China will impose a tax on Australian wine of up to 212%, starting Saturday.
Its trade department said these were temporary measures to combat the dumping of Australian wine into the country at subsidized rates. It could have taken a toll on domestic manufacturers in the long term.
Other Recent Taxes
Tariffs will go from 107% to 212%, intensifying trade tensions between the two countries.
In recent months, Beijing has been targeting imports from Australia including coal, sugar, barley and lobster amid political unrest.
Officials in China have argued that some Australian wine is sold cheaper there (discarded) than in its domestic market through subsidies. Australia has rejected that statement.
What Is Trade Dumping?
Dumping is when a country’s businesses lower the sales price of their exports to unfairly gain market share. They drop the product’s price below what it would sell for at home. They may even push the price below the actual cost to produce. They raise the price once they’ve destroyed the other nation’s competition.
A country prevents dumping through trade agreements. If both partners stick to the agreement, they can compete fairly and avoid dumping.
Violations of dumping rules can be difficult to prove and expensive to enforce. For example, the North American Free Trade Agreement (now the United States-Mexico-Canada Agreement) provides a mechanism to review violations of the trade agreement.
China-Australia Trade Relations
China is the largest wine importer for Australia, accounting for 39% in the first nine months of 2020, according to Wine Australia.
China has been conducting a year-long investigation into anti-dumping, looking at wines sold in China at prices allegedly lower than in Australia.
Following the announcement on Friday, Treasury Wine Estates (TWE), one of the world’s largest wine producers, saw its share price drop by more than 13%.
TWE, the maker of Penfolds and Wolf Blass, has set up a retail business in China which analysts estimate is estimated at A $ 4bn (£ 2.2bn; $ 3bn) only after six years of strong growth.
Other winemakers in Australia have been nominated alongside TWE, including Casella Wines and the Australian Swan Vintage.
China’s Ministry of Commerce has not specified how long these measures will last.
The reason, however has been provided for the preliminary taxes/tariffs on Australian wine imports. The Australian Minister of Agriculture has ‘strongly’ reacted to it in a tweet published the other day.
Australia’s Response To The Levies
Australian Agriculture Minister David Littleproud responded to the announcement on Twitter, saying the government was “very disappointed”.
“The Australian government has completely denied allegations that our wine producers discarded the product in China,” he said.
“Australian wine is very popular in China and around the world because of its high quality and we are confident that a thorough and thorough investigation will confirm this.”
Australian Trade Minister Simon Birmingham said the new prices made Australian wine more flexible and marketable in China.
“This is a very sad time for many Australian wine producers, who have built, honestly, a viable market in China,” he said.
Mr Birmingham proposed the idea of taking China to the World Trade Organization (WTO) across the border.
Exacerbating Relations
Political ties between China and Australia have deteriorated this year and have been at an all-time low for decades, experts say.
Australia supported an international investigation into the origin of the coronavirus in April, and successfully selected China, according to a Chinese official.
Since then, imports into Australia have been particularly prominent while Chinese students and tourists have been warned to travel to Australia for fear of racial discrimination.
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