China deliver a yet another punch in its long-running tariff war on Australian wine by extending massive regime of tariffs on some Australian wines for five years.
The simmering tension between China and Australia over Australian wine has been going on for some time and this time Australia would take the long-running dispute to the World Trade Organisation for arbitration as it deems that China violates norms of international trade and WTC rules.
On Friday, China’s Ministry of Commerce confirmed that it would impose “anti-dumping measures on some Australian wine imports from March 28 for (another) five years”.
Accusations
One of the principal accusations that China leveled against Australia was that Australian wine producers ‘dumping’ or lowering prices well below the manufacturing cost in order to expand the market share for Australian wines in the Chinese massive market.
Beijing has also accused the federal government of subsidising Australian wines so that they (wines) could be exported cheaply and to be sold cheaply in China. On these suspicions, China has introduced a rigorous four-month tariff of up to 200 per cent, what the Chinese authorities called anti-dumping measures.
Australian Grape and Wine chief executive Tony Battaglene stated that the regime of tariffs were even higher than 200 per cent.
“We‘re probably up to the 215 to 218 per cent mark,” Battaglene.
“Honestly, it doesn‘t matter. When you’re at 200 per cent you’re not viable and when you’re at 215 per cent, you’re even less viable so the market remains closed to Australian wine.”
However, Australia flatly refuse China’s accusation of ‘dumping’ and subsidising its wine to win a bigger market share in China.
Federal Trade Minister Dan Tehan has previously rejected suggestions Australia’s wine industry was subsidised by the government.
According to Department of Foreign Affairs and Trade officials, the value of Australian trade with China for almost all industries had dropped by 40 per cent.
Wine exports have fell to less than $1 million in January, from a peak of $164 million last October – prior to the imposition of tariffs.
Australian wine industry officials are expected to request the federal government to take up the dispute with the World Trade Organisation.
Deteriorating bilateral relations
It is obvious, China’s tariff war on Australian wine, although not acknowledged, is, more or less, linked to Australian policies on China and its worsening bilateral relations with it.
Relations between Australia and China began to worsen last April following Prime Minister Scott Morrison’s demand for an international investigation into the origins of the coronavirus.
The immediate reaction on the part of Chinese authorities seemed to impose restrictions on Australian exports such as timber, beef and some types of coal. At the same time, Chinese investment in Australia also drastically reduced to just over 1 billion Australian dollars ($763 million) in 2020, a reduction of almost 62% from the previous year, according to a report by the Australian National University’s Chinese Investment in Australia Database.
Australia’s wine industry has been the focal point of Chinese attacks and the Chinese Ministry of Commerce imposed temporary tariffs of up to 212% on Australian wine imports in November after an anti-dumping investigation.
Australian –China bilateral relations
It was in 1972 that Australia formally established diplomatic relations with the People’s Republic of China, changing its economic ties with Taiwan. Since the 1990s, economic ties flourished between two nations.
According to the Organization for Economic Cooperation and Development, further deterioration of bilateral relations could adversely affect Australian economy almost, making economic recovery hard following the global pandemic. Some experts are of the view that the cost of full-blown trade war with China would be equivalent to 6% of the Australia’s GDP.
Australian economy would be in a deeper crisis, if China targets Australian iron ore in its trade war as China buys 80% of the country’s iron ore.
The iron ore exports alone from Australia value over 100 billion Australian dollars ($74 billion) annually.
If the tension in the South China Sea and Asian Pacific region would escalate, China would intensify its trade war with Australia. This would, certainly, be a costly affair.
