China has begun an anti-dumping inquiry into Australian wine imports in the latest escalation of trade tensions between the two countries that analysts warn could lead to punitive tariffs.
China’s Ministry of Commerce said on Tuesday it had received an anti-dumping complaint from its domestic wine industry and would investigate imports from Australia in containers of two litres or less. These make up the bulk of Australia’s A$1.1bn ($800m) a year wine exports to China.
The ministry said it would also investigate any damage inflicted on the Chinese wine industry from 2015-2019 in an inquiry expected to be completed in a year.
The announcement of the inquiry sent shares in Treasury Wine Estates, Australia’s largest wine exporter, down 14 per cent amid concerns the investigation could damage the company’s leading position in China.
This could have serious ramifications for the industry. It’s been a pretty tough nine months with the drought, bushfires and smoke
TWE said it would co-operate with any requests for information from authorities and remained committed to China as “a priority market”.
The Australian government said it rejected any claim that Australian wine had been dumped into China and would work with industry to refute the allegations.
Beijing’s investigation follows a sharp deterioration in diplomatic relations between China and Australia. Canberra infuriated Beijing when it called for an independent inquiry into the origins of the Covid-19 outbreak in Wuhan and its decision to ban Huawei from participating in Australia’s 5G roll out.
China’s ambassador to Australia has accused Canberra of teaming up with Washington in “a political campaign against China” and said in an interview in April that Chinese consumers might wonder “why they should drink Australian wine or eat Australian beef”.
In May, Beijing said it would impose duties of up to 80 per cent on barley produced in Australia for up to five years — a move farmers said could cripple an A$2bn a year industry. It also suspended imports from four Australian abattoirs, which account for about a fifth of Australia’s A$2bn a year exports of beef to China.
Analysts said the anti-dumping inquiry was a political strike aimed at Canberra and could lead to wine tariffs.
“This is an escalation from Beijing that will hang over the heads of Australian politicians and wine producers for some time while the anti-dumping investigation continues,” said Richard McGregor, an analyst at the Lowy Institute.
“Tariffs could represent a body blow for Australian wine producers, who have worked hard to build market share in China for more than a decade,” he added.
China is the largest market for Australian wine, accounting for two-fifths of total exports in the year-to-end-June worth A$2.84bn. The potential hit to Australian producers comes at a difficult time for the industry, which has faced losses owing to bushfires, smoke taint, drought and Covid-19 over the past 12 months. Australia’s 2020 vintage is the smallest in more than a decade.
Bruce Tyrell, managing director of Tyrell Wines, said the anti-dumping inquiry was worrying because China was such a profitable market for Australian producers.
“This could have serious ramifications for the industry,” he told the Financial Times. “It’s been a pretty tough nine months with the drought, bushfires and smoke — we didn’t have a vintage this year.”
Import data from the Global Trade Atlas published by Wine Australia shows Australia held a 37 per cent share of the value of wine imported by mainland China in the 12 months ended May 2020, well ahead of France with 27 per cent, Chile with 13 per cent and Italy with 6 per cent.