China’s Ministry of Commerce (MOFCOM) launched an investigation into Australia’s wine industry in the latest escalation between the two countries that have grown further and further apart since the onset of the new year. This leaves Australian wineries in a precarious position, given that the country exports upwards of $1.2 billion worth of wine products to the east Asian giant each year.
This is all the more disconcerting when one considers that the industry as a whole is worth $3 billion, and thus, such a huge disruption could cause the entire industry to break down. Australia’s dependency on China is laid bare by the fact that the 2nd largest importer of Australian wine, the United States (US), imported just $430 million worth of Australian wine in 2019-20. In fact, shares in Treasury Wine Estates fell by almost 15% in the wake of China’s announcement.
The investigation aims to determine whether Australian winemakers have been dumping bottles containing less than two liters in China at artificially reduced prices in order to crowd out local producers. MOFCOM is also mulling over launching a parallel countervailing duties investigation into whether Australian wine exports are being propped up by government subsidies.
Australian Trade Minister Simon Birmingham called China’s decision “very disappointing” and “perplexing”. He added, “Australian wine is not sold at below market prices and exports are not subsidised. Australia will engage fully with the Chinese processes to strongly argue the case that there are no grounds to uphold the claims being made.”
Tensions between Australia and China have been escalating for quite some time now, beginning with Prime Minister Scott Morrison and Minister for Foreign Affairs Marise Payne’s calls for a global investigation into the source and spread of the coronavirus, and China’s culpability. These teething problems have only been cemented by Australia’s decision to bow under US pressure to pull Chinese telecommunications giant Huawei from its 5G network, its criticism of the new security law in Hong Kong and human rights abuses in Xinjiang, its position that China’s territorial claims in the South China Sea have “no legal basis”, and its accusations that China is engaging in cyber attacks.
The most recent investigation by China into Australian wine exports follows a similar path to that which it took with regards to Australian barley exports in early May. At the time, MOFCOM placed tariffs of up to 80% of Australian barley producers for dumping. China has also suspended imports from four Australian meat processors; Australian coal exports have also been subjected to increased trade barriers. In addition, MOFCOM has threatened a whole host of other measures, including stricter quality checks, anti-dumping probes, tariffs, and customs delays on a host of other Australian imports, including wine, dairy, seafood, oatmeal, and fruit.
Through the use of state outlet Global Times, China has referred to Australia as a “giant kangaroo that serves as a dog of the US”, and threatened to deliver a “fatal” blow to Australia’s economy if it did not relent in its pressure on and criticism of China. In addition, China’s Ambassador to Australia, Cheng Jingye, has warned that Australia’s policies cold lead to a Chinese boycott in terms of students, tourism, and exports—a threat which it has begun to make true on.
Morrison has previously engaged in some damage limitation, adding that Australia shares a “mutually beneficial” relationship with China and that Australia would continue to respect “China’s sovereignty, and their independence”. In addition, Agriculture Minister David Littleproud said that Australia will not retaliate against China’s tariffs as a “trade war benefits nobody”. In fact, even in light of these tensions, Australia’s overall trade with China is roughly 4% higher than at the same time as last year, with marked gains in the iron ore, grain, and wool industries.
China Launches Anti-Dumping Investigation Into Australian Wine Exports
This is the latest episode in escalating tensions between the two countries.
August 18, 2020
SOURCE: BEVERAGE DAILY