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China Lifts Punishing Tariffs on Australian Wine

WorldAsiaChina Lifts Punishing Tariffs on Australian Wine

In a sign of easing tensions between Australia and China, China said Thursday it will lift the tariffs it placed on Australian wine more than three years ago.

The tariffs, which were first imposed in 2020 amid a nasty diplomatic spat between Australia and China, had all but vaporized the country’s biggest overseas market, worth 1.2 billion Australian dollars or around $800 million at its peak. Australian winemakers faced desperate hardship and were stuck with a surfeit of big-bodied red wines.

The decision to lift the tariffs was announced by China’s Ministry of Commerce.

In a statement, Australian Prime Minister Anthony Albanese said he welcomed the decision, and that the outcome came “at a critical time for the Australian wine industry.” He added: “We will continue to press for all remaining trade impediments affecting Australian exports to be removed.”

As of last August, Australia had the equivalent of 859 Olympic swimming pools of wine in storage, according to a report from Rabo Bank. “That’s going to take some time to be depleted,” said Lee McLean, the chief executive of Australian Grape & Wine Inc. “And China is not going to solve that on its own.”

The price of red grapes has barely covered their production costs, prompting some growers to simply let them wither on the vine, while others accepted contracts well below the cost of production, Mr. McLean said.

The development comes after months of moves toward rapprochement between the two nations, starting with a change in the Australian government. That has led to meetings between foreign ministers, the release in October of a detained Australian journalist and, in November, the first visit by an Australian premier to Beijing since 2016.

Beijing in October agreed to review the tariffs, some of which exceeded 200 percent. In an interim decision this month, the Chinese Ministry of Commerce indicated that the tariffs were no longer necessary.

Speaking in Beijing last year, Prime Minister Anthony Albanese of Australia said that it was in the interest of both nations, their economies and the security of the wider region to “stabilize” their relationship. He expressed his “confidence” that the tariffs would be removed.

At that time, Australia withdrew complaints it had lodged with the World Trade Organization and reverted course on the cancellation of a Chinese company’s 99-year lease of the northern port of Darwin. In turn, China gradually lifted or reviewed other trade bans, sending coal, barley and timber flowing from Australia once again.

Chinese consumers had fallen hard for Australia’s red wines, leading some growers to lean into that demand, swapping white grapes for red grapes like cabernet sauvignon, shiraz and merlot, and in some cases even replacing screw tops on bottles with the corks preferred by Chinese consumers.

The tariffs begun in 2020, after Scott Morrison, then the Australian prime minister, called for “an objective, independent assessment” of how the Covid-19 pandemic began. China bristled over what it called “ideological bias and political games” intended to assign blame.

Within months, China’s Ministry of Commerce began an investigation into whether Australia was “dumping” wine onto the market at artificially low prices.

By November 2020, it had imposed “anti-dumping tariffs” of between 116.2 percent and 218.4 percent on Australian bottled wine, up from zero under a prior free-trade agreement. Sales to China that had been worth $800 million in 2019 dropped 97 percent in the first year. Australia, in turn, filed a complaint to the W.T.O., which referees trade disputes between nations.

For Chinese consumers, who have in the interim embraced high-end baijiu, a local spirit, as well as fine wines from France and more affordable ones from Chile, the tariffs had indicated a cultural shift, said Ian Ford, the founder of Nimbility, a brand and sales management company for alcohol sold in Asia. “Don’t bring it as a gift to a government official, don’t serve it at a banquet where government officials are present,” he said. “It becomes almost a statement that this is now taboo.”

The lifting of tariffs would send a clear message, he added, and some distributors in China had already begun preparing for an influx of popular Penfold’s branded wine from Australia.

“There will be a surge in demand,” he said, “but at the end of the day, I do think they’re going to have to fight to gain back the market share.”

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