In a sign of easing tensions between Australia and China, China announced on Thursday it would lift tariffs it imposed on Australian wine three years ago.
The tariffs were first imposed in 2020 amid a messy diplomatic spat between Australia and China, which had all but evaporated the country's biggest overseas market, worth AU$1.2 billion, or about $800 million at its peak. . Australian wine producers were in dire straits, stuck with over-bodied red wines.
The decision to lift tariffs was announced by the Chinese Ministry of Commerce.
Australian Prime Minister Anthony Albanese welcomed the decision in a statement, saying it came “at a critical time for Australia's wine industry”. He added: “We continue to call for the removal of all remaining trade barriers affecting Australia's exports.”
As of August last year, Australia had the equivalent of 859 Olympic swimming pools of wine in storage, according to a Rabobank report. “It's going to take some time to dry up, and China isn't going to do it alone,” Australian Grape and Wine chief executive Lee McLean said.
McLean said the price of red grapes barely covers the cost of production, leading some growers to accept contracts well below the cost of production while leaving them to wilt on the vine. It is said that there are some people.
This comes after months of moves toward closer ties between the two countries, which began with a change in the Australian government. This led to talks between foreign ministers, the release of a detained Australian journalist in October, and the first visit to Beijing by an Australian prime minister since 2016 in November.
In October, the Chinese government agreed to review tariffs that exceeded 200%. China's Ministry of Commerce said in a preliminary decision this month that tariffs are no longer necessary.
Speaking in Beijing last year, Australian Prime Minister Anthony Albanese said it was in the interests of both countries, their economies and the broader regional security to “stabilize” the relationship. He expressed “confidence” that the tariffs would be lifted.
At the time, Australia withdrew its complaint to the World Trade Organization and reversed course on terminating a Chinese company's 99-year lease for Darwin's northern port. Meanwhile, China has gradually lifted or revised other trade embargoes, allowing coal, barley and timber to once again flow in from Australia.
Chinese consumers were so hooked on Australian red wine that some producers took a leap of faith, switching out white grapes for red grapes like Cabernet Sauvignon, Shiraz and Merlot, and in some cases screw-topping bottles. They even replaced it with cork stoppers, which Chinese consumers preferred. .
The tariffs began in 2020 after then-Australian Prime Minister Scott Morrison called for an “objective, independent assessment” of how the coronavirus pandemic began. China was furious at what it called “ideological bias and political maneuvering” aimed at shifting blame.
Within months, China's Ministry of Commerce launched an investigation into whether Australia was “dumping” wine onto the market at artificially low prices.
By November 2020, it imposed an “anti-dumping duty” of 116.2% to 218.4% on Australian bottled wine, up from zero under a previous free trade agreement. Sales to China, worth $800 million in 2019, fell 97% in the first year. In response, Australia filed a lawsuit with the WTO, which adjudicates trade disputes between countries.
Nimbility founder Ian Ford said that for the time being, Chinese consumers have embraced locally distilled premium baijiu, fine wines from France and more affordable wines from Chile. He said the tariffs signal a cultural shift. A brand and distribution management company for alcohol sold in Asia. “Do not bring it as a gift to government officials. Do not serve it at banquets attended by government officials,” he said. “It's like saying this is now taboo.”
The removal of tariffs would send a clear message, he added, adding that some distributors in China have already begun preparing for the influx of popular Penfold brand wines from Australia.
“Demand will skyrocket, but I think ultimately we will have to fight to regain market share,” he said.