China places antidumping and countervailing duties on Australian wines in November 2020.
Context
Under the terms of the 2015 China-Australia Free Trade Agreement, Australian wines exported to China were not required to pay any tariffs – a significant advantage compared with other wine exporting nations. However, in August 2020 the Chinese Ministry of Commerce moved to investigate imports of Australian wine, for alleged unfair dumping and subsidies practices. Subsequently, in November 2020, the Ministry of Commerce ruled that “certain wines imported from Australia was dumped, causing material damage to the Chinese wine industry”, which it used to justify duties of between 107.1% to 212% on Australian bottled wine imports. These began in March 2021. The Ministry of Commerce’s claims were strongly disputed by the Australian wine industry.
The broader political context behind this mechanism was seen by Australia as the deterioration of ties between Beijing and Canberra, as seen in Canberra’s call for an enquiry into the origins of COVID-19. Notably, after this call for a COVID-19 investigation, the Chinese ambassador hinted at the possibility of Weaponised Trade in this sector, publicly asking the rhetorical question “[w]hy should we drink Australian wine?” However, a spokesman for the Chinese Ministry of Foreign Affairs strongly refuted allegations of economic coercion – claiming that any trade restrictions were irrelevant to the difficulty between China-Australia relations.
Impact
In the 12 months immediately preceding these Weaponised Trade measures, Australia’s wine exports to China were worth around AU$800 million. In contrast, in the 12 months to June 30, 2022, exports were worth only AU$25 million.
The share price of leading Australian luxury wine firm Treasury Wine Estates fell by 11.25% immediately after the announcement of the measures. Some smaller Australian wine firms were even more strongly impacted. One such winemaker, Jarrad White, spoke to media, explaining that the measure was damaging his firm, Jarressa Estate, “dramatically. We had a lot of supplies that needed to be paid for and all these orders that were planned to shift, so it’s left us in an awkward situation”.
Responses
(i). Australian Industry Responses
The wine industry responded with attempts to diversify export markets – with alternative destinations identified including the UK, US, and India.
Treasury Wines responded by launching its own China-made wines, which enabled it to maintain markets in China and continue using its trademarks, while avoiding the additional taxes – as the wines were not made in Australia.
(ii) Australian Government Responses
Australia’s then trade minister, Simon Birmingham, responded publicly in November 2020, calling the mechanism “a devastating blow to those (Australian) businesses who trade with China in the wine industry”, and saying that “we think [the measures are] unjustified, and without evidence to back it up.” Birmingham further stated unequivocally that “Australia defends to the hilt our winemakers, their integrity, and the commercial market-based proposition and environment in which they operate. The idea that Australia somehow subsidises our wine industry for it to be able to dump or sell its product below cost on international markets is a falsehood.”
Australia’s policy response included a formal 2021 complaint to the WTO, in which it alleged that these measures “appear to be inconsistent with certain provisions of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, the Agreement on Subsides and Countervailing Measures; and the General Agreement on Tariffs and Trade 1994.” See China – Anti-Dumping and Countervailing Measures on Wine From Australia (DS602) – available here.
The Australian government also supported wine trade export market diversification at both federal and state levels. Notably, in March 2024 a Viticulture and Wine Sector Working Group was established, “comprising representatives of the Commonwealth, state and territory governments, Wine Australia, Australian Grape and Wine and other relevant groups as agreed by the working group, to provide recommendations to Agriculture Ministers to address the challenges facing growers.” Following consultations, the Working Group reported in June 2024 that winemakers had “called for governments to assist in recovering their market share in China and diversifying and expanding Australia’s wine exports.”
(iii) Third Party Responses
US media repeatedly and sympathetically covered this incident, as did other international media. The Trump administration posted on Twitter:
The hashtag #freedomwine was also used to show support for Australian wine – a variation of the hashtag used in Lithuania‘s dispute with Russia.
Taiwanese officials were especially vocal in their support for Australia, with the Ministry of Foreign Affairs posting under the hashtag #freedomwine on twitter, also picked up in media reports.
Status
These duties were removed from 29 March, 2024, following diplomatic engagement –including talks between Australian Trade Minister Don Farrell and Chinese counterpart Wang Wentao – and a general improvement of Beijing-Canberra ties under Australia’s Albanese government. Responding to the resolution of this mechanism, the Australian government announced that it would “discontinue its legal proceedings at the World Trade Organization.” Chinese state media quoted a domestic academic expert, Chen Hong, as claiming that the end of the mechanism was motivated by “changes in the business environment” and “in accordance with laws and regulations” – and that the change in posture was not related to “what certain media hyped as ‘political gestures’”. In the first month after the resolution of this dispute, Australia successfully exported in excess of AU$86 million in bottled wine.
Media sources differ on their analysis of the ongoing legacy of the measures on Australian wine in China. A recent piece by an industry blogger included an interview with a Chinese expert & academic, who observed that “do not have any impression or memory of Australian wine, they have no idea of Australian wine. That means if Australia wants to get back the market share, they need a comprehensive marketing strategy.” The same observer pointed also to a declining market for wine overall, not limited to Australian wine, but pointing instead to a change of consumer habits.
