Massive China wine tariff ‘devastating blow’

Trade Minister Simon Birmingham has unloaded on the Chinese government, accusing it of breaching its free trade agreement with Australia to heap political pressure on the Morrison government.

Senator Birmingham said China’s decision yesterday to place tariffs of up to 200 per cent on Australian wines would be a ‘‘devastating blow’’ to the industry, rendering businesses unviable.

‘‘The cumulative impact of China’s trade sanctions against a number of Australian industries during the course of this year does give rise to the perception these actions are being undertaken as a result or in response to some other factors,’’ he said.

‘‘Doing so is completely incompatible with the commitments that China has given through the ChinaAustralia Free Trade Agreement and through the World Trade Organisation. It’s incompatible with a rules-based trading system.’’

Senator Birmingham’s response reflects a serious escalation in Australia’s trade dispute with China, which now threatens to hit more than A$20 billion (NZ$21 billion) in exports across half-a-dozen sectors including seafood, coal and timber.

More than a dozen ships loaded with millions of dollars of Australian coal remain stranded outside Chinese ports unable to offload their cargo. Queensland and Victorian timber exports have been rejected and seafood subject to quality control measures that meant 20 tonnes of live lobsters perished on the tarmac at Shanghai’s airport, unable to clear customs.

The government has for months said it was up to China to explain why Australia was being targeted with infringements that Beijing insisted were unrelated.

But it has now accused China of using economic pressure to force a change in Australia’s positions on Huawei, foreign interference and national security and a dozen other issues raised by the Chinese embassy last week. The White House and the British government have rallied behind the Morrison government in this confrontation.

On Thursday, Britain’s foreign affairs committee chairman Tom Tugendhat declared ‘‘we stand shoulder to shoulder with Australia’’.

Agriculture Minister David Littleproud yesterday said Australia would not compromise its policy positions in response to trade threats.

‘‘That’s what any Australian government of any political persuasion is elected to do. We’ll never, never compromise any of those values and principles. We’re a sovereign nation, we expect to be treated with the respect of a sovereign nation,’’ he said. ‘‘We’ll not be for turning.’’

China’s Ministry of Commerce yesterday issued the preliminary ruling after China’s drink industry accused Australian producers of dumping discounted wine into China, reducing the competitiveness of local producers.

The ministry announced it would apply a tariff rate of between 107 per cent and 212 per cent on Australian wines.

The ministry said it had conducted investigations in strict accordance with relevant Chinese laws and regulations and World Trade Organisation rules. The Australian government and the local wine industry have strongly denied the allegations.

The trade strike is the latest in a long line of hits on Australian exports by Beijing this year. Diplomatic disputes over Australia’s calls for an independent inquiry into the coronavirus and China’s actions in the South China Sea and Hong Kong culminated last week when the Chinese embassy issued a list of 14 grievances with Australia’s policy positions.

Australia exports A$1.2 billion of wine to China each year and wine industry leaders have scheduled urgent talks to discuss China’s tariff move. Australian Grape and Wine chief executive Tony Battaglene said that wine produced by companies that registered for China’s antidumping investigation would receive a tariff of between 107 per cent 167 per cent.

Australia’s biggest wine company Treasury Wine Estates, a major exporter to China, was among the companies that participated in the investigation.

Treasury went into a trading halt yesterday as news emerged about the tariffs, as its shares slid 2.4 per cent to $10.15.

‘‘We don’t see it’s justified and we’re obviously deeply concerned about what it does,’’ Battaglene said of the tariff move.

‘‘It’s all rather academic up around those levels anyway. Because once you’re up at 160, 200 per cent, essentially it’s going to be very difficult to sell product that consumers are prepared to pay for,’’ he said.

Australia has the biggest market share in China of all wine-exporting nations. Australia also has many wine producers that export wine only to China.

‘‘I think it will have a serious impact,’’ Battaglene said.

‘‘I mean, it’s very difficult to see that you can be hit with a tariff that size and still maintain the market size that we have. Obviously, we’ve got some high valued product there, and if the consumer is willing to pay for that then that’s good, but it will have a margin impact.’’

Treasury Wine subsequently issued a second statement to the ASX requesting a trading halt in its shares.