China-Australia wine dispute: WTO agrees to investigate China's tariffs after Beijing blocked it last month

The World Trade Organization (WTO) has agreed to establish a dispute-settlement panel to address Canberra's complaint over Beijing's imposition of anti-dumping duties on imports of wine from Australia, after a first request was blocked by China in September.

During a meeting in Geneva on Tuesday, the WTO's dispute-settlement body said the new panel will investigate the dispute, with 15 countries - including Canada, Britain and New Zealand - reserving a spot on the panel as third parties, according to a Geneva-based trade official.

This is the second time Australia has requested a panel to investigate its complaint over China's tariffs after it was first struck out by China in late September. Australia lodged its complaint in June.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

Australian wine had been subjected to interim Chinese duties since November amid a tense political stand-off between the countries. And in March, Beijing finalised the imposition of duties of between 116.2 per cent and 218.4 per cent on Australian wines in containers of two litres or less for five years.

The prohibitive duties had rendered Australian wine uncompetitive in the Chinese market. According to an update last week by industry body Wine Australia, since the interim tariffs were imposed in November the value of Australian wine exports to China had fallen by 77 per cent to A$274 million (US$205 million).

Australia said during the WTO meeting on Tuesday that it had repeated its request for a panel after failing to establish contact with China and was disappointed that it was "not seeing any concrete steps by China to respond to its concerns" despite the importance it had placed on its economic relationship with China.

The two countries have not engaged at a ministerial level since their bilateral relationship began crumbling after Canberra pushed for an independent investigation into the origin of the coronavirus without consulting Beijing in April 2020.

Chinese officials expressed regret at Australia's second request, and in turn said they would vigorously defend tariff measures, as they were consistent with WTO trade rules.

China's 'unfair trade practices' draw heavy fire at WTO trade review

However, Beijing said it would remain open to further engagement with Australia with a view to resolving this dispute.

Australia also got the nod from the WTO in May for the establishment of a panel to resolve its complaints over another round of Chinese anti-dumping and anti-subsidy duties imposed on Australia's barley exports.

The China-Australia row is edging towards its two-year mark. Several Australian trade goods, including timber, coal and lobsters, have been informally banned from China alongside those impositions of duties on barley and wine.

The outcome of Tuesday's meeting came after Canberra criticised Beijing for testing and breaching global trade rules, and for engaging in practices that were inconsistent with WTO commitments, during a review of China's trade policies a week ago.

Australia's representative to the WTO said that China's move to disrupt Australian exports, which Beijing said was retaliation for "groundlessly accusing and smearing China", was not allowed under the WTO.

Despite the spat between the countries, overall trade between them has remained strong. This is mainly due to Australia's continued exports of iron ore to China and record-high iron prices that had reached US$233 a tonne in May, trade data has shown. Most iron ore miners break even when the price is between US$30 and US$50 a tonne.

Including iron ore, China's share of Australian exports remained at a long-standing 40 per cent, but excluding iron ore put that figure at about 13 per cent, as measured earlier this year, BIS Oxford Economics principal economist Sean Langcake said in a note this week.

Before the conflict, China's share of non-iron ore Australian exports was 24 per cent in 2018 and 2019, and 21 per cent last year.

How is iron ore powering China's infrastructure boom?

Updating an earlier analysis of exports most affected by China's sanctions, Langcake said that while many non-iron-ore exports such as timber and lobsters fell heavily after China informally banned them, a lot of those exports were also redirected to other markets.

"Encouragingly, we find evidence that trade dispersion has occurred, rather than a collapse in export performance," Langcake said. "Across all goods, we fail to find a clear relationship between the change in the share of exports going to China and overall export performance.

"This suggests that, on average, export performance has not been dictated by changes in the share of goods going to China."

However, no data has conclusively confirmed how much of the fall in exports to China has been absorbed by other countries - that is, if other markets have filled the gap left by China.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.