China halts Australian wine imports

Amid rising political tensions between Canberra and Beijing, China has been imposing a wide range of trade blockades on Australia, escalating the souring trade and diplomatic relationship between the two to a level that could not have been contemplated just six months ago.

China birches Australian wine imports
Bottles of Penfolds Grange, made by Australian wine maker Penfolds that will now be too expensive in China. Photo: Reuters.

(ATF) In its latest salvo that could further escalate trade and diplomatic tensions between Beijing and Canberra, the Chinese Ministry of Commerce said on Friday that it would impose temporary anti-dumping tariffs on Australian wine ranging from 107.1% to 212.1% from November 28.

Importers suspected of bringing in products to be sold below cost price in order to gain market share – a process known as dumping – will need to pay deposits to China’s customs authority, which will be calculated based on different rates the authority has assigned to various companies, the ministry statement said.

Beijing on several occasions in the past has used the threat of diminished access to its vast domestic market as a stick to beat Australia since flagging the probe and has suspended imports of some products including beef and timber. But this move is seen as the strictest measure by Beijing ever since Canberra called for an inquiry into the origins of Covid-19.

The move follows a raft of other measures barring imports from coal and copper to barley this year and comes three months after China started an anti-dumping and anti-subsidy investigation into Australian wine.

China is one of the biggest buyers of Australian wine and expectedly, Australia has responded defiantly to the move, saying the "seriously concerning development" looks to be about diplomatic grievances and not any action by winemakers.

Earlier Australia also warned that it would seek WTO intervention to defend itself from the tariffs, which Australian Trade Minister Simon Birmingham labelled “grossly unfair, unwarranted, unjustified”.

He also warned that China’s actions might create a perception among businesses and countries around the globe that trade with Beijing can be risky.

Cold war

Anger and mistrust between the countries has been bubbling under the surface for years but the relationship between the two countries took a serious turn in 2017 after the Australian Security Intelligence Organisation alleged Chinese attempts to influence decision-making in Canberra.

Concerned about its national security as a consequence, in 2018 Australia publicly banned the Chinese multinational technology company Huawei from its 5G network rollouts to become the first country for outlawing the tech giant.

Trade relationship between the two though, flourished through the turmoil as China’s ever-growing hunger for Australian natural resources remained, and it emerged as Australia’s biggest customer for iron ore, coal and liquified natural gas.

The flash point however came this year when Australia called for an investigation into the origins of Covid-19, which was first detected in the Chinese city of Wuhan.

In April China threatened that it could boycott Australian products, and soon after, slapped an 80.5% tariff on Australian barley, suspended some Australian beef imports and launched an anti-dumping probe into Australian wine imports.

READ MORE: China trade bans deeply troubling, Australia says

Last week China also outlined a list of grievances about Australia's foreign investment, national security and human rights policy, saying Canberra needed to correct its actions to restore the bilateral relationship with its largest trading partner.

"China's recent comments gives the perception that it's more about their grievances around those matters, rather than in fact around anything any industry has done wrong," Australia's agriculture minister David Littleproud told media on Friday.

He added, "It just doesn't worry Australian exporters, it worries exporters from around the world."

China's foreign ministry spokesman Zhao Lijian said on Friday that the measures were in line with Chinese laws and regulations and urged Australia to do more to enhance mutual trust between the countries. "They should think about whether they have respected China's interests," he said.

Punitive measures?

China began an anti-dumping probe in August at the request of the Chinese Alcoholic Drinks Association, but in Canberra the preliminary decision to impose tariffs was viewed as part of a pattern of punitive trade measures since Australia called for an independent inquiry into the origins of the coronavirus.

With 37% of Australia's total wine exports worth AU$2.9 billion flowing into China each year, the move has clearly been a big blow to the country down under.

Trade minister Birmingham said the tariffs were unjustifiable and it was a distressing time for hundreds of wine producers because it "will render unviable for many businesses, their wine trade with China".

Birmingham pointed to "the cumulative impact of China's trade sanctions against a number of Australian industries" and said if they were a response to other factors this would be "completely incompatible with the commitments China has given" to the World Trade Organisation.

Importers bringing in Australian wine will need to pay deposits to China's customs authority, which will be calculated based on different rates the authority has assigned to various companies, according to the statement.

The rate required of Treasury Wine was 169.3%, the highest among all the named wine firms in the statement. Shares of Australia's Treasury Wine Estates Ltd, the world's largest listed winemaker, fell more than 13% before being put on a trading halt pending an announcement.

READ MORE: Beijing seen waging a shadow trade war on Australia

The measures had the potential to close down the Chinese market to Australia, said Tony Battaglene, CEO of Australian Grape & Wine Inc, the country's main industry body.

"Some will keep going (selling) very high-priced wine if people are prepared to pay for it. But it becomes very tough when you're competing with wine where they're paying 12% or 14% tariffs, or zero tariffs in the case of Chile and New Zealand, and you're paying 200%. Everyone is going to be scrambling now, looking for other markets."

An importer of Australian wine in Shanghai told Reuters: "I will stop importing Australian wines for at least 3 months to see how things go. Many importers will stop the business, according to what I know, because it is simple not workable with such a deposit."

Casella Wines will require a 160.2% deposit, Swan Vintage will require 107.1%. For Australian wines that are not named on the list, the rate is 212.1%.

The Australian government will hold a meeting with winemakers on Friday.

  • With reporting by Reuters

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