China launches anti-dumping probe into Australian wine
The greatest fear of Australia’s $6bn wine industry has been realised, with China opening an anti-dumping investigation into wine imports.
The greatest fear of Australia’s $6bn wine industry has been realised, with China opening an anti-dumping investigation into wine imports that could threaten the profitability and welfare of the entire sector.
China’s Ministry of Commerce said in a statement on its website on Tuesday that it had begun an anti-dumping investigation into imports of wine from Australia in containers holding two litres or less in 2019.
It said its investigation, which was being made in response to a complaint from the China Alcoholic Drinks Association, would also investigate any damage done to the industry from 2015 to 2019.
The investigation will determine whether Australian winemakers “dumped” bottles of wine at deliberately low prices in order to crowd out local producers and claim a bigger market share.
The federal government rejected any allegation of dumping by the Australian industry, saying the local industry competed only on its merits.
Trade Minister Simon Birmingham slammed China’s investigation as “very disappointing”.
“They have also advised Australia that they are considering a request to launch a countervailing duties investigation,” Senator Birmingham said.
“This is a very disappointing and perplexing development. Our wine industry has worked incredibly hard to establish itself as a world-leading producer and export powerhouse.
“Australian wine is highly sought after in China because of its quality. Australian wine is not sold at below market prices and exports are not subsidised.”
The countervailing duties investigation involves a probe into whether Australian wine exports are receiving and benefiting from government subsidies. The anti-dumping investigation is expected to be completed by August 18 next year but could be extended until February, 2022.
Senator Birmingham said Australia would “engage fully with the Chinese processes to strongly argue the case that there are no grounds to uphold the claims being made”.
“Our government will stand with the Australian wine industry to uphold their integrity and hard earned reputation for producing wines in high demand throughout the world.”
Shares in winemaker Treasury Wine Estates were slammed by the news, falling by nearly 20 per cent on Tuesday before recovering some ground during the afternoon.
In an ASX statement, Treasury Wine Estates said it would co-operate with any requests that it receives for information from Chinese or Australian authorities. “Treasury Wine Estates has had a long and respectful relationship with China over many years through its team, partners, customers and consumers,’’ it said.
“As an importer of high-quality, premium Australian wine, including brands such as Penfolds, TWE remains committed to China as a priority market and will continue to invest in its Chinese business and its relationships with customers and consumers.”
Australia wine is allowed into China on an import tax free basis under the China Australia Free Trade Agreement.
Agriculture Minister David Littleproud said the government categorically rejected China’s dumping allegations. “Our farmers are amongst the most efficient and least subsidised producers in the world – recognised as second only to New Zealand in our levels of support,” Mr Littleproud said.
“While we respect the right of any nation to defend their domestic producers from unfair and uncompetitive trade practices, we reject any claim that Australian wine product has been “dumped” into China.
“I note that this anti-dumping investigation will run for up to 12-months, and I am committed to working with the Australian wine industry to ensure that all necessary information is provided to refute any claim that Australian wine is being dumped.
Mr Littleproud said the government was committed to work with the wine industry – hit hard by bushfires and COVID-19 – to “fight these claims”.
The deputy Nationals leader said the reputation of Australian wines had been “recognised by Chinese consumers who have helped make China our largest export market with $1.1 billion exported in 2019-20”.
National Farmers Federation president Fiona Simson described the investigation as “baffling”.
“Australian wine exporters, like all Australian farmers, operate in a free and competitive market and pursuant to a rules-based global trading system,” Ms Simson said.
“Our farmers are among the least subsidised in the world. Claims that Australian wine makers are selling wine into the Chinese marketplace at below market price are completely unsubstantiated.”
Ms Simson said the Australian wine industry had spent “many decades establishing a highly valuable relationship with China built on a high-quality product and mutual respect”.
“Almost 30 per cent of Australia’s total agricultural exports go to China. It is an important and valuable market for Australian farmers. It is crucial that every trade-related issue is considered in isolation and on its merits,” she said.
