June 21: After a 6- month consultation with Australian winemakers and various associations regarding the duty increase up to 218% by China last year, the Morrison government has decided to knock at the door of WTO and has filed an application against China for imposition anti-dumping duties on Australian wine exports, writes Subhash Arora who is reminded of a similar action by EU against India in 2007 resulting in reduction of customs duty from 266% to 150%
After about 6 months of diplomatic efforts by Australia failed, it was a certainty that they would approach WTO for redressal as was the general consensus in their country with the wine industry up in arms against what they perceive as illegal and arm-twisting tactics by their biggest importing nation. Australia has finally gone to WTO on Saturday, a culmination of the trade and diplomatic stand-off between the two countries and follows a series of warnings by Prime Minister Scott Morrison that his government will befittingly respond to countries trying to use economic coercion against it. The action is in line with the government's support for the rules-based trading system. The Prime Minister says however, that Australia remains open to engaging directly with China to resolve the issue.
The action comes days after a summit of the G7 grouping of advanced economies that were supportive of Australia's move for a tougher stand against China's unfair trade practices. Australia was invited to the summit as a traditional observer along with South Korea, South Africa and India, which was represented by PM Narendra Modi who also attended on the virtual platform.
Also Read: Australia may approach WTO against China Wine Duty Hike
This is not the first time Australia has approached the WTO. About 6 months ago it filed a complaint against China over its tariffs on barley. It has imposed tough economic sanctions on a range of Australian products recently, including tariffs or disruption across several agricultural sectors including beef, coal, wine and tourism.
The measures are a planned way of punishing Australia for various reasons, some of which because it accused China indirectly for perpetrating the Corona Virus and asked for disclosing the origins. It has also been upset with Australia taking part in the Quad initiative that included the US, Australia, Japan and India. It had already been upset over Australia banning Chinese companies taking part in the lucrative 5G broadband network that would be an opportunity for billions of dollars of profit.
Also Read: Australia China Tussle hits a High with 200% Import Duty on Wine
PM Scott Morrison had reportedly received explicit support from the US as well as from France during a visit to Paris following the G7 meeting which ended on June 12. Morrison made it clear he would push the other nations for joint action against China's aggressive trade policies.
Also Read: China Bans Wine and Imports of several Products from Australia
China had been the top importer of Aussie wines till the last 3 months in 2020 when the exports dropped to a trickle, barely 1% of the previous value, after the embargo and duties were imposed.
Thanks to the concerted action by the exports with the help of Wine Australia-the quasi- government body that has worked diligently behind the producers, UK accepted the Australian wines fast, absorbing a substantial portion of the fall in exports to China and making it the number one export country for Australia.
Also Read: China Launches Anti-Dumping Probe against Australian Wines
WTO and India
The action by China brings memories of EU and the US embroiled in a controversy with India in 2005-08 due to high import duties imposed because of the countervailing duties applied on ad- valorem basis, taking the total duties to 266% whereas the agreed and allowed limits according to the treaties were 150%. Eventually the EU approached the WTO which forced India to reduce duties down to 150%. Actually the customs duty earlier was 100% + ad valorem. But when the ad-valorem duty was removed, India took advantage of the allowed duty of 150% and raised the basic duty to the maximum level of 150% which exists even today. The EU is keen on re-starting the dialogue with India on the Foreign Trade Agreement, the first of such meetings was held in May this year.
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