With Australia’s winemakers rethinking their future in the lucrative Chinese market, hit with painful tariffs as relations between the two countries worsen, rival producers around the world are ready to pounce.
Canberra and Beijing have been locked in a diplomatic and economic standoff for most of this year, with China hitting out at a list of issues, including Australia’s call for an inquiry into the origins of COVID-19 and a ban on Huawei Technologies Co’s (華為) participation in the country.
The row has seen at least 13 Australian sectors hit with import levies, including beef, coal and barley — but one of the worst affected is wine, with the industry hit by two waves of tariffs last month and this month.
Photo: EPA-EFE
The effect has been to double, and in some cases even triple, the price of a bottle of Australian wine in Chinese supermarkets. It is a serious blow to the winemakers — China is their largest market, accounting for more than one-third of their exports and until recently where they were the dominant players.
However, as Australian wine has become less palatable in China, new openings have emerged for domestic producers and other wine-exporting countries.
In imposing the anti-dumping tariffs, which amount to up to 212 percent of the goods’ value, China claimed that cheap Australian imports were damaging its own viniculture industry. Domestic production in the first half of this year was worth US$680 million, while imports hit US$830 million.
Now, some observers think Chinese vineyards are about to benefit after a gloomy few years.
“Local producers have suffered from extreme weather events over much of the past three years, as well as rising imports, especially from Australia,” said Matthew Reeves, a senior industry analyst at market research group IBISWorld.
However, the big winners will likely be other established wine-producing countries, Reeves added, because “the local wine industry in China will not be able to meet the demand for high-quality wine.”
Chilean wines “seem more likely to fill the gap in the medium term,” International Wine and Spirits Record Asia-Pacific research director Tommy Keeling said.
China already drinks more Chilean than any other export country — and good diplomatic relations could count in Santiago’s favor too, import consultant Jorge Matthei said.
The Chinese market has been a lifeline for Chile’s producers hit hard by the COVID-19 pandemic, he said, adding that orders from there had increased more than one-third in the past six months.
Chile is not alone in sensing an opportunity to reverse Australia’s leadership of the market, previously helped by an import tariff exemption last year.
In the first half of this year, for every 100 bottles of wine imported into China, 38 were Australian. Of the remainder, 26 were French, 13 Chilean, seven Italian and six Spanish.
Reeves believes all of these countries would see their share increase.
Even US producers — battered by a trade dispute with China that saw last year’s sales there almost halved — might also be able to leverage any potential reset under the administration of US president-elect Joe Biden, he added.
Mariano Larrain, owner of a specialist Chilean wine shop in Shanghai, was more cautious about the future of the market.
“I don’t really believe that Chilean wines are to going be a substitute for Australian wine, because they’re not really in the same range,” he told reporters.
The Federation of French Wine and Spirit Exporters also sounded a note of caution.
“It’s difficult to know how the Chinese market is going to evolve,” it said.
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