China blitz on exports strikes winemakers

China slaps tariffs on $1.2bn of wine exports, telling the Morrison government to ‘reflect upon its own behaviour’.

Howard Park Wines owner Jeff Burch in a warehouse full of wine that was destined for China. Picture: Colin Murty

China has imposed tariffs on more than $1.2bn of wine exports and told the Morrison government to ­“reflect upon its own behaviour” in a dramatic escalation of trade tensions.

The extraordinary new ­measure, with tariffs of up to 212 per cent effective from Saturday, will all but wipe out the Australian wine industry’s trade with China. It follows the halting of the $700m lobster export sector and restrictions on $1bn in coal stranded out of port.

Under the changes, Chinese importers will have to pay a duty on Australian wine ranging from 107.1 per cent to 212.1 per cent ­depending on the company that produced it.

Treasury Wine Estates, the producer of Penfolds and Lindeman’s, dropped more than $600m in value before its shares entered a trading halt after the news broke.

READ CHINA’S FULL COMPLAINT HERE

Trade Minister Simon Birmingham said the sanctions against a number of industries this year gave rise to the perception “these actions are being undertaken as a result or in response to some other factor (apart from dumping)”.

“Doing so is completely ­incompatible with the commitments that China has given through the China-Australia free-trade agreement and through the World Trade Organisation,” Senator Birmingham said.

“It’s incompatible with a rules-based trading system.

“The idea that Australia somehow subsidises our wine industry for it to be able to dump or sell product below cost on international markets is a falsehood.”

The sanctions are contained in a preliminary ruling released by the Chinese Ministry of Commerce on Friday, after China’s drinks industry accused Australian winemakers of dumping discounted wine and reducing their competitiveness.

The Ministry of Commerce said it had conducted the investigation in accordance with Chinese regulations and World Trade Organisation rules.

Hours after announcing the sanctions, China’s Foreign Ministry spokesman Zhao Lijian said: “I think the Australian side should reflect upon its own behaviour. They should think about whether they have respected China’s ­interests. We urge the Australian side to face up to the problems, correct their own mistakes, (and) take seriously China’s concerns instead of harming China’s interests and moving further down the wrong path.”

Mr Zhao’s comments were a dramatic rebuff of Scott Morrison’s attempt this week to repair relations with China, when the Prime Minister told a British think tank that Australia did not want to contain China and was not acting at the behest of the US.

Those comments were favourably received by Beijing only on Tuesday, three days before the new tariffs were announced.

Margaret River winemaker Jeff Burch said the tariffs were a “catastrophe” and China had declared “economic war”.

Speaking from a warehouse crammed with wine that was destined for China but will need to find another home — once the Chinese labels are scrubbed off — Mr Burch said it was demoralising for winemakers who had put in decades of hard work in the Chinese market.

“Most of us have put 15 or 18 years of hard work into developing that market and, jeez, part of me is thinking all that work was for nothing,” said Mr Burch, who owns Howard Park Wines.

“We are not dumping wine, that is just a red herring. It’s a ­political decision. And why is Australian wine so popular? ­Because people enjoy our taste and like the wines. They love our traceability and our honesty.”

Mr Burch has two shipments of his wine sitting in a warehouse labelled and ready to export to China.

“It is not that easy to find ­another market that quickly that can handle this kind of volume and price points,” he said.

“I would almost love to ask the general public to help the ­Australian wine industry in its hour of need.

“Do you really need to buy a bottle of New Zealand sav blanc? Can’t you buy an Aussie one?”

Australia exported $1.2bn in wine to China in the year ending September, according to Wine Australia figures.

That was more than double the $439m exported to the US, the second-largest market, and the $430m exported to Britain, the third-largest but fastest growing.

The Australian reported on Friday that the Australian coal flotilla stuck off the Chinese coast has swollen to more than 80 ships carrying black-listed cargo worth $1.2bn. Coal exports to China plunged 96 per cent in the first three weeks of November, as a go-slow by ­Chinese officials crunched the ­nation’s second biggest export ­industry.

Chinese authorities will implement an import-duty deposit scheme where Australian winemakers would pay a deposit for each shipment of wine and that deposit would be refunded if the industry was cleared of dumping at the end of the investigation next year, industry sources said.

Australian Swan Vintage, which has a label featuring Australia’s former ambassador to China, Geoff Raby, had the lowest impost, at 107 per cent.

Wu Dongqiang, a wine retailer in Beijing, said the hit to Australian wine — which last year overtook France as the biggest supplier to the Chinese market — would likely benefit wine from Chile and Italy.

“In a highly competitive ­market, no one has an unreplaceable position,” Mr Wu told The Weekend Australian.

Australian Grape and Wine chief executive Tony Battaglene said Australian winemakers had only recently submitted 80-page questionnaires to the Ministry of Commerce in response to the anti-dumping allegations.

“Pretty obviously we are disappointed and we also didn’t believe we would get a provisional tariff put on us because we have submitted all the questionnaires on time, only a couple of weeks ago,” Mr Battaglene said.

“I wouldn’t have thought there was enough time to have made an assessment.”