Opposition trade spokeswoman Madeleine King called on the government to “use all appropriate diplomatic channels” to ensure China does not slap tariffs on Australian wine exports.
“Labor is deeply concerned about reports that China’s Ministry of Commerce has started an anti-dumping investigation into Australian wine,” Ms King said.
“In our relationship with China, as with any country, we must always assert our values and our interests – including transparency and sovereignty.”
Trade pressure
The wine announcement, which follows suggestions by China’s ambassador to Australia, Cheng Jingye, that Chinese consumers might decide not to buy Australian wine and beef in response to actions by the Morrison Government, is the latest in a series of moves by Chinese authorities against Australian exports.
On Tuesday strategic experts warned of further trade retaliation from China which is engaged in a campaign to drive a political wedge between Australian industry and the Morrison government.
Peter Jennings, director of the Australian Strategic Policy Institute, told The Australian that Beijing was ramping up hostilities in retaliation for the banning of Huaweii from 5G, Australia’s push for the pandemic inquiry and espionage laws aimed at Chinese spies.
However, Mr Jennings said the Chinese Communist Party would be the ultimate loser with European countries now watching the treatment of Australia and re-assessing their relationships with the economic superpower.
Mr Jennings said China’s strategic push was motivated by internal domestic problems for Chinese President Xi Jinping, who was trying to drive nationalism through aggression as the Chinese economy showed signs of faltering. “This is just proving why it’s bad to be dependent on an economic relationship with China,” Mr Jennings said.
“There has been a clear pattern in play for a couple of months. They will selectively and sequentially go after discretionary Australian exports.
“It’s all about keeping political pressure up on Canberra by trying to split off the business community from the Australian government
“If Beijing took a mature approach … they would realise it is losing them any friends in Australia and do them long term damage.”
“The only sensible Australian approach is not to over react and stick to our guns.”
Billion-dollar industry
China is the biggest export destination for Australian wine – a business worth more than $1 billion a year. Treasury Wine’s sales to China are one of the company’s biggest single sources of earnings.
Treasury Wine’s chief executive Tim Ford told The Australian last week that he was worried about the potential implications of increasing tensions between Australia and China.
“Does it worry me?” he said. “Of course it worries me.”
“We saw it two years ago when we faced some operational challenges getting our product into China for a short period of time. We would hope that they don’t happen in the future for sure.”
Australia is the biggest source of imported wine in China, with TWE the biggest single foreign seller in the country.
For the month of June, Treasury Wine’s wine sales in China rose by a strong 40 per cent compared with June 2019 – with sales growth over the June quarter of 13 per cent compared with the June quarter of 2019.
This comes as the Chinese economy recovers from a tough first few months of the year with sales down 50 per cent in the worst months of February and March.
After presenting his first results, Treasury Wine’s Mr Ford told The Australian that it was seeing “positive signs of growth” in China in the northern part of the country, which had been lagging behind the upturn in the wealthier southern and eastern regions.
“Clearly demand is increasing and the occasions for that are increasing,” he says.
“It’s not quite back to normal (compared to what things were last year), but our team in thing have been returning back to their annual business planning processes and visiting customers.
“Banquets and other events are starting up again.”
The federal government has increased efforts in the past 12 months to diversify wine export markets for Australian producers, with 50 per cent export growth in Denmark, 14 per cent growth in Singapore, 90 per cent growth to Indonesia, 23 per cent growth to France, 42 per cent growth to Latvia and 12.6 per cent growth to Sweden.
Wine exports to Britain, Australia’s third largest wine export destination, grew to $409.7m in 2019-20. The wine export market to the US hit $445.2m in the last financial year.
Australia’s global wine exports hit more than $2.9bn in 2019-20, with $1.074bn in sales to China, representing 37 per cent of Australia’s export market. South Australia’s share of wine exports to China in 2019-20 was valued at $813.9m.
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