China hits Australian wine with anti-dumping probe as their ties deteriorate

The move is likely to sting as Australia’s exports of wine to China went up in recent years, after Chinese tariffs were removed following a 2015 free-trade agreement.

A glass of wine | Representational image| Photo: pexels.com

Beijing: China started an anti-dumping investigation into Australian wine, the latest measure to target the nation’s exports as relations between the two states deteriorate.

The probe would normally finish within a year, but can be extended to Feb. 18, 2022, according to the Ministry of Commerce statement Tuesday. The investigation applies to wine sold in containers holding two liters or less. Shares of an Australian wine maker, Treasury Wine Estates Ltd., fell as much as 20% and were temporarily paused from trading.

Ties between the two trading partners have increasingly frayed in recent years. In addition to banning Huawei Technologies Co. from participating in Australia’s 5G network, Australia’s push for an independent inquiry into the origins of the Covid-19 outbreak sparked a Chinese backlash.

“This will be painful for the wine industry, owing to China’s outsized importance as an export destination” but will have a limited impact on broader bilateral trade, which is dominated by commodities and meat, according to Nick Marro, lead on Global Trade at the Economist Intelligence Unit in Hong Kong.

“China’s recent treatment of Australian exports adds a political dimension that will inevitably dominate the discussion of this issue,” he said. “That’s the consequence of leaning too heavily on economic retaliation as part of foreign policy; it damages your credibility and erodes any perception of acting in good faith.”

China halted some beef imports and then placed tariffs on Australia’s barley exports in May after the conclusion of an earlier anti-dumping probe. In addition, the Chinese ambassador to Canberra said in April that Chinese consumers might choose to boycott the nation’s exports because of strained relations, a comment that was seen as a threat in Australia.

Barley and beef

China is seen as frequently using trade and regulatory sanctions against nations it squabbles with, as it did in 2017 with South Korea and in 2012 with Japan.

Australia’s exports of wine to China have risen in recent years, with Chinese tariffs being removed after a 2015 free-trade agreement. China was the largest export destination in 2019-2020, according to Wine Australia, a government body that regulates exports.

“This is a very disappointing and perplexing development,” Trade Minister Simon Birmingham said in an emailed statement. “Australia will engage fully with the Chinese processes to strongly argue the case that there are no grounds to uphold the claims being made.”

The anti-dumping investigation announced today was at the request of local industry, Birmingham said in the statement. In addition, the Chinese have notified the Australian government that they are considering a request to launch a countervailing duties investigation, he said.

The U.S. and Australia last month announced some modest defense initiatives while pushing back against Beijing on issues from Hong Kong national security law to 5G technology.

Treasury Wine Estates said in a statement that it will co-operate with any requests for information from Chinese or Australian authorities. The company has a long and respectful relationship with China over many years, and remains committed to China as a priority market and will continue to invest in its Chinese business and its relationships with customers and consumers, it said.

Treasury Wine Chief Executive Officer Tim Ford said last week in an interview that demand in China was recovering from Covid-19 restrictions, and was particularly strong in June.- Bloomberg