A wine expo in Yinchuan, China (Image: EPA/ Alex Plavevski)

The Coalition government’s much ballyhooed free trade agreement (FTA) with China — since upgraded to the bizarre-sounding Comprehensive Strategic Partnership — appears to be in tatters after Chinese government edicts indicated that a ban of $6 billion in coal, wine, lobster, wood, sugar, barley and copper has been eyed by authorities.

The FTA and its successor, which has nothing to do with any strategic agreement but is merely a diplomatic fiction, has been the cornerstone of the Coalition’s China policy since it was fast-tracked by the Abbott government following the 2013 election.

But shortly after the FTA was signed in 2015, Canberra began steadily increasing its pushback against Beijing’s regional adventurism, which has seen the Chinese military build bases in disputed areas of the South China Sea. Scott Morrison was so disturbed at the ructions created by Malcolm Turnbull and his foreign minister Julie Bishop that he promised a “reset”.  This turned out to be just more marketing from the PM.

More recently, Canberra has escalated its criticism of China’s human rights abuses in Xinjiang and Hong Kong. Most inept was the government’s ill-advised diplomatic fumble of a pipe-dream demand for an independent investigation into the origins of the COVID-19.

The precise situation with Australian exports remains typically murky, with predictable denials from Chinese sources and the usual confusion in Canberra. The Morrison government has once again been wrong-footed by a regime that has proven thin-skinned, capricious and utterly untrustworthy on trade matters.

“China conducts friendly co-operation with other countries based on mutual respect, equality and mutual benefit,” Chinese Foreign Ministry spokesman Wang Wenbin said Monday. “We hope Australia can do more things conducive to mutual trust, bilateral co-operation and the spirit of China-Australia comprehensive strategic partnership.”

Effectively: pull your head in and play ball the way we want or we keep going.

Of the sectors targeted by China, it’s Australia’s wine industry that faces potential Armageddon after wine buyers in some of China’s biggest cities were called in by authorities Monday morning and told to deliver a brutal message to Australian suppliers: that their wine was not wanted after November 6.

Australian wine exports to China began a fresh surge in 2019 when tariffs were wound back under a deal reached in the FTA. Now China is looking at imposing a new tariff of 200% on Australian wine that would effectively make our product unaffordable.

Chinese importers of Australian wines in major cities Shenzhen, Tianjin, Hangzhou and Ningbo were summoned for meetings with officials and told not to bring communications devices.

“Importers are cancelling orders and we are hearing from a very wide range of sources that this is happening. It may be temporary while they institute new tariffs on Australian wine,” Australian Grape and Wine Association chief Tony Battaglene told Crikey.

The move will upend Australia’s $3 billion wine export sector, as 40% of the country’s wine exports are sold to China. Warehouses will be clogged with stock and wholesale wine prices will plunge.

The surprise move dramatically escalates an ongoing stoush in which Chinese authorities have accused Australian producers of dumping wine, a claim Australia has denied.

Wine Australia data released last month revealed that Australian wine exports were valued at $2.99 billion in the year to September 30, a rise of 4% on last year. China, Australia’s largest market by far, increased its purchases by 4% to $1.17 billion. The volume of wine sold to China dropped by 12% to 123 million litres, making it only the number three export destination by volume. The United Kingdom imported 28.4 million cases of wine in the same period, compared to 15.6 million by the United States.

Chinese authorities have attempted to curb Australian wine imports previously but an industry source said “this feels much more comprehensive and comes in an environment where relations between the two countries are at record lows”.

Industry observers said it was likely to set off panic selling in the sector as producers and wholesalers dump stock, sending farm gate prices plunging.

The example of the wine sector shows just how much economic damage China is able to inflict on Australian industries built on the back of two decades of relentless messaging about China’s amazing opportunities.

There appears to have been a deluded belief in Canberra that China needs Australian exports more than Australia needs the Chinese market. This may be true in the case of iron ore (though China is making longer-term moves to change this equations too) and the coking coal used for steelmaking. But for most other products and any services, it has other options.

It’s all well and good for Canberra to beat its chest and say it’s “standing up” to China. Indeed, in most situations, it’s very much the right thing to do. But our politicians also have a duty to be honest about the risks that this brings. 

These risks — ignored in Canberra’s public diplomatic discourse — have always been very clear. Now it seems that the reality of them is starting to bite.

The Australian people deserve an honest assessment of our relationship with China, and a difficult public discussion of what trade we are willing to make for either strategic or economic security.

The future of our exports depends upon it.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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