Removing Chinese tariffs on wine a tougher fight than barley, trade minister warns

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Trade Minister Don Farrell has warned that getting China to drop its tariffs on Australian wine will be a harder victory to secure than the backdown on barley.

Farrell, also a winemaker, is hosting his New Zealand counterpart, Damien O’Connor, at his home at a vineyard in the Clare Valley in South Australia, where both ministers said Beijing’s economic coercion had prompted them to pursue other export markets for their countries and boost trans-Tasman trade.

Australian Trade Minister Don Farrell owns a winery in the Clare Valley in South Australia.Credit: Facebook

Last week, China removed tariffs it had imposed on Australian barley after then-prime minister Scott Morrison in 2020 called for an inquiry into the origins of COVID-19. This week, Beijing allowed Australia back onto its list of approved destinations for outbound Chinese group tours.

But Farrell said securing the removal of Chinese tariffs on Australian wine would be more difficult.

Australian Trade Minister Don Farrell (left) and New Zealand counterpart Damien O’Connor on Zoom.Credit: SMH

“The importers in China were very supportive of Australian barley coming back into the Chinese economy,” he said.

“We don’t have the same support from Chinese wine producers, so it will be a more difficult process.”

According to German data collecting firm Statista, China is the largest grape producer in the world, and has the third-largest vineyard area, although its wine production volume has been dropping every year.

Australia’s case against China on wine tariffs remains before the Word Trade Organisation (WTO) and Farrell said he was confident the decision would go Australia’s way.

“We’re prepared to do with wine what we did with barley, suspend the application, that will require some action on their part to review their internal application of tariffs,” he said.

While Australian barley producers were able to find new markets for their grain, wine producers were not as successful and have borne the brunt of Beijing’s economic coercion.

Trade Minister Don Farrell on a trade visit to Beijing in May.Credit: DFAT

Both the value and volume of Australian wine exported plummeted after 2020, following a pre-pandemic peak. China was Australia’s largest wine buyer between 2017 and 2021, but slipped out of the top 10 in 2022 as a result of China’s 212 per cent tariffs.

The total value of Australia’s wine exports was $1.8 billion in the 12 months to June this year, down from 2019’s record high of $2.9 billion.

China is the biggest trading partner of both New Zealand and Australia. Before New Zealand embraced its zero-COVID policy, it was exporting more than it was importing. However, since September 2021 the country has been in trade deficit.

Australia, by contrast is in trade surplus, with exports to China – overwhelmingly iron ore – comprising 30 per cent of its total goods shipped overseas.

O’Connor agreed that it would be devastating for New Zealand if Beijing imposed the same punitive tariffs it slapped on Australia.

“We wouldn’t like to see anything like this happen across the globe, that’s why we support the World Trade Organisation and regardless of who conducts any kind of coercion or who breaks any trade rules, we think there should be a good dispute settlement process at the WTO,” O’Connor said.

Australia and New Zealand have looked for new markets in the wake of China’s trade sanctions.

New Zealand, with a population of 5 million, ranks as Australia’s 10th-largest trading partner, whereas Australia is New Zealand’s second-largest partner, behind only China.

Farrell said he was mindful of partnerships as he showed O’Connor around the Clare Valley, following the 40th round of Kiwi-Australia Closer Economic Relations Trade Talks.

“It’s been 40 years, the same number of years I’ve been married to my wife, and as Damien pointed out … you don’t want to take anything for granted in the relationship,” Farrell said.

He said that the Albanese government’s strategy of diversifying trading relationships also meant building on existing relationships with current friends.

“One of the reasons for bringing [O’Connor] to the Clare Valley is, so he can experience the magnificent food and wine of this region, and he can go back and talk about that,” Farrell said.

“The things that we do well, the export of food and wine, I think we can do it even better in partnership with the New Zealanders.”

Diversification leads to Europe

O’Connor conceded New Zealand had been slower than Australia in opening trade talks with the world’s most populous country, India, but said recent deals struck with the UK and the European Union were a significant start. A deal with the EU has so far eluded Australia.

Asked if Australia would accept a New Zealand-style deal offered by Brussels, Farrell said: “We think we’ve got more things to offer the Europeans.”

He said the abundance of critical minerals that Europe needed to meet its net-zero emissions goals meant Australia hoped to gain greater access to EU markets.

“The New Zealand agreement was good for New Zealand, as the minister [O’Connor] said, but we want a different arrangement with the Europeans,” Farrell said.

Australia and the EU failed to strike a deal in trade talks last month, and are due to resume negotiations this month.

“I’ve invited [European] Commissioner [for Trade, Valdis] Dombrovskis to come to Australia for another round of negotiations and hopefully, we can do that,” Farrell said.

“I’ve been there three times, so it’s a case now of them giving consideration where the next place for the negotiations will be.”

European Commission trade spokeswoman Miriam Garcia Ferrer said more was needed before talks would resume.

“At the last ministerial-level round of talks last month, there were several issues on which the Australian side required further internal consultations,” she said.

“We look forward to engaging with our Australian partners to conclude soon.

“At this stage no specific meeting has been set at the level of EVP [Executive Vice President] Dombrovskis and Minister Farrell, but we remain open to organising such a meeting, once the Australian side indicate that their internal consultations are finalised.”

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