Australia’s top wine authority closes offices in China as exports plummet

Lin Tiangui, a representative of Winston Wine, looks at a bottle of wine produced from Winston Wine’s own Australian cellar at one of its stores in Shanghai, China, October 18, 2011.

Qilai Shen | Bloomberg | In pictures | Corbis History | Getty Images

Australia’s leading wine industry body, Wine Australia, will close its only physical office in China after sales to greater China succumbed to prohibitive Beijing duties.

“Wine Australia has made the difficult decision to close our physical office in Shanghai. This decision follows extensive consultation with the Australian grape and wine industry and is based on the current environment and market opportunities,” said a spokeswoman for Wine Australia.

“Wine Australia will continue to maintain its brand presence in China through its consumer-facing wine and social media channels, and will continue to work closely with in-market sales representatives on brand building and marketing campaigns.”

The once A$1.2 billion-a-year ($830 million) trade shrank to just over A$200 million by the end of March, a suspected victim of tension between the two countries.

Wine Australia said it would continue to operate in China as in other markets, through “relationships with key in-market agencies and marketing partners, trade show organizers and educational networks”, a format that tends to be used for smaller trading markets.

The industry body is responsible for supporting the Australian wine industry through research and development as well as establishing new export markets.

The once envied Chinese trade for Australian exporters, however, suffered a major blow in 2020 when Beijing launched an investigation into alleged dumping of cheap Australian wine in China.

Beijing then imposed anti-dumping duties of between 116.2% and 218.4%, making Australian wines uncompetitive in the Chinese market. The case is under arbitration at the World Trade Organization.

Anti-dumping and anti-subsidy duties are protectionist tariffs that governments impose on imports that they deem to be below fair market value, usually at prices below those in the domestic markets of exporting countries.

The punitive tariffs were part of a series of Chinese trade restrictions on Australian exports, including barley, coal and lobsters.

Many of these restrictions were enacted informally after the two countries fell when Canberra called for an independent investigation into the origins of the coronavirus, without consulting Beijing diplomatically.

Australia’s national winemakers’ association, Australian Grape and Wine, said the closure of the Shanghai office did not mean “the end of an era”. He noted that despite the difficulties, exporters are keen to re-enter the Chinese market and that Chinese demand for Australian wines remains strong.

“We understand and support Wine Australia’s decision, which is based on operational requirements,” said AGW chief executive Lee McLean.

“We also note that there is still a strong demand for Australian wine in China and hope that Chinese consumers will again have the opportunity to taste Australian wines at some point in the future.”

Australian exporters struggled to sell wine in China after the imposition of the duties, according to data from Wine Australia for the 12 months ending March. They have since diverted sales to other markets like the US and UK, but have still faced pandemic-related challenges such as supply chain and global freight disruptions.

The UK has since overtaken China as Australia’s top wine export destination, although this market was less than half the size of the Chinese market at its peak.

Australia exports 60% of its wine production and China previously represented about 40% of these exports.

But there have been some signs of a thaw between the two major trading partners in recent weeks following the election of a new Labor government in Australia.

Earlier this month, Australia’s new Defense Minister Richard Marles and Chinese Defense Minister Wei Fenghe met on the sidelines of the Shangri-La Dialogue in Singapore, also known as the “Summit on security in Asia”.

Previously, there had been no ministerial visits or talks between the two countries for several years.

Political observers also said Marles’ speech at the summit indicated there had been a shift in Canberra’s tone towards Beijing. Using less hawkish rhetoric, Marles acknowledged the reality of China’s rise but framed it in terms of the responsibilities that come with it, wrote Nick Bisley, professor of international relations at La Trobe University in a opinion piece last week.

Chinese Premier Li Keqiang also sent a congratulatory message to new Australian Prime Minister Anthony Albanese after his victory in the Australian federal election in late May and in turn received “a letter of appreciation”.

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