Aussie wine industry toasts expected end to China tariffs

SYDNEY: Australia’s wine industry yesterday toasted news that China could lift punitive tariffs within weeks, raising hopes it will soak up some of the country’s red wine glut.

Melbourne-based Treasury Wine Estates said it had been advised by Chinese and Australian authorities of Beijing’s “interim draft determination” to remove the tariffs following a five-month review.

A final decision by China’s Ministry of Commerce is expected “in the coming weeks”, said the global wine giant, which owns the Penfold label.

However, it predicted only a “minimal” impact on earnings in its financial year ending June 30.

China imposed tariffs on key Australian exports such as wine, barley and beef in 2020, after Canberra legislated against overseas influence, barred Huawei from 5G contracts and called for a probe into the origins of the Covid-19 pandemic.

But trade ties have eased since Australia’s centre-left government won the election in 2022, adopting a less confrontational approach to China.

Tariffs and barriers have already tumbled for commodities including Australian coal, timber and barley.

If wine tariffs are removed, only Australian rock lobster, hay and beef from some abattoirs will be subject to Chinese trade restrictions.

Treasury Wine Estates chief executive Tim Ford welcomed China’s move towards letting Australian wine back in.

“This is subject to change, however we’re optimistic that the final determination will be a positive outcome for the Australian wine industry.”

In its interim 2024 results, the company said it was well placed to resume its portfolio in China if the tariffs were lifted.

China’s tariffs added up to 200% to the cost of Australian wine imported into China, and effectively halted the industry which was worth US$1 billion (RM4.7 billion) per year.

Australian winemakers responded by turning to other Asian markets including Hong Kong and Thailand.

Tim Mableson, a market analyst at consultancy KPMG, said Australia had an oversupply of red wine, which would be eased by the reopening of China’s export market.

But global wine consumption had declined, he said.

“The assumption that the market will return to or be the same level as before should be still treated with some caution by some producers,” Mableson said.

“If we don’t adjust levels of production, then ultimately we won’t be able to address the oversupply.”

Before the trade restrictions were imposed, China was the largest destination for Australian bottled wine – accounting for 33% of export revenue in 2020, data from the Australian government shows.

Industry body Grape and Wine’s chief executive Lee McLean welcomed the news.

“We appreciate the collaborative efforts from both the Australian and Chinese governments, and industry partners, in working towards a resolution,” he said.