Chinese may soon yamseng without Aussie wine

Guardian (Aus Ed):

China opens door to tariffs on Australian wine imports as trade tensions spiral

Share prices tumble after Beijing launches ‘anti-dumping’ investigation amid growing diplomatic unease

Mainland China is responsible for 39% of the total export value of Australian wine. Beijing’s decision to start an ‘anti-dumping’ investigation into imported wines originating in Australia has unsettled businesses

Photograph: Bloomberg/Getty Images

China has opened the door to imposing tariffs on Australian wine imports by launching the same kind of trade investigation that triggered steep imposts on barley, sparking sharp falls among affected businesses on the Australian share market.

Amid ongoing diplomatic and trade tensions between the two countries, China’s commerce ministry announced on Tuesday that it was starting an “anti-dumping” investigation into imported wines originating in Australia.

The brief statement did not provide any details about the alleged trade distortions that had triggered the investigation, but said the review was due to be completed within a year – with the possibility of a further six-month extension.

Beijing’s decision to introduce tariffs of about 80% on Australian barley imports in May this year followed a 18-month-long investigation by China’s commerce ministry into “dumping” – when a product is sold at a lower price overseas than it is in the country where it is produced – and the effect of government subsidies.

China is the leading export market for Australian wine, but China also produces wine domestically. The commerce ministry investigation is understood to have been triggered after China’s wine industry association complained about the impact of alleged dumping by Australian competitors.

Australia’s agriculture minister, David Littleproud, said the government rejected the wine “dumping” allegations and vowed to “work closely with industry to fight these claims”.

He said Australia’s reputation as a quality wine producer was “recognised by Chinese consumers who have helped make China our largest export market with $1.1bn exported in 2019/20”.

“I note that this anti-dumping investigation will run for up to 12 months, and I am committed to working with the Australian wine industry to ensure that all necessary information is provided to refute any claim that Australian wine is being dumped,” Littleproud said in a statement.

The move has unsettled the sector, given that China is the top export market for Australian wine. Mainland China was responsible for 39% of the total export value of Australian wine in the year ending June 2020, followed by the United States (15%) and United Kingdom (13%), according to Wine Australia.

Treasury Wine Estates Limited – whose share price fell by nearly 20% before regaining slightly – told the Australian stock market it would cooperate with any requests for information from Chinese or Australian authorities.

It emphasised that Treasury Wine Estates – which has headquarters in Melbourne and is responsible for importing brands such as Penfolds – had “had a long and respectful relationship with China over many years” and remained committed to China as a priority market.

The share price of Australian Vintage Limited – whose brands include McGuigan Wines, Tempus Two and Nepenthe – also fell by about 8% in trading on Tuesday.

Wine was one of the goods cited by China’s ambassador to Australia, Cheng Jingye, in a controversial interview in which he warned that Australia’s forthright push for an international investigation into the origins and early handling of Covid-19 could sour bilateral ties and affect consumer sentiment.

Cheng told the Australian Financial Review in April that “if the mood is going from bad to worse”, Chinese consumers might ask: “Why should we drink Australian wine? Eat Australian beef?”

The Australian government condemned those remarks at the time, branding them as a form of economic coercion, but there have been fears about broader trade impacts. Earlier this year, China also barred red-meat imports from four Australian abattoirs on technical regulatory grounds.

Chinese state media have run numerous articles in recent months warning that trade ties could further spiral if the diplomatic dispute worsened.

In May the Global Times said that Australia would be “delusional to think that economic and trade cooperation between the two countries would not suffer from a deteriorating bilateral relationship”.

The same article claimed numerous Australian exports – including wine and iron ore – along with tourism and international education “could be at risk if Canberra continues to exacerbate bilateral relations”.

Comment on the wine investigation has been sought from the Chinese embassy in Australia.

Australia’s trade minister, Simon Birmingham, revealed that Chinese officials had advised Australia they were also considering a request to launch a countervailing duties investigation into Australian wine. That would focus on the alleged impact of government subsidies.

“This is a very disappointing and perplexing development,” Birmingham said.

“Australian wine is highly sought after in China because of its quality. Australian wine is not sold at below market prices and exports are not subsidised.”

Labor’s trade spokesperson, Madeleine King, said the opposition was “deeply concerned” by the development and called on the government “to use all appropriate diplomatic channels to address these allegations” in order to prevent tariffs from being imposed.

As the Guardian has previously reported, the Australian government has been receiving advice to be patient and hold the line amid the turbulence in its relationship with China, even as trade is increasingly emerging as a pressure point.

Insiders point out that Chinese officials have long had objections to Australia’s anti-dumping system and how it has affected Chinese products such as steel. They say both countries will ultimately have to find a new settling point in the relationship.

The latest move comes amid rising diplomatic tensions between China and Australia, driven by a range of issues including the dispute over Canberra’s call for a Covid-19 inquiry, along with Beijing’s imposition of tariffs on Australian barley and the disagreement over the new national security law in Hong Hong.

Some Australian business leaders have lamented how trade has been used as a “weapon for foreign affairs”. But the former prime minister Malcolm Turnbull has warned business against reacting to Beijing’s actions in a way that would only “encourage more bullying from China”.