRT-10, which averaged 154 miles per hour during a test run Feb. 2, according to Guinness World Records, which recorded the event.

Mitsubishi, which has been making cars in Australia for two decades, is shopping a high-end version of its Magna four-door sedan under the badge of Diamante.

Meanwhile, Australia could surpass Italy as the top exporter of wine to the U.S. by the end of the year, although like Aussie cars, the wine industry faces hurdles as well. Most notable is the weakened U.S. currency; the cost of an Australian dollar is currently 77 cents, up from 50 cents in September 2001.

That means U.S. importers are paying more to bring in Australian wine, which jacks up the cost to consumers.

The exchange rate will slow the growth of wine imported from Australia, but it shouldn’t hurt the country’s position against Italy, where the cost of a Euro has increased by about 50 percent in the past two years.

One area where the trade pact will have less effect is the politically sensitive farm sector, where the U.S. government refused to grant any quota increase for the small allotment of sugar imports from Australia and will retain tariffs and quotas on about 25 percent of farm exports.