Ministers Stare Down Beijing’s Latest Trade Salvo Aimed at Australia’s Wine Sector

A visitor is checking bottles of Champagne at the Vinexpo Asia Pacific in Hong Kong, on May 27, 2014. On the international financial change, China is very close to pop the Champaign at the end of the year. PHILIPPE LOPEZ/AFP/Getty Images

Prime Minister Scott Morrison has declared Australia will never trade away its sovereignty in the face of Beijing’s latest trade-related salvo, this time targeting the valuable wine sector.

The Chinese Ministry of Commerce announced on Aug. 18 it was launching an investigation into anti-dumping allegations against Australian wine exporters to China.

The claims allege Australian winemakers are deliberately selling wine into the country at below-the-market prices, at times even below production cost, effectively “dumping” the product into China to drown out local winemakers.

Red wine imported from Australia are displayed for sale at supermarkets on June 17, 2015 in Beijing, China. Lintao Zhang/Getty Images

The investigation will also examine whether wine production is being subsidised by the government, which in certain cases, can allow exporters to easily undercut competitors.

The investigation could lead to more tariffs being implemented on Australian exports to China.

Prime Minister Morrison has dismissed the allegations telling reporters on Aug. 19, “We totally don’t accept any suggestion that there has been any dumping of Australian wine in China whatsoever.”

“There is no basis against the claims made against the Australian wine industry or subsidies or things of that nature,” he added.

Australian Prime Minister Scott Morrison speaks during a media conference at Parliament House in Canberra, Australia on July 9, 2020. David Gray/Getty Images

“We will never trade away our sovereignty in Australia on any issue,” Morrison said. “We will be consistent, clear, and respectful and we will get on with the business.”

Morrison also made the point that Australian wines had the second-highest average price in China in the first half of 2020, following New Zealand wines.

In fact, Australian wine brands such as Penfolds, are highly regarded by Chinese consumers and tourist. Penfolds is so popular it has had to contend with a copycat brand called Benfords.

A Penfolds 1962 vintage Cabernet Shiraz (C), voted number seven in a list of 100 of the world's greatest ever wines, is flanked (L and R) by 1991 vintage bottles of the famous Penfolds Grange red wine, at a special re-corking clinic in Sydney, 12 July 2006. Greg Wood/AFP via Getty Images

Trade Minister Simon Birmingham on Aug. 18 called the dumping investigation “perplexing.”

“Australia’s wine producers have worked hard for years to establish themselves with a reputation for the highest of quality and for being internationally competitive based on their excellence,” he said.

Birmingham said the government would defend against the claims and work towards preventing potential tariffs or duties being imposed on the sector.

The barley industry in May was hit with 80 percent worth of tariffs, following the Ministry of Commerce’s “findings” into anti-dumping allegations against Australian barley exporters.

China is currently Australia’s largest wine export market, accounting for 37 percent of exports valued at over $1 billion (US $792 million) annually.

600 Chinese staff from Pernod Ricard visiting Jacob's Creek's Steingarten Vineyard in South Australia's Barossa Valley on July 20, 2010. Greg Wood/AFP via Getty Images

The wine investigation is the latest Beijing-instigated action targeting key economic trading relationships between China and Australia.

Agriculture Minister David Littleproud told Sky News on Aug. 19 that all options were on the table for the government including possible World Trade Organization action.

He emphasised that the government would follow all formal processes around the investigation.

While cabinet members have avoided directly criticising the Chinese regime or any allusion to a “trade war” between Beijing and Canberra, backbenchers and independent members of Parliament have not been as coy.

Queensland Senator Matt Canavan said Beijing was “bullying the rest of the world” and called for Australia to “stand up to this and call it out for what it is,” reported AAP.

“Every Australian business must be very wary and careful about how they interact with a country that is proving itself not to be trusted,” he added.

Independent senator from South Australia Rex Patrick said the wine probe was politically motivated and “ludicrous.”

Chardonnay grapes lie rotting on the ground at a grower's vineyard on the Mornington Peninsula May 6, 2005 in Melbourne, Australia. Mark Dadswell/Getty Images

Patrick, who has been critical of “bloated” diplomatic staff numbers at Chinese consulates across Australia, said: “This is a political issue, it is in effect coercion, and we need to work with a number of other countries to deal with this issue.”

According to agricultural financing firm Rabobank, Australian food and farming exports to China rose eight percent in the last financial year.

Rabobank warned however that Australia’s exposure to China may have reached its peak and cautioned against concentrating too heavily on the market.