Local wineries see benefit in improved China trade

Western Australian wine producers have expressed cautious optimism about the potential reopening of China’s market after high level trade talks. 

This week, Trade Minister Don Farrell announced the Australian government was considering suspending its World Trade Organisation complaint against China in exchange for a review of tax on imports.  

Tariffs on Australian wine of up to 200 per cent were introduced in 2020 during a diplomatic dispute with Australia, causing what had become Australia’s biggest export market to collapse. 

While WA wine exports were comparatively low, the resulting chaos in the $1 billion export market meant significant Australian wine was sold domestically.  

Nevertheless, some producers had spent considerable effort making inroads to China and will be unwilling to to commit such resources again. 

Wines of Western Australia chief executive Larry Jorgensen said benefits are expected to come if the wine complaint is suspended, although the benefits forecasted are likely to be broadly across the market, rather than just for exporters. 

“For us in WA, it'll be a good thing when it is removed,” Mr Jorgensen said.  

“But that's more of a macro-economic impact, it's because of the impact that it will have on the excess stock in the red wine industry.”  

Swan Valley-based Sandalford Wines chief executive Grant Brinklow is one who expressed a great deal of caution about the opportunity the tariff reduction could bring. 

Mr Brinklow said the cost required to re-establish a presence within the nation is high.  

“Now, naturally producers would like to get back into the marketplace,” he said.  

“But as I've expressed a view to others before, I think any efforts to re-enter, if the efforts of the minister are successful, would have to be very measured.  

“I think it would be a bit naive to think that if these efforts to address the tariff issues are successful, that it automatically means a walk up start for Australia as a category.  

“Those spots on shelves, on wine lists, all of those sorts of things won't change automatically because the tariffs may come down, you’ve got to go do the work and there's an enormous amount of work to be done.”  

China was once Australia's biggest importer of wine, so the tariffs created shockwaves across the entire market when they were implemented in 2020 Mr Brinklow added.  

“Business almost became a strategy around China exclusively,” he said.  

“China was the number one market for Australian wine at the time, China was worth over $1 billion worth of sales, and naturally everybody expected that the growth would continue at an explosive rate.”  

WA-based Calneggia Family Vineyards owner Mike Calneggia said the tariffs hit wine the hardest among other commodities.  

“Wine seems to have been the one that suffered the most.” he said.  

“Mainly because, at the same time as the tariffs kicked in for China, the world was facing a fairly large oversupply of wine, or red wine in particular.  

“And just very recently, the French government has approved 200 million euros to pay for the cost of distilling a whole bunch of French wine down into spirits.”  

Mr Jorgensen said WA has performed well in the domestic market, despite China’s tariff disruption. 

He said WA’s mainly premium production represented about 10 per cent of national wine making, of which about one quarter was exported to China, resulting in a much smaller economic impact than eastern states producers.  

“Even though 25 per cent of what we exported was to China, 25 per cent of 10 (per cent of national production) is not as significant as 25 per cent of 60 (per cent of national production),” Mr Jorgensen said.  

Mr Jorgensen added WA wineries have diversified their quiver of international markets over the last three years.  

“If we're talking about newer markets, or reinvigoration, we're looking more deeply into Southeast Asia,” he said.  

“So Thailand, Vietnam, Indonesia to some extent, and then Japan is a reasonable focus in North Asia.”  

His comments came as Deputy Premier Rita Saffioti's announced the introduction of a non-stop flight to Vietnam last week in addition to Prime Minister Anthony Albanese's claim to strengthen trade with South-East Asia.  

Mr Calneggia supported the Wine WA chief executive's view with an insight into the international markets Calneggia Family Wines has its eye on.  

“I think Vietnam has got reasonably favorable import duties, Hong Kong does obviously, but it feeds a lot into China, so you run into issues there,” he said.  

“But mostly other Asian markets have pretty punitive import taxes on wine, and my cynical side of me says that was probably put in place well before wine became a thing.”  

In synopsis Mr Calneggia acknowledged the advantages a tariff lift would provide within the Australian market.  

“It will positively impact all producers, if people exported to China before the tariffs, they would probably rekindle those relationships fairly quickly,” he said.  

“I think China was about $1.2 billion in total imports of Australian wine.   

“Even if we could return to half of that, $500-600 million, that would still be the biggest single market for Australian wine in the world.  

“I'm confident we will get some of that business back, maybe not all of it, I guess that's one of the fears that comes with being a producer.  

“We're just reluctant to go back and invest in the market if this kind of thing can happen again.”