What Australian wineries and wine merchants in China are fearing the most is about to happen, as sources close to Chinese government told Bloomberg that wine is among a list of potential agricultural products drawn up by Chinese officials to retaliate Australia over its push for coronavirus inquiry.
According to people familiar with the matter, the list of potential goods targeted include wine, dairy products, seafood, oatmeal and fruit.
It’s not clear at the stage if the so-called retaliation would be in the form of increased tariffs or stricter quality checks.
At the time of publishing, Vino Joy News can’t independently verify the news.
If the news is indeed confirmed, it would mean a dramatic escalation of relations between the two countries and a huge blow to Australian wine exports to its most lucrative market, China.
Share price of Treasury Wine Estates, Australia’s biggest wine company and owner of the popular brand Penfolds, dropped 1.7% today.
China is already Australia’s biggest trading partner and its biggest wine buyer. It imported AU$1.136 billion worth of Australian wines in the last 12 months ended in April this year.
End of Free Trade?
Australian wine’s fast rise in China in large part is due to the two countries’ Free Trade Agreement signed in 2015 that eventually saw China scrapping wine tariffs on Australian wines to zero in 2019, giving Australia a huge edge over other imported wines from France, Italy or Spain.
The same year when the import tariffs are removed, Australia overtook France as China’s biggest wine supplier. It takes up about 37% of China’s wine market share by value, compared with 25% for France.
Last month Australian government pushed for an independnet inquiry into the origin and outbreak of coronavirus, which promoted China’s immediate protest.
In what analysts described as politically motivated move, China banned beef imports from four Australian companies citing “technical” reasons and levied 80% tariffs on Australian barley.
China however dismissed claims of political retaliation over inquiry, calling it “erroneous political interpretation.” The country also backed WHO’s resolution yesterday which calls for independent assessment of the global response to the pandemic.
The resolution was drafted and promoted by the EU and Australia. It’s backed by over 100 countries, according to SCMP.
Commenting on the potential escalation of trade relations, Australian Trade Minister Simon Birmingham, said “This is an unsourced claim for Chinese authorities to respond to.”
“Australia notes recent statements from Chinese spokespeople emphasizing the mutual benefits that flow from our trading relationship. We share those sentiments and will continue to work with China to uphold the commitments we both made under” the nations’ free-trade accord.