On 24 March, the European Union and Australia announced the agreement of a bilateral free trade deal that, according to the Australian government, will see “98% of the current value of Australia’s exports entering the European Union duty-free”.

It was a deal that followed eight years of negotiations and arrived just two months after the signing of a landmark trade deal between the EU and India and the derailed trade deal with the Mercosur bloc of South American countries, as Brussels continues to diversify its global trade partnerships amid geopolitical instability and an unpredictable relationship with Washington.

The mood was buoyant in Canberra following the signing of the accord, with Australian Prime Minister Anthony Albanese praising his “good friend” EU president Ursula von der Leyen and hailing a relationship between the two trading partners that “continues to go from strength to strength”.

Crucially, for Australia’s wine industry, the immediate removal of the 5% tariff will represent a saving of an estimated A$37m for the country’s winemakers and exporters. As it stands, the EU ranks among the most important export destinations for Australia. According to government data, of the A$2.4 billion in wine the region exported in 2025, $159.3 million found its way to the EU.

But while cheaper trade is good news for Australia, the exact impact of lower barriers to a highly competitive wine market isn’t easy to project.

“The EU is an important but highly competitive market for Australian wine,” Australian Grape & Wine chief executive Lee McLean tells Drinks International.

“In 2025, Australian exporters shipped around 76 million litres valued at approximately $143m to EU member states, representing about 12% of export volume and 6% of value.

“What this agreement does is remove a longstanding structural disadvantage. The elimination of tariffs is expected to save Australian wine exporters approximately $14.5m per year, immediately improving competitiveness and helping level the playing field with countries that already enjoy tariff-free access.

“However, it is a challenging environment. The EU produces more than 90% of the wine it consumes and overall consumption has been declining, so Australian producers are competing in a mature, oversupplied market.”

It’s a dynamic that Australian growers and winemakers are all too aware of. In March 2024, overproduction and reduced consumption led to the destruction of tens of millions of vines as the price of grapes slumped by more than half in comparison to four years prior.

The EU is a difficult market for any New World wine producer. According to the World Population Review, France, Spain and Italy alone account for almost half of the world’s wine production and among its residents are some of the world’s most selective wine drinkers. But while many European markets continue to show a strong affinity for the Old World, Australia has become a highly respected producing region. In the latest edition of The World’s Most Admired Wine Brands, the trio of Australian brands in the list made the region the fourth most represented, behind only France, Spain and Italy. And Penfolds, at number six, ranked higher than any French brand.

“There is real potential, but it needs to be viewed in context,” says McLean. “The EU is one of the largest wine markets in the world, but it is also mature and highly competitive, with declining consumption in many countries.

“The benefit of tariff removal is that it improves the commercial viability of exporting into that market. It makes it easier for Australian producers to compete on price and margin, particularly in markets where we already have a foothold. Tariff removal tends to have the most immediate impact in price-sensitive segments where margins are tight, and even small cost savings can make a difference. That means some of the more commercial and volume-driven parts of the industry may see early benefits.

“However, the agreement goes beyond tariffs. It also reduces red tape through simpler certification, fewer testing requirements and more streamlined processes. That’s a benefit across the entire sector, including premium producers.”

Simplified certification

Alongside the tariff removal, the Australia-EU Wine Agreement builds on earlier deals made in 1994 and 2009. The new accord has seen the EU agree to several terms that could potentially benefit the Australian wine industry.

Notably, simplified certification requirements for Australian wine exporters to the EU will see a reduction in testing requirements, saving exporters money on each consignment.

The EU will also protect seven Australian Geographical Indications - New England, Pokolbin, Upper Hunter Valley, Mount Gambier, Robe, Wrattonbully, and Australia – and allow seven new grape variety names for Australian use: Alicante Bouschet, Alicante Henri Bouschet, Carignan, Carignane, Nero d’Avola, Blaufrankisch and Friulano.

Australian wine exporters can also use all existing grape variety names indefinitely, even if they become an EU Geographical Indication in the future.

And the EU has agreed to the reduction of the lower alcohol limit to 7%, welcome news to a burgeoning generation of mid-strength producers in the region.

In return, Australia has agreed to adopt the EU’s residual sugar limits for sparkling wines and the protection of new and existing EU GIS and traditional terms.

But perhaps the biggest sticking point for the region’s makers is surrounding its Prosecco. Australian Prosecco is a rapidly growing category worth over A$200m, according to Australian Grape & Wine.

Unlike its Italian namesake, which is made with Glera, Australian Prosecco is a reference to the grape variety used in production. The new agreement will allow the domestic use of the term, but Australian producers must phase out its use for export over the next decade. “The protection of wine GIs was one of the most sensitive elements of the negotiation, with implications beyond Australia,” says Ignacio Sánchez Recarte, secretary general of Comité Européen des Entreprises Vins.

“The phase-out of the use of Prosecco for Australian exports, together with clearer labelling rules to avoid consumer confusion when Australian producers use domestically the term Prosecco as a variety name, is not a bad result considering the complexity of the discussions.”

The agreement marks perhaps Australia’s largest compromise across the deal and potentially gives its producers a 10-year headache when it comes to an export strategy.

“Australia has been very clear, and continues to be, that Prosecco is a grape variety in Australia and that position has not changed,” says McLean.

“However, the outcome of the agreement reflects a negotiated balance rather than a shift in the EU’s long-held position on geographical indications.

“The EU has maintained its view, and the agreement settles how the term can be used between our two markets. So while the varietal argument remains valid and important domestically, it did not ultimately change the EU’s position in the context of this trade negotiation.

“There will also be new labelling requirements domestically to clearly distinguish the use of Prosecco as a grape variety in Australia, and protections against the use of imagery or language that evokes Italy, to ensure Australian consumers understand they are buying Australian Prosecco.

“For producers, the key impact is on export strategy. While there is a long transition period, businesses will need to plan for how they position and market those wines internationally over time.”

This trade deal is a rare good-news story for an Australian wine industry that has become familiar with the opposite. While the removal of the tariffs may not create a seismic shakeup, it does level a previously sloped playing field and provide a clearer strategic route for exporters.