April 17, 2024

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China lifts punitive tariffs on Australian wine

China lifts punitive tariffs on Australian wine

In a sign of easing tensions between Australia and China, China announced Thursday that it would lift the customs duties it imposed on Australian wine more than three years ago.

The tariffs, first imposed in 2020 amid a nasty diplomatic spat between Australia and China, have vaporized the country's largest overseas market, worth A$1.2 billion or about $800 million at its peak. Australian winemakers faced desperate difficulties and were stuck with a glut of large-bodied red wines.

The Chinese Ministry of Commerce announced the decision to raise customs duties.

Australian Prime Minister Anthony Albanese said in a statement that he welcomed the decision, and that the result came “at a critical time for the Australian wine industry.” “We will continue to press for the removal of all remaining trade barriers affecting Australian exports,” he added.

As of last August, Australia had the equivalent of 859 Olympic swimming pools' worth of wine stored, according to Report from Rabbo Bank. “It will take time for this stock to be exhausted,” said Lee McLean, CEO of Australia's Grape & Wine Inc. “China won't be able to solve this problem alone.”

The price of red grapes barely covers their production costs, prompting some growers to simply let them wither, while others accept contracts far below the cost of production, McLean said.

This development comes after months of moves towards rapprochement between the two countries, starting with a change in the Australian government. This led to meetings between foreign ministers, the release of a detained Australian journalist in October, and the release of an Australian journalist in November First visit by an Australian Prime Minister To Beijing since 2016.

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In October, Beijing agreed to review tariffs, some of which exceeded 200 percent. In an interim decision this month, the Chinese Ministry of Commerce noted this Definitions are no longer necessary.

Speaking in Beijing Last year, Australian Prime Minister Anthony Albanese said it was in the interests of both countries, their economies and the security of the wider region to “stabilize” their relationship. He expressed his “confidence” in canceling customs duties.

At the time, Australia withdrew its complaints to the World Trade Organization and reversed its course on canceling a Chinese company's 99-year lease of the northern port of Darwin. In contrast, China has gradually lifted or reviewed other trade embargoes, sending… coal, barley And the woods Flowing from Australia again.

Chinese consumers were strongly influenced by Australian red wines, leading some growers to rely on this demand, replacing white grapes with red grapes such as Cabernet Sauvignon, Shiraz, and Merlot, and in some cases replacing bottle caps with corks favored by Chinese consumers. .

The tariffs began in 2020, after Scott Morrison, then Australian Prime Minister, called for an “objective and independent assessment” of how the Covid-19 pandemic unfolded. China Rough so called “Ideological bias and political games” aim to shift blame.

Within months, China's Ministry of Commerce launched an investigation into whether Australia was “flooding” the market with wine at artificially low prices.

By November 2020, it had imposed “anti-dumping tariffs” of between 116.2% and 218.4% on bottled Australian wine, up from zero under the previous free trade agreement. Sales to China amounted to $800 million in 2019 It decreased by 97 percent In the first year. Australia, in turn, filed a complaint with the World Trade Organization, which adjudicates trade disputes between countries.

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For Chinese consumers, who have meanwhile embraced high-end products BaijiuThe tariffs, a local spirit, as well as fine wines from France and less expensive wines from Chile, signal a cultural shift, said Ian Ford, founder of Nimbility, a brand and sales management company for alcohol sold in Asia. “Do not give it as a gift to a government official, and do not give it to a banquet attended by government officials,” he said. “It almost becomes a statement that this is now taboo.”

He added that raising tariffs would send a clear message, and some distributors in China had already begun preparing for an influx of popular Penfold-branded wines from Australia.

“There will be an increase in demand, but ultimately, I think they will have to struggle to regain market share,” he said.