Australia will strike a blow in its trade duel with China by launching a complaint with the World Trade Organization over China's punitive tariffs on Aussie wine.
The development is Australia's second WTO complaint about China. It also comes at a time that new research shows relations between the two countries are at an all-time low.
China is Australia's largest trading partner. The WTO complaint comes in response to a temporary ban on Aussie wine that then led to tariffs as high as 212.1% on imports into China, tanking a US$1 billion business.
Australian Minister for Trade, Tourism and Investment Dan Tehan says the government is acting now to "defend the interests of Australian wine makers," and after extensive consultation with the industry. Tehan, who said on Saturday that officials will lodge the WTO complaint, added that Australia remains "open to engaging directly with China to resolve the issue."
That seems unlikely. Chinese officials have literally taken to not picking up the phone when Australian trade representatives have reached out to them.
There's a feeling of mutual mistrust. China's status in Australian eyes is at a record low, according to the new poll by the Lowy Institute think tank. Even Aussie perceptions of China's economic growth - historically a positive - has shifted into negative territory.
China is the least-trusted major power to "act responsibly in the world," in Australian eyes, according to the survey. Almost half (47%) say they feel it is "not at all" likely that China will act responsibly, while only 14% agree "somewhat." Only 8% of Australians say the United States cannot act responsibly, while 48% say it's "somewhat" likely America will.
Almost two-thirds of Australians (63%) now see China as "more of a security threat to Australia," the Lowy Institute Poll 2021, published today, shows. That is down a startling 22 percentage points from the 2020 poll.
Only one-third (34%) say China is "more of an economic partner to Australia," a figure that is similarly 21 points lower than last year. Almost all Aussies (93%) say China's military activities in the Asia Pacific region have a negative influence on their perceptions, up by 14 points.
Australia on June 14 signed a free-trade agreement with the United Kingdom, Britain's first such deal since it left the European Union. But Australia will struggle to make up the A$136 billion (US$102.9 billion) in imports it sent into China in 2018, if the spat continues to widen.
Tehan said sales of Australian wines to "non-traditional markets" rose in Q1, with exports to the Netherlands up 63% to US$15.1 million, and up 133.6% to US$10.3 million into South Korea.
But they in no way make up for the roughly US$1 billion in shipments into China that Australian wineries could previously expect. Faced with a doubling or tripling of prices in China, Australian vineyards shipped only US$9 million in wines to China in the four months from December through March, down from US$244 million the same time in 2020.
Australia first lodged a complaint with the WTO in December about Chinese punitive tariffs on imports of Australian barley. China's secret "hit list" in November temporarily stopped all inbound shipments into China of coal, barley, copper ore and copper concentrate, sugar, timber, wine and lobster. Trade analysts said the unannounced trade bans were intended to intimidate all Australian exporters, since no one knew exactly what kind of ban was in effect.
It is also impossible to prosecute policy if it's unstated. To justify the punitive tariffs it then did announce, China concocted an excuse that Australian government subsidies to its wine industry allow Australian winemakers to sell bottles for less than the cost of production. Barley, beef and coal all saw sky-high tariffs put in place.
Aussie perceptions of China, once seen as the country's brightest hope, have been on the slide since 2017. Back in 2018, a full 82% of Australians said they viewed China as more of an economic partner. There has also been a large recent increase in the share of Australians, now above half at 52%, who say a military conflict between the United States and China over Taiwan is a critical threat to Australia's vital interests over the next decade.
"While Australians' trust in many countries has increased in 2021, sentiment towards China is now quite bleak," Natasha Kassam, the institute's director of public opinion and foreign policy, says.
Politically, relations soured between Canberra and Beijing after Australia in 2018 banned Huawei Technologies from participating in its 5G broadband network. What really seems to have stoked China's fire, though, is the demand from Australia in April 2020 for an independent international investigation into the origins of the coronavirus.
Australian Foreign Minister Marise Payne said at the time that her concern over China's transparency was at a "very high point," and that Australia will "absolutely insist" on a proper independent review of where the coronavirus originated and how it spread.
Payne repeated this week that Australia is determined to work with its partners to ensure the "investigation is able to access its material that it needs, including within China."
Shares in Treasury Wine Estates (TSRYY) were already suffering thanks to shipping problems due to the pandemic, down 53.4% in the year through November 2020. They have recovered 35.9%, but remain far off their levels in pre-pandemic years.
Treasury Wine is Australia's third-largest wine producer, counting Penfolds, one of the world's largest wine labels, under its brands, as well as Beringer, Wolf Blass and Lindeman's. It had previously raised prices on its wines globally thanks to high demand for its wines from China.
Both Accolade Wines, Australia's largest wine company by production, and Castella, the second-largest, are privately held companies. Accolade said in May that it intends to ship wine into China from third-party nations such as Chile, which has a zero-tariff deal with China on wine. Accolade, bought by private-equity manager Carlyle Group (CG) in 2018 for A$1 billion, intends to launch an initial public offering to go public on the Australian Stock Exchange or, preferably, the Hong Kong stock exchange within the next two to three years.
