Australia reaches wine deal with China, PM sets dates for Beijing trip

The nation’s wine producers are hopeful of clearing a $1 billion glut of shiraz and merlot after Canberra and Beijing struck a deal that could end China’s tariffs on Australian wine exports, marking a further stabilisation in relations between the two nations.

Prime Minister Anthony Albanese on Sunday confirmed the tariffs deal while revealing he would head to Beijing and Shanghai for three days between November 4 and 7 in what would be the first visit by an Australian leader since 2016.

Anthony Albanese has revealed he will head to Beijing on November 4, after confirming a deal that will end Chinese tariffs on Australian wine has been struck.Credit: Alex Ellinghausen

Australian wine exports to China were hit with tariffs of up to 220 per cent in 2020 as part of a series of trade sanctions worth $20 billion as relations between the two nations deteriorated.

Restrictions have been gradually removed, including the end of tariffs of 80.5 per cent on Australian barley in August which in effect had shut the market to local growers.

Albanese said since the removal of the barley tariffs, the government had been seeking an end to Australia’s wine dispute with China that is before the World Trade Organisation (WTO). An interim report from the institution on the dispute is imminent.

He said a deal had been struck in which China would conduct an “expedited” review of the wine tariffs that is expected to take five months. The WTO dispute between the two nations will be suspended pending the review’s conclusion.

If the tariffs are not removed at the end of the review, Australia will resume its actions in the WTO.

Albanese said the deal had not been transactional, with Australia putting its case on a range of issues to China.

He said the move was another step towards the relationship between the two countries normalising.

“It is important that we stabilise our relationship with China. That is in the interests of Australia and China, and it is indeed in the interests of the world that we have stable relations and that is what this [deal], what this visit will represent,” he said.

“A win-win, Australia gets to export our wine. Importantly, China gets to receive this amazing product.”

The announcement follows the repatriation of Australian journalist Cheng Lei this month after three years being held by China on national security charges.

During his trip to China, Albanese will meet President Xi Jinping and Premier Li Qiang. Economic links between the two nations, climate change and personal relations between China and Australia will be discussed.

Opposition foreign affairs spokesman Simon Birmingham welcomed the announcement but said the tariffs should never have been put in place.

“It was an attempted economic coercion by China. The tariffs were never justified,” he told ABC Television.

Peter Dillon says having that capacity to trade with China will be a major boost.Credit: Penny Stephens

Peter Dillon, group chief winemaker at Handpicked Wines on the Mornington Peninsula, in Victoria’s south-east, was cautiously optimistic about the news on Sunday morning.

“We’re waiting to see the final hurdle fully removed before we celebrate in full. But it’s obviously welcome news,” he said.

Dillon, who is also treasurer of the regional industry association, Mornington Peninsula Wine, said that before the tariffs were imposed, 40 per cent of Handpicked Wines’ sales had been to China – its biggest export market.

Of the 100 wine producers on the Mornington Peninsula, about half of them had exported to China to some degree before the tariff was imposed, he said.

Dillon said the area’s winemakers had been doing it tough.

“So to get to this point of being able to trade again is going to have a significant boost for everyone’s business at a time when the wine industry has been through a few difficult seasons and everyone’s been trying to find customers,” he said.

“It’s got the potential to be huge in terms of positive change for everyone’s wine business. Just having that capacity to trade with China is going to be a major boost to everyone’s export capacity.”

Since the tariffs were introduced, the wine sector has been grappling with an oversupply of red wine, particularly in commercial wine and in ‘heavy red’ varieties like shiraz, cabernet sauvignon and merlot.

In June 2022, national wine inventory levels came at nearly 2.3 billion litres, a 15-year record high, according to KPMG’s latest wine industry report.

The export market – worth $1.3 billion at its 2019 peak – plunged to $8.1 million in the 12 months to June this year. Analysis by Rabobank expects it will take at least two years to clear the current oversupply, equivalent to 2.8 billion bottles.

Tim Ford, chief executive of Treasury Wines Estates – which owns Penfolds – welcomed the review and said it paved a “path forward” to develop the Chinese market.

“There are only positives to come out of a favourable tariff review for the Chinese consumer, customers and wine category, for the Australian wine industry and for TWE,” Ford said on Sunday.

“We now look forward to a new era of positive engagement that will ultimately build a strong and growing China wine category should the review see the removal of these tariffs.”

Albanese made the announcement just hours before departing for the US where he will have a series of meetings including with President Joe Biden, Vice-President Kamala Harris and Secretary of State Antony Blinkin.

Discussions between Albanese and Biden are expected to focus on the AUKUS agreement, the events in the Middle East and Ukraine, climate change and America’s relationship with the Indo-Pacific region.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.