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May 30, 2022 View:

Australian wine exports to China plunge 98% in two months

Australian wine exports to China plummeted 98 percent between October and December last year as a result of a trade dispute between Australia and China. China decided to impose tariffs of up to 212 percent on Australian wine in November last year based on the results of an anti-dumping duty investigation. Australian Prime Minister Morrison's government also actively sought to restart dialogue with China earlier this week, but the Chinese side cannot attach any preconditions or jeopardize Australia's national sovereign interests.

Image from: FX168 Financial Network

Australian wine exports to China fell by $158 million, from $162 million in October to $4 million in December, with red wine exports taking the biggest hit, according to the latest export figures cited by Sky News Australia. China remains Australia"s largest trading partner to date, accounting for 39.4 percent of Australia's merchandise exports and 17.6 percent of its services exports between 2019 and 2020, according to analysis by Marcel Thieliant, senior economist at Capital Economics. Tariffs, Australia's economic growth could shrink by up to 2.8%.

In November last year, the Ministry of Commerce of China issued an announcement on the preliminary determination of the countervailing investigation on imported wine of Australian origin, which stated that the investigating authority preliminarily found that the imported wine of Australian origin was subsidized and the domestic wine industry was materially damaged, and that there was a causal relationship between the subsidy and the material damage. According to the provisions of Article 29 and Article 30 of the Countervailing Regulation, the Ministry of Commerce proposed to the Customs Tariff Commission of the State Council to take provisional countervailing measures on the import of relevant wines originating from Australia.

The Tariff Commission of the State Council, based on the recommendation of the Ministry of Commerce, has made a decision to impose temporary countervailing measures in the form of temporary countervailing duty deposits on imports of the relevant wines originating from Australia since December 11, 2020. When importing the investigated products, the importing operator shall provide the corresponding provisional countervailing duty deposit to the Customs of the People's Republic of China in accordance with the ad valorem subsidy rate of each company as determined by this preliminary ruling.

As Beijing's trade sanctions against Australia continue to escalate, a list of 41 Chinese-backed wine companies was sent out by the Vino e Amigos Facebook page, prompting calls for a boycott of the companies on the list and a national dialogue where ownership is foreign-owned. News Australia also noted that China's 212 percent tariff on Australian wine threatens to cripple the $6 billion wine industry. The Chinese Ministry of Commerce then imposed a further 6.4 percent tariff, adding to the bleak outlook for the industry's failure to recover. Australia exports 39 percent of its wine to China, but Beijing exporters claim Australia is dumping cheap wine into the Chinese market.

Australian Prime Minister John Morrison has released a softening signal, shouting to China that he is willing to restart dialogue but cannot impose any additional preconditions. In an interview with The Australian, he said he would be willing to meet at any time, despite China's outlook being increasingly at odds with Australia's sovereign interests. In recent months, China has initiated a series of trade bans against Australia and issued a list of complaints about the relationship between China and Australia.

Faced with the possibility that the China-Australia dispute may be in a long-term unresolved state, Morrison responded in an interview, saying: I am aware of the difficulties in the relationship with China, and the 14 allegations listed in the list of complaints become obstacles that will take a long time to get back on track. But we would be happy if we could meet and work through these issues and even have a discussion. I don't think this is a dispute that happened in an instant, we've seen this hold for a number of years and the China-Australia relationship has clearly changed, however it's not on any specific incident, it's over time. It seems to me that Australia's sovereign status and China's outlook has changed and that has made us increasingly at odds.

Morrison has also consulted former prime ministers John Howard and Kevin Rudd for diplomatic advice on how to deal with Beijing. He has not ruled out Labor's proposal and intends to invite the two former Labor prime ministers to serve as diplomatic envoys to help break the worsening trade impasse.

After Australian Labor leader Anthony Albanese submitted his proposal to Morrison's government, Morrison said he was keeping an open mind to people with experience in the diplomatic field, stressing that both former Australian prime ministers have extensive experience in this area. I always keep an open mind to people who have experience in the field of diplomacy with China, but how we do that is something we will continue to do with the way we conduct our business," he said. China-Australia is an important and valuable relationship and we will seize every opportunity that we believe will put Australia in the best possible position to facilitate an improved relationship. We will, of course, remain absolutely open to discussion on any issues that have come up.