Chinese wine importer Song Tian knows firsthand the cost of a trade war.
The Tianjing businessman, who used to sell 20,000 bottles of Australian wine a year to Chinese customers, had to stop importing from Australia altogether as the trade relationship between Beijing and Canberra worsened.
In late 2020, China imposed so-called “anti-dumping” tariffs of up to 218 per cent on Australian wine, killing a $ 1 billion-a-year market.
Song Tian says Chinese wine importers want the tension between Australia and China to be reduced so they can re-import from Australia. (Supplied by Song Tian)
“It was too high, many other importers also stopped buying Australian wines,” he told ABC.
“It simply came to our notice then that there were fewer Australian wines on the shelves in China.
“And they became too expensive for Chinese consumers.”
Tian said the injurious tariffs forced many wine importers like him to look for business elsewhere, looking for alternative wine suppliers such as Chile and the US.
The economic damage goes both ways
Australian grape growers and winemakers have also felt the pinch of escalating trade tensions.
According to Wine Australia, China was a $ 1.2 billion market for Australian wine in 2020.
However, the market value fell to just $ 24.2 million in March this year, plummeting 98 percent from its peak.
About 10 percent of domestic production was previously destined for China. (Pixabay)
Last year, the Australian government brought the trade dispute with China to the World Trade Organization (WTO) and an independent group has been appointed to try to resolve the issue.
Lee McLean of Australian Grape and Wine, the top body in the wine industry, told ABC that China’s tariffs on Australian wine made the market “unviable”.
“This has created a very significant imbalance in the supply and demand of both wine and grape grapes, which has led to sharp falls in grape prices in some parts of the country and an oversupply of wine in the market.” he said.
“Some growers made the difficult decision to leave the grapes in the vineyard in the 2022 vintage due to the lack of contracts or the low prices on offer.”
Other commodities, such as barley, beef, wood, cotton, lobster and coal, were also affected by tariffs or trade restrictions.
However, Beijing’s policy of hurting Australia was counterproductive in areas that depended on Down Under imports.
The unofficial ban on Australian coal has exacerbated blackouts in 18 Chinese provinces last year due to an electricity crisis due to coal shortages.
Later, China reportedly moved to release some Australian coal from collateral storage during the ban to alleviate the shortage.
Tim Harcourt is the chief economist at the UTS Institute of Public Policy and Governance and the former chief economist at Australade.
He told the ABC that the trade war was hurting both sides and that small and medium-sized business owners and consumers were carrying the brunt of it.
Tim Harcourt says Australian companies want to improve relations with China and Chinese customers. (Supplied)
“I think it’s hurt a lot in China,” said Professor Harcourt.
“Chinese average business people and consumers have a good view of Australia’s quality and Australia’s professional reputation. I think they have been badly hurt by the trade dispute.
“And for local Australian exporters, I think bigger companies can handle that, but for small and medium-sized businesses, there are 10,000, they have survived but it has been quite difficult.”
Why did China put tariffs on Australia?
Under the former coalition government, which banned Chinese technology giant Huawei from deploying 5G mobile phones, it has pushed hard for China’s human rights abuses in Xinjiang and Hong Kong and called for an independent investigation into the origins of China’s human rights abuses. COVID-19, the bilateral relationship was launched. in a deep freeze.
China cut off contact with Australian ministers and imposed tariffs and restrictions on some $ 20 billion worth of Australian exports.
The Chinese government also targeted the international education sector last year, advising Chinese students not to study at an Australian university during the trade dispute.
Kirk Yan runs an education agency in both China and Australia, which mainly recruits Chinese students for Australian universities.
Kirk Yan says it is difficult to promote Australia to Chinese students when the relationship is bad. (Photo: Kirk Yan)
He told the ABC that he had lost customers due to the trade dispute and the negative media coverage of political tensions in the two countries.
“Some Chinese parents thought Australia was not a friendly country, so they sent their children to the UK, the US or Canada,” he said.
“But they missed a very good study destination and would have to pay more tuition fees and expenses.”
International education is one of Australia’s largest exports and China is the main home country for students.
