Australia and China on “potential pathway” to resolve three-year trade dispute over wine tariffs

China has a demand for Australian wine, especially red varieties. Chinese consumers are only beginning to branch out into sparkling and white wines.

24 Oct 2023 --- Australia is to develop discussions focused on eliminating the tariffs China had levied on Australian wines for the last three years. The tariffs, initiated in 2020 following a call by then-prime minister Scott Morrison, an independent investigation into the origin of COVID-19, have impacted exports of multiple Australian products, including F&B products like barley, beef and wine, as well as cotton and coal.

During a news conference, prime minister Anthony Albanese said: “We’re very confident that this will result in, once again, Australian wine, a great product, being able to go to China, free of the tariffs which have been imposed by China.”

In the year leading up to the tariffs, Australia had exported wine valued at over US$800 million to the Chinese market. This trade took a hit, with sales plummeting by 97% in the immediate year following the tariff imposition.

The downturn left Australian farmers grappling with a dilemma: sell grapes at monumental losses or cut costs by avoiding harvesting altogether.

Right now, hope is on the horizon for a return to more stable market dynamics. Albanese revealed China’s willingness to reevaluate duties that span from 116.2% to 218.4% on bottled Australian wine.

Earlier this year, China decided to end the anti-dumping and countervailing duties on Australian barley, which were implemented under the same tariffs.

In the meantime, the Australian government plans to hold off on its World Trade Organization complaint challenging these tariffs.

Hopes for eliminating tariffs
Reflecting on the ongoing situation, NSW Wine Industry Association president Mark Bourne responds: “The announcement of a potential pathway to resolve the multi-year trade dispute, and the reopening of the Chinese market, is positive news for many grape growers and winemakers across NSW.”

“Under the current circumstances, we are hopeful that the proposed approach is the best way for the Australian wine industry to achieve its desired result within the shortest time frame,” says Bourne.

Opportunities for the Australian and Chinese wine industries have been identified in fostering collaboration.A spokesperson for China’s Ministry of Commerce states: “China and Australia have recently engaged in amicable consultations under the WTO framework regarding mutual concerns, including WTO disputes related to products like wine.”

“China and Australia hold significant roles as trading partners for each other. Both parties are willing to collaborate, continue engaging in dialogue and consultations, and collectively advance the stable and sound development of their bilateral economic and trade relations.” adds the spokesperson.

A shift in China’s wine preferences
As one of the leading wine consumers worldwide, China’s demographic of wine drinkers has shifted in recent years.

Although France remains China’s primary wine supplier, Australia and other non-traditional wine-growing regions are gaining popularity, particularly among Millennial and Gen Z consumers.

Traditional European wines, which once captivated China’s elite at social events, are now seen by many young people as old-fashioned and overpriced. Instead, low-cost wines from regions like Australia symbolize fashion and individualism. They are a preferred choice drink at home or on dates.

This evolution in tastes can be attributed to a more globalized younger Chinese generation. Many of them, enriched by international education experiences, have developed a penchant for these wines.

The wine market in China also recognizes an emerging female consumer base. While traditional male consumers might still lean toward liquors such as beer and baijiu, female consumers, especially from Gen Z, show an increasing inclination toward wine.

As this demographic transitions into adulthood, their potential purchasing power reshapes the country’s wine market.

By Sichong Wang

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