What do you do when you lose your top wine export market?
This is the position Australia’s wine industry finds itself in the wake of extremely steep retaliatory tariffs that China has imposed for 5 years on a variety of Australian exports that also includes beef, coal, and timber. The tariffs range from 116 percent to 218 percent.
The tariffs are a result of Australia’s government pushing for an international investigation last year into the origin of the coronavirus in China, and the Chinese government subsequently enforcing the antidumping duties.
“Australian wine is the second-highest price point wine in China. You don’t go and dump a high quality product into a market such as China,” said David Littleproud, Australia’s minister for agriculture, drought and emergency management, in a recent CNBC interview.
Nonetheless, China represents 40 percent of Australia’s wine export trade, which was about $840 million worth of Aussie wine sold into the Chinese market in 2019, so it is an economic hit to an industry that contributes an estimated $35 billion to its economy, according to Wine Australia.
“When you look at China imposing that 200 percent [wine] tax on Australia—we see this as really part of a much deeper narrative that we think is going to play out and have much deeper ramifications moving forward,” said Stephen Rannekleiv, a beverage sector strategist for the food and agribusiness research and advisory group at the Dutch financial services multinational, Rabobank, during the Unified Wine & Grape Symposium’s 2021 virtual conference in January, that was written about here at VinRoutes in February.
Trade is being used as “a stick” and “trading partners are being forced to pick a side,” as it is harder to be neutral now and “wine is getting caught in the crossfire,” said Rannekleiv.
As a result, in this case, Australians are going to have to diversify their market from China, such as considering moving more premium brands into the U.S., the panelists at the symposium said.
“While China may want to play games with respect to market mechanisms, we have the opportunities to send this product into other markets because of the quality of it,” said Minister Littleproud.
Moral of the story: Don’t put all your wine bottles in one basket.