Aug 19: China’s Ministry of Commerce announced an anti-dumping probe into Australian wine imports yesterday, causing worry to the industry already reeling under CoronaVirus, drought and fall in world economy, writes Subhash Arora who believes it is a political move by China which has India and the world turn against it in recent times and is facing a huge dent into its economy
China has been Australia’s biggest wine export market for several years, displacing France. It exported A$1.2 billion of wine to China in 2019-20, over 40 % of the total exports of A$2.84 billion.
The Australian Government has been critical of China’s handling of the pandemic and has called for an inquiry, thus upsetting China. It had warned Australia in April that Chinese consumers may boycott Australian wine, beef and barley. In fact, it banned beef imports from four of the biggest abattoirs citing mislabelling as the reason for rejection and ban and imposed 80% duty on barley.
Treasury Wine Estate (TWE) is the biggest exporter to China selling high-quality, premium Australian wine, including brands like Penfolds. On being advised by the Chinese Ministry of Commerce that it had initiated an anti-dumping investigation into Australian wine exports into China, the company said ‘TWE will of course cooperate with any requests that we receive for information from Chinese or Australian authorities. We have had a long and respectful relationship with China over many years through our team, partners, customers and consumers.’ Shares of TWE nose-dived by 20% before recuperating some of the losses’ yesterday, according to a Report by Australia’s Wine Business Magazine.
The Financial Review has reported that this is China’s “first step in levying hefty import duties on Australian wine”. The investigation could take 12 months and might be extended by another year to 18 August, 2022.
The probe includes imports of wine from Australia in containers holding two litres or less (technically wines above this limit are considered bulk wines, suggesting that bulk wine imports are excluded in the investigation-editor) in 2019. China’s Commerce Ministry says the investigation follows calls from the China Alcoholic Drinks Association (CADA) on behalf of the domestic industry. According to one media report, the CADA has asked the regulator to look into 10 Australian wine producers including TWE and Accolade Wines. It claims that from 2015-19, share of the domestic industry dropped from around 75% to 50% and there was a drop of average value of Australian wine imports by about 13% and the import doubled.
Australia signed a Free Trade Agreement with China in 2015, with the import tariff of 14 % for Australian bottled wine and 20 percent for bulk wine phased out over four years. There were thus no import duties in 2019,
Sixty-two percent of wine produced in Australia is exported by around 2900 exporters to 119 markets including India where Pernod Ricard is the biggest exporter thanks to the popularity of the ubiquitous Jacobs Creek. Exports to China slowed down during the start of the pandemic but orders started pouring in June and July. Interestingly, an increasing number of wineries in Australia are owned by Chinese.
The Australian wine industry has known for many years that it was too exposed to China and has been scrambling to develop other markets, with mixed success and slow progress. One such person who believes it is purely a political move is Dan Traucki, an Australian wine journalist of repute, taster and an international wine judge who says the move is purely political and will impact everyone in the Australian wine industry, whether they export to China or not. He has been advocating for 3 years that Australia had too many eggs in the China basket, and encouraging wineries to diversify but ‘sadly it looks like I have been proven right’, he writes.
‘There is no factual basis for this witch hunt, as our value of exports to China have been steadily rising over 2015- 2019. If we had been dumping, the value would have been going down- unless we are dumping more and more expensive wine!’ he says, adding, ‘the bully boy is flexing his muscles’. The real impact of this new “measure” will take time to unfold but he hopes Australians can find new markets to diversify now that we are being punished by the Chinese Regime.’
China has been facing a lot of resentment and opposition in India thanks to the mishandling and misreporting of Covid-19 but also due to the border skirmishes and the aggressive Chinese military stand at India’s borders. Many Chinese Apps like Tik Tok have been banned and the government has taken several steps to reduce business between the two countries and even banning companies like Huawei into participating in India’s growth in tele-communications, due to perceived security risks. However, there is hardly any business in wines between the two countries.
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