China lifts penalties on Australian wine after more than three devastating years

China has announced it is lifting punishing tariffs on Australian wines more than three years after imposing penalties that devastated the industry and were a major point of friction between the trading partners.

China’s Ministry of Commerce on Thursday said that “in view of the changes in the wine market conditions in China,” it was “no longer necessary to impose anti-dumping duties and countervailing duties on imported wines originating from Australia.”

The measure would come into effect on Friday, two days before the end of a five-month review period agreed on by Canberra and Beijing that saw Australia suspend a dispute on the issue at the World Trade Organization for that period.

The decision scraps duties as high as 218% on Australian wine exports to China, its largest overseas market once worth more than 1 billion Australian dollars ($653 million).

The Australian government said it welcomed Beijing’s decision “which comes at a critical time for the Australian wine industry.”

“Since 2020, China’s duties on Australian wine effectively made it unviable for Australian producers to export bottled wine to that market,” the statement read. “We acknowledge and thank Australian grape growers and wine producers for their fortitude and support during a challenging period.”

The wine tariffs were part of a raft of trade curbs Beijing slapped on key Australian exports starting in 2020 as punishment for political grievances.

Their removal comes amid a thaw in China-Australia relations that’s seen Chinese authorities steadily roll back a number of those barriers including on barley, timber, and coal.

Winemakers toast decision

Beijing’s move was embraced by the country’s hard-hit winemakers, who have been grappling with oversupply amid flagging broader global demand on top of years of major revenue losses from China.

“The loss of China over these last three years has caused a fair bit of damage to the industry and brought uncertainty. We don’t know what the Chinese market looks like after (the Covid-19 pandemic), but having access to it is a lot better than not,” he said.

Tariffs of up to 212% were originally introduced by China’s Ministry of Commerce in November 2020. A final ruling the following March set between 116% to 218% antidumping and countervailing duties for a five-year period.

The wine duties were a sharp hit for the key Australian industry, with sales to China down 97% in 2021 from the previous year at a loss of nearly $1 billion in value and 90 million liters in volume, according to national industry group Wine Australia.

Global exports also dropped by 30% in value during that period.

Annual wine production hit its lowest point in more than 15 years during 2022-2023, Wine Australia said. The same year, the United Kingdom and the US became the country’s most valuable export markets.

Lee McLean, head of national association of grape and wine producers Australian Grape & Wine, said industry groups were working with the Australian government to “ensure a coordinated re-entry” into the market.

“We look forward to seeing Australian wines back on Chinese dining tables and rejuvenating our relationship with customers and business partners in that market,” McLean said.

“We will also, however, be maintaining our focus on diversifying our export footprint and growing demand here in Australia as well,” he added.

Diplomatic thaw

China imposed the wine tariffs and other trade controls amid a souring of relations between the two countries over issues of national security and foreign investment, which deteriorated further in 2020 following Canberra’s call for an international inquiry into the origins of the Covid-19 pandemic in China.

China’s Foreign Ministry had blamed Australia for the trade issues, in 2020 accusing it of “violating the basic norms governing international relations,” though its commerce ministry has cited anti-dumping and other reasons for the raft of curbs.

Relations began to improve after the election of Anthony Albanese’s Labor government in May 2022 allowed for a reset of relations, but the wine tariffs had remained a sore point.

On Thursday, China’s Foreign Ministry said the two countries “for some time” had “properly addressed each other’s concerns through dialogue and negotiations, and jointly pushed for the momentum for improvement in bilateral relations.”

Beijing’s decision comes as the country is facing a number of steep economic challenges and has sought to stabilize its relationships with key trade partners from Australia to Europe.

It also follows concerted diplomatic efforts between the two sides to repair ties, which culminated with a trip to China from Albanese last November, the first visit by an Australian leader in seven years.

Earlier this month, Chinese Foreign Minister Wang Yi made the first trip by China’s top diplomat to the Australia in the same period.

During that visit, Australian Foreign Minister Penny Wong raised ongoing points of stress between the two, including China’s sentencing to death last month of imprisoned writer and democracy activist Yang Hengjun, an Australian citizen detained in China since 2019.

Wong also said she stressed Canberra’s desire for the removal of remaining curbs on beef and lobster.

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