The loss of China as a significant export market for Australian wines




The Ministry of Commerce of the People’s Republic of China reported that "anti-dumping measures on some Australian wine imports from 28th March 2021 for five years". This means that Australian wines cannot consider China as a significant export market anylonger. The Department of Agriculture, Water and the Environment forecasted that “the average price of Australian wine grapes is to fall from $694 per tonne in 2019–20 to $540 per tonne in 2020–21”.



As shown by the figures below, the average wine grape price is expected to remain below $600 per tonne, and the unit export value (right axis) is expected to remain above $3 per liter from 2021-2026. Compared with 2019-2020, the future wine grape price will be about 15% to 20% lower, and the future unit export value will drop nearly $1 per liter.



The China’s Ministry of Commerce decided that importers who import wine from Australia (including cross-border e-commerce) will pay anti-dumping duties to the customs of the People's Republic of China. The anti-dumping duty rate of each company is 116.2% - 218.4% and the period of implementation is 5 years. To avoid double taxation, decision was made not to levy countervailing duty. The anti-dumping duty is levied AD valorem at the customs value approved by the customs. The calculation formula goes like: anti-dumping duty = custom value approved by the customs × the anti-dumping duty rate. The consumption tax on imports shall be based on the customs value approved by the customs plus the duties and anti-dumping duties, then divided by (1- consumption tax rate) as a dutiable price levied AD valorem. The import value-added tax is the dutiable value approved by the customs plus tariffs, anti-dumping duties and import excise duties, which levied AD valorem as a dutiable price.


These duties are sufficiently high to curtail exports of Australian wine to China. The average price of wine exported to China was around 17% higher than the average price of wine exported to all other markets. Australian wine was exported $1.26 billion and 129.6 million liters to China in 2019-2020. Due to the loss of the China market, wineries are expected to pay for grapes flowing through to the cost, and winemakers are expected to produce lower-valued wines. The composition of Australian wine production is expected to fall over the period to 2025-26. It is likely that some grapes formerly used to produce high-value wine will be blended with other grapes to produce lower-value wine. This should happen relatively quickly because China was lost as a major export market before wineries started making wine from the 2020-21 wine grape harvest.


The Australian wine industry will still export high volume wine. The UK, USA, Canada and New Zealand are expected to be the major exported market from the second half of 2021. All export markets other than China are expected to absorb around 15% more wine from Australia. An expansion into these alternative markets is assumed to extend through the projection period. The USA market is the second large Australian wine export market behind the Chinese market, but the volume and value of Australian exported wine has trended down since 2009. Similarly, the volume and value of Australian wine exports to the UK has trended down since 2008. The best markets for Australian wine export are Singapore, Malaysia and the United Arab Emirates, which have a growth opportunity to import low volume but high value wine. It represents the best opportunity to sell high-value wine formerly exported to China.



References


ABC NEWS. (2021). China locks in five more years of tariffs on Australian wine industry. Retrieved from https://www.abc.net.au/news/2021-03-26/australian-wine-exports-china-confirms-tariff-five-years/100029282


Department of Agriculture, Water and the Environment. (2021). Wine and wine grapes: March quarter 2021. Retrieved from https://www.agriculture.gov.au/abares/research-topics/agricultural-outlook/wine


MINISTRY OF COMMERCE OF THE PEOPLE'S REPUBLIC OF CHINA. (2021). Notice of the Ministry of Commerce No. 6 of 2021 on the Final Ruling of the Anti-dumping Investigation on Imports of Related Wines from Australia. Retrieved from http://www.mofcom.gov.cn/article/b/c/202103/20210303047613.shtml