Trade tensions rise as China targets Australian wine

China is set to impose anti-dumping duties of more than 100% on Australian wine from this weekend, adding to a series of sweeping trade reprisals this year and further escalating tensions with Canberra.

The anti-dumping deposits will take effect on November 28 and range from 107.1% to 212.1%, the Chinese ministry of commerce said in a statement on Friday. Australia responded by warning Beijing that its actions could create a perception among businesses and countries around the world that trade with China is risky.

The duties come just three months after China started an anti-dumping and anti-subsidy investigation into Australian wine, and follows a raft of other measures barring imports from coal to copper to barley this year.

China is the biggest buyer of Australian wine, importing A$1.2bn ($880m) in the year through September, according to government marketing body Wine Australia. That is 167% more than the value of exports to its next biggest market, the US

In response to China’s announcement, Australia said it would seek World Trade Organisation intervention to defend itself from the tariffs, which trade Minister Simon Birmingham labelled “grossly unfair, unwarranted, unjustified.”

Businesses and countries outside China viewing Beijing’s backlash against Australia this year would see the “potential that their trade, their businesses, can be disrupted through these sort of unwarranted, unsanctioned actions that frankly don’t stand up,” Birmingham told reporters in Adelaide.

Treasury Wine Estates shares tumbled more than 11% after the news, before trading was paused. The company said it is reviewing details of the provisional measures “as a matter of urgency” to update the market. Subsidiary Treasury Wine Estates Vintners is subject to duties as high as 169.3%, according to the Chinese commerce ministry’s statement.

Tony Battaglene, head of industry group Australian Grape and Wine, said he plans to respond to the Chinese commerce ministry in the next 10 days. “There must be rationale behind the various tariff rates that were put on so we just have to work through those arguments,” he said.

The two nations have been in a deadlock since 2018, when Canberra barred Huawei Technologies from building its 5G network. Adding to grievances is Prime Minister Scott Morrison’s call for an inquiry into the origins of the coronavirus outbreak, a move that bruised China’s pride and unleashed a torrent of criticism that Australia is a puppet of the US.

“This latest hit by the Chinese government shows Beijing is determined to teach Australia a lesson that can reverberate globally,” said John Blaxland, a former intelligence officer who is now a professor in international security at the Australian National University. “While it’s important for Australia not to cave into this pressure, it also shows how the nation’s traders have no option but to quickly recalibrate and diversify their markets.”

‘Positive comments’

Morrison sought this week to release some of the pressure, giving a speech that praised China for pulling its people out of poverty. Australia, he said, wants a “mutually beneficial” relationship and insisted his government is not siding with the US to contain China. The ministry of foreign affairs in Beijing noted the “positive comments.”

“Beijing is saying that Scott Morrison’s speech this past week was simply not enough, and so China wants to keep the trade pressure on,” said James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney.

Since the ruling applies to wine shipped to China in containers of as much as 2l, Australian exporters could potentially circumvent the duties by shipping bulk wine to the country and have it bottled there, Laurenceson added, noting that he expected “a good proportion” of the product that the country used to send to China to be sold elsewhere within a year or two.

Australia is the world’s most China-dependent developed economy, and the trade issues hit the country in the midst of its first recession in almost 30 years. China would not be able to import products including coal, barley, copper ore and concentrate, sugar, timber, wine and lobster, people familiar with the situation said earlier this month.

Australian wine has already been piling up in the country after China announced two trade probes earlier this year. More than 50 vessels carrying at least $500m in Australian coal have also been stranded near Chinese ports as the diplomatic spat cut into trade.

Bloomberg