Winemakers fear China could slap 200 per cent import tax on Australian wine, effectively wiping out that market
Winemakers have warned that China’s inquiry specifically targets several SA-based companies – and a potential 200 per cent tax would force them out of that market completely.
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China could slap import taxes of up to 200 per cent on Australian wine through its anti-dumping probe - essentially wiping out the lucrative Chinese market for Australia.
It would mean about $2 billion in extra import taxes for Australian winemakers if the steep duties were imposed across the whole sector, given packaged wine exports to China were worth $1.1 billion in the 2020 financial year.
“If we get export duties of around 200 per cent, it would simply close that market to us,” Australian Grape and Wine boss Tony Battaglene told The Advertiser.
South Australia would be hit the hardest, with 43 per cent or $814 million of its wine exports going to China and as the nation’s biggest wine export state.
Ten Australian companies have been named in Beijing’s inquiry, including six major South Australian or SA-based winemakers.
Treasury Wine Estates, the maker of Penfolds; Casella Wines, which makes Yellow Tail; Accolade, Australian Vintage, Yalumba, South Australian Wine Group, The Wine Company, Truffle & Wine, Wingara Wine Group and Stoney have all been named.
Three of those companies do not export wine, Mr Battaglene said.
A separate Chinese investigation into whether Australian wine companies receive government subsidies could be announced as early as Thursday.
Mr Battaglene said Australia had a strong case against the claims it was dumping wine on the Chinese market but tariffs as steep as 200 per cent would simply make the market “unviable”.
In a briefing note prepared for the industry last week, Mr Battaglene also warned the “worst case scenario” would involve China slapping interim tariffs on Australian wine as early as late October.
“In the worst-case scenario, provisional measures in the form of tariffs can be imposed in a shorter time frame, but not until at least 60 days after the initiation of the action on 18 August 2020 and only where there is first a preliminary affirmative determination that such measures are necessary to prevent injury to the domestic industry during the investigation,” he wrote.
The interim tariffs could only remain in place for four months.
If there are no provisional measures, there’s likely to be no impact on the Australian industry until after the inquiry concludes in August 2021 or February 2022 if it is extended for six more months.
China could also drop the inquiry completely, as it did for an anti-dumping inquiry into European wines in 2013, or find in Australia’s favour.
The inquiry was launched last week by China’s Ministry of Commerce after a request from the China Alcoholic Drinks Association, which has argued for ananti-dumping margin of 202.7 per cent.
Mr Battaglene told industry the anti-dumping duty could be applied on an individual exporter basis but often with a so-called ‘all others’ rate, which would mean different companies may have differing rates of duty.
He also noted an additional countervailing duty could be applied to the whole wine sector or individual exporters if there was an adverse finding against Australia on that inquiry.
“It is very important that we have full cooperation from all companies named ... as a lack of cooperation will cause problems for all parties and is likely to have flow on impacts for the entire sector,” Mr Battaglene wrote.
He has warned winemakers to seek advice first before registering to be part of the inquiry, which they do not have to do despite some law firms advising companies they had to register.
Mitchell Taylor, managing director of Taylor’s Wines, said the value of bottled wine going into China in recent years had been increasing, which made it hard to understand the allegation of dumping.
“If you look at the latest export figures, they really indicate the reverse is happening. We’re selling more into China at the high end, and the volumes are dropping,’’ he said.
Mr Taylor said a high tariff, were it to eventuate, would have a severe impact, but the industry was expecting a push for a more modest amount, similar to the duties which existed prior to the Free Trade Agreement with China.
“Let’s hope it doesn’t happen at all,’’ he said.
“$1.2 billion in sales to China is by far our biggest market with probably daylight second followed by the USA and UK.
“And also what drives the asset values in the Australian market is related to that Chinese demand.’’
Mr Taylor said Australian wines did not tend to compete with home-grown Chinese wine, which was sold generally at a much cheaper price, and this year’s smaller local harvest due to drought and bushfires also meant there was upwards pressure on pricing.
“We export to over 100 countries around the globe and we’re always exploring opportunities everywhere, but the main issue if we lost a major market like China is where would that wine be sold?’’
AMP Capital Chief Economist Shane Oliver said if the duties were imposed, it would mean a sharp increase in the price of Australian wine in China.
He said it would have the effect of reducing sales and encouraging Chinese customers to buy wines from other countries where the retail price is cheaper.
“[It] would basically mean the importer would have to pay a huge amount of tax for any wine it imports from Australia,” he said.
“It would be virtually impossible to absorb that in their profit margin without going out of business, so they would have to pass it on to the consumer.”
He said there were two sides to the story as Australia had also put tariffs on imports from China.
China’s second most senior diplomat to Australia Wang Xining denied Beijing’s wine probe was politically motivated in a speech to the National Press Club in Canberra on Wednesday.
Trade Minister Simon Birmingham has strongly denied the allegations Australia is dumping wine in China, and has vowed to fight the claims.