China's government officially abolishes heavy tariffs on Australian wine

China’s government has officially abolished heavy tariffs on Australian wine, offering a potential lifeline to an industry struggling with low prices and global oversupply.

Beijing agreed to review the tariffs five months ago as it gradually unwinds the trade barriers it placed on around $20 billion of Australian exports in 2020 and 2021, when the bilateral relationship was at its nadir.

Earlier this month, China’s Commerce Ministry handed down an interim decision all but confirming that the tariffs of up to 220 per cent on Australian wine would be dropped.

Now, the Commerce Ministry in Beijing has announced it is “no longer necessary to impose anti-dumping duties and countervailing duties on the imports of the relevant wines originating in Australia.”

China always claimed the tariffs were targeting anti-competitive behaviour from the Australian wine industry, but both Labor and the Coalition have been adamant it was an act of political retribution after the Morrison government clashed repeatedly with Beijing.

Australian wine exports to China peaked at $1.1 billion in 2019-20, but crashed to a tiny fraction of that after the tariffs were imposed.

However, China’s consumption of wine has dropped dramatically in recent years, and analysts are warning exports are unlikely to return anywhere near the peak even after the tariffs disappear.

China agreed to review the tariffs in return for Australia suspending an appeal to the World Trade Organisation (WTO), which was initiated by the former Coalition government.

Re-entry of Australian wine into Chinese market benefits both

Trade Minister Don Farrell had repeatedly warned the government would recommence its action at the WTO if the barriers were not lifted.

In a statement, Mr Farrell and Prime Minister Anthony Albanese welcomed the decision and said it came at a “critical time” for the industry.

“The re-entry of Australian bottled wine into the Chinese market will benefit both Australian producers and Chinese consumers,” they said.

“We acknowledge and thank Australian grape growers and wine producers for their fortitude and support during a challenging period.

“The removal of duties means that Australia will discontinue its legal proceedings at the World Trade Organisation.”

The decision means that China has now lifted almost all the formal and informal trade sanctions that it imposed on Australia from 2020, although barriers remain to the $700 million rock lobster trade, and several Australian meatworks remain blocked from the market.

The prime minister and trade minister said they were hopeful those barriers would be lifted soon.

“We will continue to press for all remaining trade impediments affecting Australian exports to be removed, which is in the interests of both Australia and China,” the statement said.

Beijing has already lifted hefty tariffs on Australian barley, as well as dropping barriers to a host of other products including coal and cotton.

‘Very important’

Australian Grape and Wine chief executive Lee McLean said the decision from China was “very important” for the industry and “reflected the positive outcome of diplomatic efforts by the Albanese government to stabilise relations with China.”

“We look forward to seeing Australian wines back on Chinese dining tables and rejuvenating our relationship with customers and business partners in that market,” Mr McLean said.

“We will also, however, be maintaining our focus on diversifying our export footprint and growing demand here in Australia as well.”

Treasury Wines Estate chief executive Tim Ford said the company would immediately “begin to expand its premium and luxury Australian wine distribution in China.”

“The removal of tariffs on Australian wine exports to China is terrific news and is cause for celebration across the Australian wine industry and with our partners and consumers in China,” Mr Ford said.

However, both analysts and major wine producers have cautioned that exports to China are unlikely to return to the boom era of the 2010s – in part because wine consumption has fallen sharply in China in recent years.

“While we do not anticipate a snapback to 2020 levels, we do see a sizeable opportunity for our business in China and we are excited about the long-term potential this market brings,” Accolade Wines chief executive Robert Foye told the ABC in a statement.

“I was in China last week meeting with our key customers and distributors including at the Food and Drinks Fair in Chengdu and I can say there is genuine excitement about bringing Accolade’s portfolio of exceptional Australian wines back to the Chinese consumer.”