There are fears Australia’s booming wine export market to China has been irreparably damaged by the introduction of huge tariffs on Australian winemakers from November 28.
The decision to introduce tariffs ranging from 107-200% followed the preliminary findings of an anti-dumping investigation. China’s Ministry of Commerce launched the investigation in August to review whether imported Australian wines were being sold below “fair” prices and hurting China’s wine industry.
The Australian Financial Review noted yesterday: “Analysts have all but conceded that all Australian wine producers must now accept that China is a ‘lost market’ and that any future profits will vanish because the tariffs will price them out of the market for even the most loyal drinkers in China.”
Treasury Wine Estates went into a trading halt on the ASX last week, with speculation the tariffs will wipe more than 30 % from its annual profits.
“The only minor glimmer of hope for Treasury Wines, which makes up about 40% of Australia’s total annual exports to China of $1.3 billion, is the the strength of the upper end portfolio of the Penfolds luxury range which will enable those products to find a new home in Australia and offshore,” the AFR said.
Chief executive Tim Ford told the AFR: “We’re extremely disappointed to find our business, our partners’ businesses and the Australian wine industry in this position.
“We call for strong leadership from governments to find a pathway forward.”
In the meantime, TWE will redirect the 25% of Penfolds high-end wines that were destined for China to other countries. High-end grape supply will also be re-directed to other brands, including Wynns, Wolf Blass, Seppelt and Pepperjack.
Ford said TWE will also look at options such as setting up a production site in China.
Government undecided on tariff action
Yesterday, Prime Minister Scott Morrison promised to help Australian winemakers hit by the trade sanctions.
“As a government, we will be looking to see how we can get a number of our producers through this difficult time,” he told ABC radio.
Trade Minister Simon Birmingham said that it was too early to tell whether the government would protest the wine tariffs with the World Trade Organisation.
“This is an interim application of tariffs at the early stage of the anti-dumping investigations, so we still have parts of that Chinese process that we have to work through before we get to the point of a WTO dispute,” he said.
Wine sector disappointed by China’s anti-dumping tariffs
Australian Grape & Wine is “deeply disappointed” that the Chinese Ministry of Commerce (MOFCOM) has announced the imposition of preliminary anti-dumping tariffs on Australian bottled wine imports.
“This restriction on Australia’s exports to China will adversely impact the wine sectors of both countries,” it said. “It will also be particularly disappointing for the millions of Chinese consumers who enjoy Australian wine, and the distributors in China who have built relationships with Australian wine businesses. Given the size of the tariff, Australian winemakers will now be forced to consider alternative markets for export sales.”
Tony Battaglene, Chief Executive of Australian Grape & Wine, added: “These are preliminary tariffs, and both the anti-dumping and countervailing duties investigations are ongoing.
“We continue to stand firm that Australian exporters are not dumping wines in the Chinese market, nor have they received subsidies that have had a negative impact on the Chinese wine industry.
“While we are disappointed with this development, our members will continue to cooperate with MOFCOM as the investigation continues, working towards an outcome that is consistent with the facts of the case, and supports the growth of the wine industry in Australia and China.”
Meanwhile, the Inter-Parliamentary Alliance on China has released a video in support of Australian wine. IPAC represents more than 200 MPs from 19 countries who describe themselves as a “cross-party group of legislators working towards reform on how democratic countries approach China”. Watch the video below: