China offers ‘package’ deal to end tariffs on Australian wine, signalling resumption of $1.2b trade

Senior officials in the Chinese government have told their Australian counterparts the wine tariff could be “properly resolved” in coming months.

A recent decision to reinstate the import of Australian barley into China has raised hopes wine would be next.

Beijing has proposed a “package” deal to end its crippling tariff on Australian wine as senior figures in China’s government indicate the industry can “expect” to be granted re-entry into the lucrative Chinese market, pushing Treasury Wine Estates shares up almost 3 per cent.

China’s Commerce Ministry on Thursday evening suggested Beijing was willing to “meet the Australian side halfway” to broker an end to the almost 200 per cent tariff, which Canberra has taken to the World Trade Organisation.

Ministry of Commerce spokesman He Yadong said Beijing was now proposing a “package” deal to end the dispute.

“We are willing to meet the Australian side halfway, further enhance mutual trust and co-operate on the basis of the settlement of the barley case dispute,” said the Ministry of Commerce spokesman, according to a report in China’s official newsagency Xinhua.

The Chinese government spokesman said both countries needed to “accommodate each other’s concerns”, urging Canberra to note that “China’s wine industry is very important”.

Mr He said China wanted Canberra to address its concerns about decisions taken by the Australian anti-dumping commission on Chinese wind towers, railway wheels and stainless steel sinks, but indicated Beijing’s position was malleable.

“We are also open-minded,” the Ministry of Commerce official said.

Senior officials in the Chinese government have in recent weeks told their Australian counterparts that the wine tariff could be “properly resolved” in the coming months.

“I believe that is something we can expect,” a senior figure in Xi Jinping’s government told a recent Australian delegation in Beijing.

Beijing’s wine tariffs were imposed in November 2021, decimating the $1.2bn Australian wine trade to China. An initial report by the WTO on Australia’s case against is due next month.

Government sources familiar with the case told The Weekend Australian that Canberra is confident of a decision in its favour.

Beijing’s recent positive signalling follows Prime Minister Anthony Albanese’s announcement that he will visit China before the end of the year to meet with President Xi.

Dismantling the wine tariff would be a big win for Canberra and leave the 700 million live lobster trade as the last major sector on China’s black-list, which totalled $20bn before the Albanese government was elected last May. This year, trade in coal, copper, timber and most recently barley have all been restored.

“We want to see all trade impediments removed, which is in the best interest of each country,” Trade Minister Don Farrell told The Weekend Australian.

“I have been clear from the outset that if the process used for barley was successful, that we expect a similar process to remove trade impediments for Australian wine.”

Shares in Treasury Wine Estates rallied 2.6 per cent in a falling sharemarket on Friday, following news of the Chinese Commerce Ministry’s comments.

Winemakers such as Treasury Wine, which owns Penfolds, Wolf Blass and Lindemans, as well as the wider $45bn Australian wine sector have seen their exports to China crushed by the tariffs, which run up to 218 per cent.

Treasury’s chief executive Tim Ford on Friday said he was “optimistic” about an end to the tariff.

Mr Ford this week joined other senior representatives from the Australian wine industry on a delegation led by South Australian Premier Peter Malinauskas to China, part of Australia’s ongoing campaign to have the tariff overturned.

“The Premier’s delegation was really valuable and we saw how business and government are keen to keep exploring opportunities in China and building local relationships,” Mr Ford told The Weekend Australian.

“We have strong relationships with our Chinese customers and we know they love our Penfolds wines. We remain optimistic about a potential resolution to tariffs on Australian wine.”

Another wine industry figure closely involved in the dispute said they would wait until the tariff’s removal was “signed, sealed and delivered” before celebrating.

After Australia took China’s barley and wine tariffs to the WTO in 2021, Beijing launched its own case against Australia over anti-dumping measures imposed on Chinese made wind towers, stainless, deep drawn stainless steel sinks and railway wheels.

That dispute — which is contesting decisions made by Australia’s anti-dumping commission — is running six months behind Australia’s wine case.

Australian officials have told their Chinese counterparts that each case should be dealt with separately on their merits.

“We continue to defend China’s WTO challenge to Australian duties on Chinese steel products,” a Department of Foreign Affairs and Trade spokeswoman told The Weekend Australian.

At Treasury Wine’s annual results presentation in August, Mr Ford signalled the winemaker was starting to allocate stocks of its prized Penfolds wine in anticipation of a reopening of the Chinese market.

“We are planning to sell more Penfolds in the second half versus the first half of fiscal 2024, and we’re doing that strategically to give us the flexibility of a potential change to the (wine) tariffs in China,” Mr Ford said.

E&P Capital analyst Phillip Kimber said before the pandemic, Chinese operations delivered $180m to $200m of annual earnings for Treasury Wine, predominantly through the sale of around 600,000 cases of luxury and icon wines.

As well as smashing China-focused Australian wineries, Beijing’s wine ban has hurt many in China’s wine distribution and retail industry, which has suffered from poor sales during the pandemic years as Chinese consumer confidence has been pummelled.

“Many wine sellers are still hoping for Australian wine to return,” one Chinese wine industry figure told The Weekend Australian.