Wine Companys Entry into the US Market

As such, a leading Australian winemaker would need prior familiarization with the prevailing political, social and economic situations. Particularly, political developments in the US following Donald Trump’s election, coupled with the government’s adoption of protectionist trade policies, and a highly competitive multi-segmented market are some of the scenarios a newcomer to the US market should be prepared to deal with. While various other areas of interest will also be explored in this report, the areas already mentioned will form the bulk of its contents. Notably, the US political environment is experiencing significant transitions that are impacting the business environment. Businesses usually thrive in a predictable atmosphere. Just as critical is the ability of the managers to incorporate information gained from political risk assessment into the decision making process.

Notably, political risks present challenges to a business enterprise that are beyond socio-economic risks. It is, therefore, imperative that a business organization that intends to expand to another country conducts research, not only with regard to socioeconomic risks, but political risks involved. Failure to adhere to this precaution may lead to a serious exposure of a business to immense losses. Indeed, an international company can potentially make serious losses if an incoming government nationalizes investments by foreign companies. Furthermore, the country has a vibrant media fraternity which is, to a great extent, responsible for the transparency in different fields. Importantly, the US is an economic superpower. The citizens’ living standards are high. The US presents an overall stable business environment. Disruptions associated with politics and trade unionists barely exist as demonstrated by the rapid withering of Occupy Wall Street movement (United States Country Report, 2017).

5% in 2016. Political Risk Concerns Trump’s Presidency and Populist politics The political risks associated with investing in the US are linked to the fact that the country is a global player in the trade, geopolitical and military arenas. As such, American local policies and national interests have far-reaching impact not only on local business but also international trade. It is, therefore, very crucial that an organization that is seeking to enter the American market is watchful of the local American political scenario as well as the geopolitical developments. The ability to forecast future trends is critical in deciding if it is a company’s interest to commit resources to the expansion agenda. As such, populist initiatives and policies are meant to reassert the powers and the influence of a country on domestic matters while reversing the grip of the international community on national interests.

In this regard, populist regimes purpose to shake off international forces supplanted by trade agreements by establishing taxation regimes that are favourable to home-country companies. At the same home companies and multinationals that source parts and labour from abroad are vilified while shipping of production attracts a backlash from the authorities. Essentially, companies will require to prove that their operations are adding value to the local economy in terms of job creation and generation of revenue if at all they can expect preferential treatment. The downside of pursuing such an agenda by the authorities is that free enterprise is hampered which negatively impacts on foreign companies. In recent times, the US administration has been embroiled in a trade war with China since the former introduced new tariffs on the latter’s products, a move that has been viewed as detrimental to both parties (Zaharia, 2018).

This trade war is viewed as a consequence of the status that the US has a trade deficit with China. As a consequence, the current American administration has attracted admonition and criticism both from within the US and from the country’s trading partners who view the approach as a hindrance to international commerce (Market Line, 2017). Furthermore, Trump’s presidency has led to political polarization in a measure not experienced before (United States Country Report, 2017). The American president is also fighting accusations of nepotism and conflicts of interest. For a wine company pursuing expansion into the American market, it is essential that the managers take full advantage of the benefits availed by AUSFTA. The agreement allows for unprecedented access of Australian products to the US market.

It also affirms strong ties between the two countries especially as investment destinations for citizens and companies from either country. There have been questions regarding the actual impact of Trump’s protectionist policies on US-Australia trade. An article on Sunday Morning Herald points out that indeed several other countries other than the US and China will be negatively impacted by the prevailing trade wars due to the international nature of supply chain of goods involved. It has to be stated, however, that the resilience of American institutions and governance structures are the strongest hope that Trump’s policies will not incapacitate global commerce. Australian companies, as observed earlier, may only suffer limited losses associated with America’s newly embraced protectionism. The Australian businesses are experiencing this advantage mainly because they are shielded by the AUSFTA.

However, the fact that the Australians have not invested as heavily as some other nationals in the supply chain of trade goods involved in the trade war also helps to mitigate overall effect of the US-China trade war. So far, AUSFTA has not attracted criticism or desire for renegotiation from the American administration. As discussed earlier, the US government regulates many aspects of the alcohol industry. This constitutes a political risk in the form of a regulatory barrier, albeit non-tariff in nature. In fact, it can be argued that regulatory barriers could form a more significant barrier to smooth entry into the US market for an Australian wine company than the tariff barriers. Regulatory or non-tariff barriers have the effect of increasing business costs.

A company may need to effect changes in packaging, labelling including warnings, and distribution practices to comply with American regulatory requirements. The economic impact of the Australia–United States free trade agreement *.  Australia – Japan Research Centre. Retrieved from https://crawford. anu. edu. Johnson, R. The U. S. Wine Industry and Selected Trade Issues with the European Union. Retrieved from http://nationalaglawcenter. Retrieved from http://www. realinstitutoelcano. org/wps/wcm/connect/ae4e55bf- 7b154798-8c43-9ad4e152b533/ARI47-2018-Higgot-From-policy-to-populism-Donald- Trumps-trade-policy-global-context. pdf?MOD=AJPERES&CACHEID=ae4e55bf-7b15- 4798-8c43-9ad4e152b533 Zaharia, M. How trade war with US can hurt China and economies including Australia. com/content/5afbd914-a2b2-11e7-8d56-98a09be71849 [Accessed 10 Sep.