China probes Australian wine imports as relations fray

China started an anti-dumping investigation into Australian wine, the latest measure to target the nation’s exports as relations between the two states deteriorate.

The probe would normally finish within a year, but can be extended to Feb. 18, 2022, according to the Ministry of Commerce statement Tuesday. The investigation applies to wine sold in containers holding two liters or less. Shares of an Australian wine maker, Treasury Wine Estates Ltd., fell as much as 20% and were temporarily paused from trading.

Ties between the two trading partners have increasingly frayed in recent years. In addition to banning Huawei Technologies Co. from participating in Australia’s 5G network, Australia’s push for an independent inquiry into the origins of the Covid-19 outbreak sparked a Chinese backlash.

“Up until now, both Australia and China, the governments have had the good sense not to let those political disputes, by and large, spill over into trade,” said James Laurenceson, director of Australia-China Relations Institute at the University of Technology Sydney. “There’s every prospect that it could spread to other goods. Within agriculture, the obvious possibilities are around dairy, for example.”

China is also damaging its reputation well beyond Australia and it is “shooting itself in the foot here, because the Australian government is not going to change its political positions over Chinese pressure on trade,” he said.

China halted some beef imports and then placed tariffs on Australia’s barley exports in May after the conclusion of an earlier anti-dumping probe. In addition, the Chinese ambassador to Canberra said in April that Chinese consumers might choose to boycott the nation’s exports because of strained relations, a comment that was seen as a threat in Australia.

Barley and Beef

China is seen as frequently using trade and regulatory sanctions against nations it squabbles with, as it did in 2017 with South Korea and in 2012 with Japan.

Australia’s exports of wine to China have risen in recent years, with Chinese tariffs being removed after a 2015 free-trade agreement. China was the largest export destination in 2019-2020, according to Wine Australia, a government body that regulates exports.

“This is a very disappointing and perplexing development,” Trade Minister Simon Birmingham said in an emailed statement. “Australia will engage fully with the Chinese processes to strongly argue the case that there are no grounds to uphold the claims being made.”

The anti-dumping investigation announced today was at the request of local industry, Birmingham said in the statement. In addition, the Chinese have notified the Australian government that they are considering a request to launch a countervailing duties investigation, he said.

The U.S. and Australia last month announced some modest defense initiatives while pushing back against Beijing on issues from Hong Kong national security law to 5G technology.

Treasury Wine Estates said in a statement that it will co-operate with any requests for information from Chinese or Australian authorities. The company has a long and respectful relationship with China over many years, and remains committed to China as a priority market and will continue to invest in its Chinese business and its relationships with customers and consumers, it said.

Treasury Wine Chief Executive Officer Tim Ford said last week in an interview that demand in China was recovering from Covid-19 restrictions, and was particularly strong in June.