Australian wine producers welcomed China’s announcement that it will review the tariffs imposed to their industry, after a breakthrough in negotiations before Australian Prime Minister Anthony Albanese’s visit to Beijing in November.
In 2020, China imposed trade sanctions on US$20 billion worth of Australian products at the height of a diplomatic feud, including tariffs of between 107% and 212% on Australian wine.
The Australian government is confident of a successful outcome and the normalization of trade relations between the two countries. The premier’s visit, scheduled from November 4 to November 7, aims to reinforce diplomatic ties with China, Australia’s key trading partner.
According to The Guardian, Albanese said the two countries had agreed to suspend their long-running World Trade Organization (WTO) dispute while Beijing undertakes an “expedited review” of duties, which is expected to take five months.
If the sanctions are not removed at the end of the review, Australia will resume the dispute at the WTO.
The announcement comes after weeks of speculation in Canberra that a breakthrough was imminent. It was also expected the WTO would release its ruling on Australia’s complaint to the two countries.
The timely announcement has already begun to positively impact the Australian wine industry. The normalization of diplomatic relations between both countries has been a focus for Albanese since he took office in 2022.
Both leaders are expected to discuss issues such as economic partnerships, climate change initiatives and people-to-people ties, emphasizing the importance of sustained engagement between the two nations.
This breakthrough signals a turning point for Australia’s wine industry, which has grappled with formidable challenges, notably the pressing issue of overcapacity. The potential resumption of wine exports to China is poised to serve as a fundamental catalyst for the industry’s resurgence.
Unlike some of the other products, the Australian wine industry had great difficulty in finding other markets to fill the gap that was created by the breakdown in the trade with China. Australian wine exports to China were valued at more than US$1 billion before the tariffs were put in place but that figure plunged to US$12 million.
Tariffs’ origins
Australia’s call for an inquiry into the origins of the COVID-19 virus in 2020, caused severe damage in the trade relations between both countries. This action pushed China on taking retaliatory measures, significantly impacting Australia’s export-oriented economy.
In September 2021, China removed tariffs on Australian barley, fostering hope for a possible resolution and a potential easing of the wine tariffs.
This did not happen since China proposed a comprehensive approach, linking the wine dispute with other trade issues. Despite this position, Australian Agriculture Minister Murray Watt insisted on an amicable solution and emphasized the necessity of resolving the wine issue through dialogue.
Beijing proposed a package deal last month to lift tariffs on Australian wine while demanding tariffs be lifted on three Chinese products – including wind towers used to build wind turbines.
China’s Ministry of Commerce announced that both nations have reached a consensus to settle not only the WTO wine dispute but also the dispute concerning Australian duties on Chinese wind towers.
The Wine Industry
The recent decision by China to review these tariffs was welcomed by the Australian Wine Industry, which hopes for a speedy recovery.
Lee McLean, CEO of Australian Grape and Wine, expressed optimism about the potential market resurgence should the tariffs be lifted and emphasized the need for concerted efforts by companies to rebuild relationships with their Chinese customers.
Though it is not likely to go back to previous numbers, Australian wine makers recognize the importance of the Chinese market for the industry.
Opportunities and Challenges
The Australian wine sector has struggled to find alternative markets to offset the losses caused by the rupture of trade relations with China. A change in the political climate and recent negotiations between both nations could mean a more sustainable future for the industry.
The lifting of tariffs on Australian barley and the ongoing review of wine tariffs are important steps in the right direction. The Australian wine sector has shown impressive resilience and adaptability, navigating the difficulties of international trade.
China’s intentions of solving disputes and fostering stronger trade relations with other countries, such as Australia, are evident in these negotiations.
The Prime Minister’s visit
Albanese’s visit to China has special significance. His trip is the first one by an Australian premier in seven years and seeks to put an end to a longstanding trade dispute. Albanese will discuss issues of mutual importance with President Xi Jinping and Premier Li Qiang, focusing on the resumption of Australia’s wine exports.
The trip will mark the 50th anniversary of the first visit to China by the then prime minister, Gough Whitlam, in 1973.
The premier’s trip serves as a crucial step towards fortifying ties between the two nations, with a particular emphasis on restoring trade relations. It also seeks to foster a conducive environment for continued collaboration and strengthened diplomatic ties.
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