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August 20, 2020
It's hard to tell why China is targeting Australian wine. There are two possibilities
It’s on again. This time it’s Australia’s wine industry that’s under investigation in China for allegedly violating anti-dumping rules.
The investigation has sent shock waves through the wine industry and beyond.
Broadly speaking, anti-dumping rules prohibit producers from selling anything for less than its market value.
The Chinese that the market share of Chinese wine has fallen from about 75% to just under 50% over the past four years.
It says this is due to the sale of Australian wine being dumped (sold at less than market prices) in China. It has asked for the imposition of an anti-dumping tariff of 202.70%, which would triple the price at which Australian wine is sold.
Australian wine has enjoyed zero tariffs since 2019 under the .
In the past financial year, of Australian wine exports (worth AU$1.1 billion) went to China.
The proposed duty would effectively exclude Australian wine from the Chinese market.
This comes after a in April in which China鈥檚 Ambassador to Australia Jingye Cheng said the Chinese public was 鈥渇rustrated, dismayed and disappointed鈥� at Australia鈥檚 stance on a number of issues and might boycott Australian goods and services.
Among those issues was Australia鈥檚 into China鈥檚 handling of the coronavirus outbreak.
Other irritants include of the new Hong Kong security law and its China鈥檚 Huawei from involvement in Australia鈥檚 5G network.
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Anti-dumping investigations turn on highly technical data, often obtainable only through the analysis of confidential business information.
This latest probe can be looked at in two ways:
1. Tit for tat
One is that it is just a tit for tat action following against Chinese electric cables, wind towers, glass, A4 copy paper, chemicals, herbicides and aluminium products and steel.
Australia has more anti-dumping measures in place than it does against any other country.
Australian anti-dumping and countervailing measures by country, March 2020
China鈥檚 foreign ministry was quick to suggest its actions were a 鈥溾��.
The ministry could find Australia鈥檚 wine industry is in a , a technical term relating to government intervention and subsidies that when it imposes anti-dumping duties.
Standing in the way of such action is the presence of in Australian wineries that sell directly to China via their own distribution networks. It would be difficult to design an anti-dumping penalty that didn鈥檛 also hit them.
2. Geo Economics
Another possibility is that China is trying to inflict economic pain to send a political message.
Using wine would be a shrewd move. China doesn鈥檛 need it for its economic growth. It has the added benefit of upsetting Australia鈥檚 powerful agricultural lobby which has the ear of governments.
The latest probe follows sanctions against Australian , and .
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The aim might be for the targeted industries, and their workers, to pressure the Australian government to be less confrontational with China.
A related strategy might be to portray Australia in a negative light. China (questionably) claimed that it stopped Australian coal and beef shipments for and reasons. Along with , it is a way of turning the sentiment of Chinese citizens against Australia.
It鈥檚 hard to know which way to jump
It鈥檚 too early to tell whether China is simply expressing its dissatisfaction with Australian anti-dumping actions against it, or whether it is hoping to make Australia more politically malleable.
Each would require a different response.
The anti-dumping investigation might take up to , as did the investigation into Australian barley which resulted in extra tariffs.
Both countries stand to lose from a protracted battle.
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But China can get its coal, barley, beef and wine from elsewhere, although at potentially higher cost or lower quality. It is also trying to diversify its sources of .
The uncomfortable truth is that Australia鈥檚 economy relies on China than China鈥檚 relies on Australia.
, Associate Professor of Law, and , Senior Lecturer and member of Herbert Smith Freehills CIBEL Centre, Faculty of Law, UNSW Sydney,
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