China’s wine tariffs will hurt small Australian producers: trade group

SINGAPORE – Small exporters, wine growers and regional communities will bear the brunt of China’s decision to impose high tariffs on Australian wine. That’s according to Tony Battaglene, managing director of Australian Grape and Wine, the national association of grape and wine producers.

China’s Commerce Ministry on Friday announced preliminary anti-dumping duties ranging from 107% to 212% on imports of bottled Australian wines, which went into effect the next day. This follows China’s anti-dumping investigation into Australia’s wine imports earlier this year.

“This is going to have a devastating impact,” Battaglene told CNBC’s “Squawk Box Asia” Monday. He explained that Australia’s biggest wine exporters with diverse portfolios would likely be able to cope with China’s move even if they too would feel the pain.

“It is the wine growers, regional communities and small exporters who have very little adaptive capacity. They are the ones who will suffer,” Battaglene said.

Entering other markets on short notice is not easy as it takes time, relationships and money to develop these markets, he added. “We just don’t have that. This is our peak period for exporting – 50% of our product goes to China in the last four months of the year. It’s closed. So this product has nowhere to go. “

Battaglene dismissed Beijing’s dumping allegations, saying China is the “highest market” for Australian wines, where exporters make more dollars per liter than anywhere else.

“We have higher margins in China, so we’re clearly not dumping there. If anything, we’re digging. So it’s clearly ridiculous and we just don’t understand why you even suggest such a thing, “he said.

China is Australia’s top wine export destination. It accounted for 39% of total exports for the 12 months ending September 2020, according to Wine Australia.

Many small wine exporters in Australia, especially those that export exclusively to China, are also funded by Chinese money, according to Battaglene. He explained that these exporters as well as importers in China will be equally affected by the tariffs.

Australian Trade Minister Simon Birmingham told reporters on Monday that there are a range of processes to resolve disputes with Chinese agricultural officials, Chinese customs officials or, ultimately, the World Trade Organization.

“But we also recognized that there is a cumulative effect of what happened with China, this series of individual measures that China has taken against Australian companies during this year is concerning,” a- he said, adding that Australia remains ready for a dialogue with China to try to resolve the issue.

Australia’s Agriculture Minister David Littleproud tweeted on Friday that the government in Canberra was “extremely disappointed” with China’s decision to impose preliminary tariffs on Australian wine.

“The point is, Australia produces one of the least subsidized products in the world and provides the second lowest level of agricultural subsidies in the OECD,” Littleproud said. He added that the Australian government “categorically rejects any allegation that our wine producers are dumping products in China, and we continue to believe that there is no basis or evidence for these allegations.”

Bilateral relations between Canberra and Beijing deteriorated earlier this year after Australia backed a growing call for an international inquiry into China’s handling of the coronavirus pandemic.

China has taken a number of measures against Australian exporters, including anti-dumping and anti-subsidy duties on Australian barley, an import ban on several red meat slaughterhouses, and has reportedly verbally notified utilities and state steel companies to stop importing Australian coal. Last month, two cotton industry groups in Australia said China had started to discourage its spinners from using cotton imported from Down Under.

Economists said any potential import restrictions from China on Australia’s mining exports would have a greater impact as it would take up a significant portion of the export basket. According to Oxford Economics, the majority of Chinese imports of iron ore, needed to make steel, come from Australia. He added that given the difficulty in finding alternative sources in the short term, China had yet to impose strict regulations on Australia’s iron ore exports.

The world’s second-largest economy remains Australia’s largest trading partner in goods and services and accounts for about 27.4% of Australia’s trade with the world, according to government data.

Earlier this month, China and Australia became signatories to the world’s largest trading bloc – the Regional Comprehensive Economic Partnership, or RCEP.