Much has been said about China’s shocking announcement to launch an anti-dumping probe into Australian wines. Most argue that the probe has to do with China-Australia’s rapidly deteriorating relations since the outbreak of coronavirus.
There’s no shortage of evidence to back up this claim. The two countries’ relations are at historic low, and politicians on both sides traded barbs and engaged in tit-for-tat retaliation.
This year, Australia launched anti-dumping investigation into Chinese imports including steel, aluminum and A4 paper, prompting China to retaliate by slapping tariffs on Australian barley and sanctioning beef exports from four companies.
Tensions between the two countries rose when Australia called for independent inquiry into coronavirus origin and outbreak in China. Chinese ambassador to Australia Chen Jingye threatened boycott of Australian wine and tourism if Australia followed US’ lead.
Within a month of the warning, Australian wine appeared on a list of draft agricultural products to be targeted by Chinese government. This month, the probe was officially launched by China’s Ministry of Commerce, following a proposal put forward by the China Alcoholic Drinks Association (CADA) which blasts that Australia’s “unfair dumping that severely disrupted China’s wine market.”
But what has been missed in the discussion so far is about the probe’s context. The original proposal drafted by CADA argued at length about how Australia has been dumping imported wines at lower price to gain market share in the past five years, but any keen reader would notice the case is built and argued on the basis that domestic Chinese wine suffered drops because of what the association claimed to be Australia’s unfair competition that created a dumping margin as high as 202.7%, according to the association.
In other words, the association believes the rise of Australian wine in Chinese wine market is at the cost of domestically produced Chinese wine. To be exact, it attributed China’s wine production decline from 2015’s 11.61 million hl to last year’s 4.51 million hl, and Chinese wine sales’ slump from 2015’s RMB 46.6 billion to 2019’s RMB 14.5 billion to Australia’s allegedly dumping of inexpensive wines, regardless of the two countries’ Free Trade Agreement that eliminated tariffs, Australia’s successful marketing campaign and consumer preference.
“A lot of evidences have shown that Australia’s dumping behaviors has severely disrupted fair competition in China’s wine market, and damaged Chinese wine industry”, the association said in a press conference on August 20.
Domestic wine sales’ decline “raises causes for concern and will face huge impact and threat from Australian wine products,” it warns.
In more plain terms, Huo Xingsan, head of wine division under CADA, revealed the goal for anti-dumping probe is to protect domestic wine industry and promote economic and agricultural industries in main wine regions including Ningxia, Xinjiang and Gansu. The growth of local wine industry in northwestern region particularly in Muslim-populated Ningxia and Uyghur Xinjiang is not just a means to alleviate poverty but also to stabilize local political situation, as Huo articulates when explaining the probe’s goal.
Rejuvenation of Chinese wine?
This would echo a pattern of recent moves that has been promoted by the association throughout this year, which looks increasingly like – to borrow Chinese president Xi Jinping’s catch phrase, “the great rejuvenation of Chinese nation” in wine terms – “rejuvenation of Chinese wine”.
In June, the association led a nationwide campaign titled ‘Chinese drink Chinese wine’ 国人喝国酒.
In the following month, it revealed a shocking finding of Chinese wine consumption v.s. imported wine consumption, which presented an eschewed ratio of 40% v.s. 60% with imported wines leading over Chinese wine. This directly contrasts a previous perception that Chinese wine accounts for majority of wines consumed in China at roughly 70%. This is revealed shortly after the anti-dumping proposal was submitted by CADA to Ministry of Commerce in June. One can argue this could be seen as laying groundwork for what’s to come.
Earlier this month, the country eliminated key requirements to set up wineries, in a move that’s seen to boost local production as Vino Joy News reported. Let’s also not forget the association is the main architect behind promoting and launching a Chinese wine rating system, which it describes would cater to “Chinese tastes”. When talking to Vino Joy News earlier this year, the association says the rating system is expected be applied to all imported wines, and will be as part of quality evaluation requirement. The implication of not being rated by it, as the association did not specify conveniently is risking being shunned out of China market.
This begs a question had Australia not surged ahead of France to become China’s biggest wine supplier and taken up close to 40% market share, would it make a difference?
I am afraid the answer is probably no. When diplomatic assertiveness combined with protectionism and nationalism, the target wouldn’t matter much. In China, there’s a saying 杀鸡给猴看, which means killing the chicken to scare monkey. It’s the muscle flexing and deterrent it seeks. Would France be next if it performs well and surges ahead, no one knows.
The only thing we can hope for is that the investigation won’t lead to punitive tariffs. CADA lodged a similar complaint about European wine in 2013, which was eventually dropped the following year. The saber-rattling from China led to Europe’s technical guidance on viticulture and winemaking advice for the country’s own wine production in exchange.
With Australia’s devastating bush fires and Covid-19, the threat of losing its most profitable market adds more woes and uncertainties to wineries and producers. Many of their wine hopes for China will probably wither on the vines unless two parties can reach an agreement after negotiations.
There’s also a rumor circling around that Chinese-owned Australian wine companies would be spared of punitive tariffs, but it looks unlikely as one of the ten wine companies targeted for investigation included Australian Vintage, producer of McGuigan Wines. It is partly owned by Chinese company Vintage China Fund.
Australia’s biggest wine companies such as Treasury Wine Estates, Accolade Wines and Casella Group, owner of Yellow Tail, are also on the investigation list.
“It’s not unusual, it’s just disappointing … I’d love trade to be trade and politics to be politics,” bemoans Justin Jarrett from New South Wales when interviewed by Australian media.