But many Chinese students opted for other countries instead of Australia during the pandemic, which was also due to Australia’s severe border restrictions.
Veteran Chinese Australian businessman Richard Yuan is another who has become collateral damage from the trade war.
Richard Yuan emigrated to Australia two decades ago and says it is not easy to rebuild trust. (Provided by: Richard Yuan)
He said his immigration business, which has helped many wealthy Chinese invest and emigrate to Australia, was up to 90 per cent affected by the trade dispute and the COVID-19 pandemic.
“It had a big negative impact on our business, as I experienced almost a complete elimination from my 22-year-old business,” Yuan said.
“Cautiously optimistic” about a new government
The end of nine years of coalition rule has raised new hopes for a resumption of relations, as Chinese Premier Li Keqiang sent a congratulatory message to new Prime Minister Anthony Albanese, breaking a two-year diplomatic freeze. i mig.
Prime Minister Li said last week that “the Chinese side is ready to work with the Australian side to review the past and look to the future.”
He also referred in his message that diplomatic ties with Australia were established during the 1970s when former Labor Prime Minister Gough Whitlam was in power.
The gesture has been well received by some exporting industries.
“We look forward to your willingness to engage in a political dialogue between our two countries,” said McLean of Australian Grape and Wine.
“There is still a great demand for Australian wines in China and we hope that Chinese consumers will be able to enjoy the best wines in Australia again in the near future.”
McLean said that while he did not expect an immediate reopening of the Chinese market, he hoped that would be the first step towards a political resurgence.
Patrick Hutchinson, CEO of the Australian Meat Industry Council, told the ABC that any opportunity to re-establish bilateral relations and re-establish dialogue with China is welcome.
Patrick Hutchinson says the industry’s trade with China could pick up when sanctions are lifted. (Provided by: AMIC)
“As always, we respect China’s sovereignty to apply individual sanctions if they think they are necessary,” Hutchinson said.
“The problem for our industry is, and has been, the loss of dialogue with China.”
For Chinese business owners such as Tian and Yan, the recent change in the Australian government is “positive news”, but both said they remain “prudently optimistic”.
“We had a pretty good relationship with Australia when Kevin Rudd was Prime Minister … however, it’s still too early to know if the Labor Party will affect us or not,” Tian said.
Yuan said the positive perception of the new government has already translated into an increase in business consultations last week.
“The current trade relationship with China may be at an all-time low, except for iron ore, the newly elected Labor government provides real hope,” he said.
Treasurer Jim Chalmers previously told the ABC that it would be “a good start” for China to lift current tariffs and sanctions as they are “harming” Australia’s economy.
Space to play or pause, M to mute, left and right arrows to search, up and down arrows for volume. Clock time: 5 minutes 53 seconds 5 m The future of trade relations with China (Kathryn Robinson)
How to repair business relationships?
In recent years, Australian exporting industries have made efforts to diversify to minimize supply chain disruptions and offset China’s deficit.
While some sectors such as coal and barley held up relatively well, thanks to the rebound in alternative markets, others such as lobster and wine were less resilient to Beijing’s economic coercion.
“Market diversification cannot happen overnight, and while there is no single market or collection of markets that can offset the loss of the Chinese market, we are working to create opportunities in others. places, “McLean said.
“This will require a sustained effort to promote our wines and communicate our history in key markets, both traditional and emerging, and work hard to break down barriers to market access in collaboration with the Australian Government.”
Professor Harcourt said that while market diversification was more effective than expected in the short term, it would be strategic to improve the relationship with China in the long term.
“China’s 300 million middle class, its purchasing power may be worth more than Indonesia, India and the US combined,” he said.
“It’s always important to have a diversification of trading partners, but China needs to be part of Australia’s history for the future.”
Harcourt said “the big opportunity for China and Australia is climate innovation”, given Australia’s changing climate change and renewables policy and China’s ambition to reduce carbon emissions. .
Prime Minister Anthony Albanese said he wanted to turn Australia into a “renewable energy superpower” and the new government has committed to zero net …