Power of China | Economy | East Asia
Australia is seeking WTO arbitration over Chinese tariffs on Australian wine.
Australian Trade Minister Dan Tehan said last week that the government had appealed to the World Trade Organization to help arbitrate China’s decision to impose tariffs of more than 200% on the Australian wine. “We wish we could sit down [with Chinaâs government] and be able to resolve these disputes. Although we are not in a position to do so, we will use any other mechanism to try to resolve this dispute and other disputes we have with the Chinese government, âTehan said.
Australian wine is one of the country’s largest agricultural exports. In 2019-2020, Australia exported 729 million liters of wine, valued at $ 2.8 billion. Mainland China was the top destination for Australian wine, accounting for nearly 40% of exports. After China imposed heavy anti-dumping measures last November, Australian wine exports to the Chinese market fell from $ 1.1 billion to $ 20 million.
The Chinese wine market represents only 4 to 5% of the consumption of alcoholic beverages in the country but it continues to show promising growth, both with the increase in imports from abroad and with the development of the Chinese production, sometimes supported by investments from Australian and French winegrowers. With the blow to Australian wine imports, China could turn to other foreign markets, including Chile and Italy, as well as strengthening domestic brands, to fill the void left following a medium and long-term exit by Australian winegrowers. In March, Beijing said tariffs on Australian wine would last for five years.
Last week’s WTO appeal is Australia’s second trade body targeting China in six months. Former Trade Minister Simon Birmingham referred China to the trade body in December 2020 over other tariffs that have affected bilateral barley trade. Australian wine and barley aren’t the only industries to suffer in recent times; the beef, lobster and timber sectors have also been caught in the crosshairs of trade and political tensions between Beijing and Canberra.
China’s entry into the WTO two decades ago has been touted as the seed of market reforms and trade liberalization in the country. Although the blow effects of membership in the WTO were more nuanced than a black and white verdict of success or failure, China has kept its commitments to participate in the entity’s dispute settlement mechanism. Between China’s accession to the WTO in 2001 and 2019, it was involved in 65 disputes with nine other WTO members: 21 times as complainant and 44 times as respondent.
Still, there is a general belief that Chinese trade crimes have been under-enforced, possibly because foreign investors prefer to keep the gains of the large Chinese market rather than incurring costs or provoking retaliation from the authorities. Chinese. âIf we use a country’s share in world trade as an indicator of the number of disputes it faces in the WTO as a respondent, then China is definitely under-representedWrote Petros C. Mavroidi and AndrÃ© Sapir to VoxEU CEPRA, a source of research-based policy analysis and commentary from economists.
Currently, China has pending cases against the European Union (five), Greece, Italy and the United States (16), while China is the respondent in cases filed by Australia, Brazil, Canada (four), l ‘European Union (nine), Guatemala, Japan (three), Mexico (four) and the United States (23). Traditionally, cases against China have targeted government efforts to support and subsidize its manufacturing and high-tech sectors, but Australia’s latest filing seeks the imposition of what it sees as punishing anti-dumping measures intended to protect the nascent Chinese wine industry and their market share.
Despite Beijing’s activity with the WTO dispute settlement system, its compliance with dispute rulings has been mixed since its accession. While Australian officials are hopeful that a formal WTO complaint against China’s tariffs will facilitate consultation and negotiation, a resolution is unlikely to be found soon. In the meantime, Australian wine producers will continue to turn to other markets to compensate for the dependence on the Chinese market, notably with an increase in sales in the Netherlands, South Korea and Taiwan.