References & Further Information
Australian Government. 2024. “Agriculture Ministers’ Meeting.” Department of Agriculture, Fisheries and Forestry. March 8. Available at: https://www.agriculture. gov.au/about/news/stay-informed/communiques/ag-ministers-forum-mar-2024
Australian Government. 2024b. “Viticulture and Wine Sector Working Group – June 2024.” Department of Agriculture, Fisheries and Forestry. June. Available at: https:// http://www.agriculture.gov.au/about/news/stay-informed/communiques/viticulture-wine-sector-working-group-june-2024 – :~:text=Acknowledging the oversupply is a,most impacted by the oversupply
Australian Government. n.d. “Summary of Australia’s involvement in disputes currently before the World Trade Organization.” Department of Foreign Affairs and Trade. Available at: https://www.dfat.gov.au/trade/organisations/wto/wto-disputes/summary-of-australias-involvement-in-disputes-currently-before-the-world-trade-organization#complainant
BBC News. 2021. “Australia takes wine dispute with China to WTO.” BBC News. June 20. Available at: https://www.bbc.com/news/world-australia-57536422
Butler, B. and H. Davidson. 2020 “China imposes swingeing tariffs on Australian wine in ‘devastating blow’ to exporters.” The Guardian. November 27. Available at: https://www.theguardian.com/business/2020/nov/27/china-imposes-swingeing-tariffs-on-australian-wine-in-devastating-blow-to-exporters
Birtles, B. 2020. “China launches second probe into Australian wine, claiming government subsidies could infringe trade rules.” ABC News. August 31. Available at: https://www.abc.net.au/news/2020-08-31/china-launches-anti-subsidy-investigation-into-australian-wine/12612896
Evans, S. 2022. “Wine sales to China slump to $25m from $1.1b in two years.” Australian Financial Review. July 26. Available at: https://www.afr.com/companies/ agriculture/wine-sales-to-china-slump-to-25m-from-1-1b-in-two-years-20220726-p5b4jf
Ferguson, A. 2023. “China Wine Tariff Pushes Australia’s Grape Growers Into Crisis.” New York Times. March 16. Available at: https://www.nytimes.com/2023/03/ 16/business/china-wine-australia.html
Hobson, P. 2024. “Australian wine exports to China rocket after Beijing drops tariffs.” Reuters. June 12. Available at: https://www.reuters.com/markets/australian-wine-exports-china-rocket-after-beijing-drops-tariffs-2024-06-12/
McCarthy, M. 2021. “China-Australia trade war forces winemakers to look to US, UK, and India to market.” ABC News. January 2. Available at: https://www.abc.net.au/news/ rural/2021-01-02/china-australia-trade-war-winemakers-look-for-new-markets-covid/13026228
Ministry of Commerce. 2020. “MOFCOM Publishes Preliminary Ruling of Anti-Dumping Investigation on certain imported wines originating from Australia.” Ministry of Commerce, People’s Republic of China. November 28. Available at: http://english. mofcom.gov.cn/article/newsrelease/significantnews/202012/20201203019743.shtml#:~:text=Based%20on%20petitions%20filed%20by,imported%20wines%20originating%20from%20Australia.
Ministry of Commerce of the People’s Republic of China. 2024. ‘Notice of reviewing the decision on the antidumping and countervailing investigation into Australian wines’ [关于原产于澳大利亚的进口相关葡萄酒所适用反倾销措施和反补贴措施复审裁定的公告]. March 28. Available at: https://cacs.mofcom.gov.cn/cacscms/article/jkdc?articleId=180036&type=4.
Minister for Foreign Affairs. 2024. “Resolution of wine dispute with China.” Senator the Hon. Penny Wong. March 28. Available at: https://www.foreignminister.gov.au/minister/ penny-wong/media-release/resolution-wine-dispute-china
Ministry of Foreign Affairs of the People’s Republic of China. 2024. ‘Spokesman for the Ministry of Foreign Affairs, Geng Shuang, held a regular press conference on 28 April 2020’ [2020年4月28日外交部发言人耿爽主持例行记者会]. April 28. Available at: https://www.mfa.gov.cn/wjdt_674879/fyrbt_674889/202004/t20200428_7816122.shtml
Minister for Trade and Tourism. 2024. “South Australia benefits from wine exports to China.” Senator the Hon. Murray Watt. June 12. Available at: https://www.trademinister .gov.au/minister/don-farrell/media-release/south-australia-benefits-wine-exports-china
Pal, A. 2024. “China wine dispute may be resolved in weeks, Australian trade minister says.” Asahi/Reuters. February 27. Available at: https://www.asahi.com/ajw/articles/ 15179974
Shanghai Observer. 2020. ‘Confrontation at Foreign Ministry press conference: Urging Australia not be exploited by the United States’ [外交部记者会罕见交锋, 澳网友喊话澳政府: 别做美国炮灰]. April 30. Available at: https://www.shobserver.com/wx/detail.do?id=242858.
Tillett, A. 2020. “China consumer backlash looms over Morrison’s coronavirus probe.” Australian Financial Review. April 26. Available at: https://www.afr.com/politics/federal/ china-consumer-backlash-looms-over-morrison-s-coronavirus-probe-20200423-p54mpl
Toh, M. 2020. “China slaps tariffs of up to 212% on Australian wine imports.” CNN. November 27. Available at: https://edition.cnn.com/2020/11/27/business/china-australia-wine-dumping-intl-hnk/index.html
Westcott, B. 2021. “How China is devastating Australia’s billion-dollar wine industry.” CNN. February 18. Available at: https://edition.cnn.com/2021/02/16/business/ australia-china-wine-tariffs-dst-intl-hnk/index.html
Woo, R., A. Zhang, and C. Hall. 2024. “China lifts tariffs on Australian wine, ends three-year freeze in trade.” Reuters. April 2. Available at: https://www.reuters.com/markets/ commodities/china-lifts-tariffs-australian-wine-ends-three-year-freeze-trade-2024-04-02/
Xuanmin, L. and F. Fan. 2023. “China starts review of duties on Australian wine imports.” Global Times. November 30. Available at: https://www.globaltimes.cn/page/202311/ 1302807.shtml
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