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AUSTRALIA-CHINA: THE WINE WAR

Australia is the fifth largest exporter of wine around the world. It produces and exports approximately 4% of the world’s total wine.

The wine industry is a major contributor to its economy in terms of revenue, production, tourism and employment. It roughly generates $40 billion every year to its economy.

China is one of the major importers of Australian wine. In 2019 Australia exported wine globally worth $2.16 billion of this 37% alone was to China. That’s nearly $797 million.




AUSTRALIA-CHINA WINE DISPUTE

When Australia joined hands with other nations for an independent inquiry into China to trace the origins of the coronavirus, that’s when the relations between these two nations turned sour.

There were several incidents that took place before this, however this was the catalyst for a shift in China’s economic policy towards Australia.

China in retaliation imposed interim tariffs on Australian imported wine and other goods. Subsequently in August 2020, China’s also announced an anti-dumping investigation against Australia’s wine, citing that they were being exported to China at price below the cost to gain a wider market share.



Later in March 2021, it was announced that anti-dumping tariffs on Australian wine would be in place for a period of five years at a rate around 220%.

IMPACT OF TARIFFS ON CHINA

The supply and availability of wine was severely hit once this dispute came to light, but demand fell due to the raging pandemic.

The upper side to this dispute is the opportunity for local Chinese wineries to boost their business and contribute towards their economy.

The Chinese government planned to make China a “globally influential” market in the winery ecosystem and to scale up the grape industry to $31.3 billion by 2035, thus boosting the local grape farmers.

China has a huge potential local market to sell its wines as the consumption levels go up to 1.24 billion liters annually. If they are able to keep up with the changing tastes and preferences of potential consumers and adhere to international standards they can easily tap the global market.

IMPACTS OF TARIFFS ON AUSTRALIA

Wine exports to China fell by 96% after the tariffs were imposed. In 2019 wine worth $244 million was exported between December to March, but in 2020 for the same period only $9 million worth wine was exported.

In January 2021 about 23,000 liters of Australian wine was sent back by Chinese ports citing labelling issues.

Overall Australia’s total exports to China also fell by 8%, roughly $1 billion.




While this trade war on top of the global pandemic severely impacted Australian exporters, the silver lining is that most of the exports were redirected to other nations such as the United Kingdom, United States and Canada.

RESOLUTION

While the trade war is ongoing Australia is supposed to have approached the World Trade Organization (WTO) with a formal complaint against China for their high tariff imposition and that they are open to dialogue with China on the matter.

“The government will continue to vigorously defend the interests of Australian winemakers using the established system in the WTO to resolve our differences,” Dan Tehan, Minister of Tourism, Trade and Investment said.