Five months into his presidential term and Donald Trump’s incendiary rhetoric on immigration and free trade has already stirred up controversy and debate. His policies have certainly hit a nerve in California’s wine industry, with some commentators predicting disastrous consequences for the region’s future as a key wine exporter..
Labour shortage
Top of the list of immediate concerns is immigration, particularly in Napa Valley. Like most agricultural industries in California, Napa relies on immigrant labour to survive. Census data estimates that over 30% of the county’s residents are of Mexican or Hispanic origin. But as the growing season gets underway in 2017, wineries are having to grapple with a Trump administration hell-bent on cleaning up illegal immigration, exacerbating the region’s growing labour shortage.
“Tightened immigration rules will definitely amplify the shortage of immigrant labour,” says Brent Shortridge, managing partner of Anders-Lane in Napa. “Even prior to the current administration, we have experienced labour shortages in the wine industry. Most of Napa Valley’s fruit is harvested by hand, and the reality is that we can’t rely on domestic youth to get the job done. Locally, it is estimated that less than 10% of migrant workers are undocumented, which would be the segment targeted by tough immigration rules.”
Nonetheless, Shortridge also believes that California is on a path to becoming ‘a sanctuary state,’ pinning his future hopes on a state legislature strong enough to fight against pending anti-immigration federal policies.
“In California, immigration simply drives our economy. We need people to work the fields not just for wine grapes, but for all the producers we have,” said Tom Davies, president of V. Sattui Winery in St Helena. “Whatever happens on the political front, we remain firmly committed to our immigrant labour force,” adds Don Weaver, estate director of Harlan Estate.
The ultimate sting in the tail is perhaps the sheer hypocrisy of Trump’s rhetoric. The recently signed executive order, entitled ‘Buy American, Hire American’, is designed to make it harder for companies to hire low-wage foreign workers – something Trump encourages at many of his properties, including Trump Winery in Virginia.
NAFTA
However, it is the president’s stance on free trade – specifically the North American Free Trade Agreement (NAFTA) that created the trilateral trade bloc between the US, Mexico, and Canada – that is causing particular concern. “NAFTA has been a disaster for the United States. We’re going to make some very big changes or we’re going to get rid of NAFTA once and for all,” President Trump has said.
Yet American exports of wine – the bulk of it from California – set a record in 2016, helped in no small part by NAFTA, which was created in 1994. Indeed, IWSR figures show that US exports to Canada and Mexico in 2016 comprised 19.3% of volume and 26.5% value, so California’s wine industry would clearly be impacted if NAFTA ceased to exist.
“Negotiations over the Trans-Pacific Partnership have already been abandoned by our current administration, so the opportunity for lowered tariffs and standardised import procedures in key Asian markets will be lost, regrettably,” says Shortridge, who says he’s worried. “There is concern over the possibility of tariffs or trade restrictions and the hope that wine will not be targeted. Canada represents a significant share of business for California wineries, and tariffs would exacerbate our current disadvantage with foreign exchange and a relatively strong US currency.”
He is not alone. Kathleen Inman, owner and winemaker at Inman Family Wines in Sonoma, also has serious concerns over Trump’s position on NAFTA and the potential effects on her business. “It has been very easy for me to export to Canada as a result of that agreement – generally easier than exporting to the EU or Japan. I just don’t see the need to do away with it, and I do think it could make export to Canada and Mexico more difficult for smaller wineries.”
Patsy McGaughy, communications director at Napa Valley Vintners, is another important stakeholder in the NAFTA discussion. “Mexico is an emerging market for our region, but Canada is one of the top international markets for Napa Valley wine. Our internal data indicates that nearly 40% of our 530 members currently export or have recently exported to Canada. It is our experience that Canadian wine drinkers appreciate, enjoy, and purchase Napa Valley’s high-quality wines with enthusiasm. For these reasons, we don’t want NAFTA to go away.”
Meanwhile, corporate wineries such as E&J Gallo refuse to comment on this sensitive issue, a fact that does not surprise Ken Morris, communications and marketing manager at Grgich Hills Estate. “Most people in the wine industry don’t want to talk politics, now more than ever. If you say something positive or negative about any candidate, you’ve probably alienated half of your customers.”
Of course, larger corporate brands have the resources to mitigate the worst effects of a possible NAFTA withdrawal, while individuals like Brent Shortridge are planning ahead, investing greater resources into emerging markets. “Representing a third of my business, export markets play a critical role in the success of my Waterstone brand. I am seeing growth potential in South America, specifically in Colombia, Brazil, and Peru.”
Overall though, emerging markets are unlikely to provide, at least in the short term, a substitute for the buoyant Canadian wine market, which is vital to the prosperity of many brands in California.
Therefore, all eyes are on Trump, and his final decision on this hugely important issue. But, considering his hostile rhetoric to date, and his election promise to create American jobs for Americans, California’s wineries should probably prepare for a bumpy ride.
