Corking News: Australia and China reach ‘wine deal’

Lots of headlines popping up Down Under the past few hours:

• “China agrees to review tariffs on Australian wine ahead of Anthony Albanese’s visit to Beijing” — ABC News

• “Breakthrough on crippling wine tariffs” — The Australian

• “China agrees to review tariffs on Australian wine” — The New Daily

• “Australia reaches wine deal with China, PM sets dates for Beijing trip” — Sydney Morning Herald

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Per the Australian Broadcasting Corporation (ABC):

“China has agreed to review the tariffs it imposed on Australian wine in another major breakthrough for the relationship between the two countries.

“The decision comes ahead of Prime Minister Anthony Albanese’s visit to Beijing, which will take place in November, coinciding with the 50th anniversary of Gough Whitlam’s visit to China.

“The tariffs of up to 220 per cent on Australian wine were imposed in 2020, as relations deteriorated. Australian wine exports to China were worth more than $1 billion at the time.

“China has now agreed to a five-month review. Australia has agreed to suspend action in the World Trade Organisation as a result.”

And confirmation comes from the top, according to the Sydney Morning Herald:

“Prime Minister Anthony Albanese on Sunday confirmed the tariffs deal while revealing he would head to China for a three-day visit early next month in what would be the first visit by an Australian leader since 2016.”

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There is lots packed into those ABC paragraphs:

• A visit on a 50th anniversary. Auspicious dates are always a good reason / excuse to do something here. It makes for good speeches and soundbites, too.
  
• The “$1 billion” mention. Yes, that was the high point — AU$1.2 billion in one year was the highest, I believe — and raises hopes it might be reachable again.
  
• And the “it ain’t over ’til it’s over” factor– a five-month review during which who knows what other concessions might occur. We already saw the headline “China has wins on Darwin Port, wind towers ahead of Albanese visit” this past week.

Long story short, Australia aims to get back something it once had, but has got nothing so far for its wine trade so far.

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Frankly, this whole tariffs situation has seemed like a “lose-lose” to me.

Australian lost a lucrative wine market, though an insanely high percentage of the Aussie imports were from Treasury Wine Estates / Penfolds, on par with the value of some individual countries in late 2019.

Since the tariffs, China’s wine market has continued to decline, and the hopes local brands would get a major boost by replacing Australia ones in areas like banqueting were dashed.

The major battle for Chinese wine isn’t wine from other nations, it’s diverting consumers from areas like baijiu, beer and cocktails to wine, and Australia was at least helping to do that.

Anyway, I think I will focus an upcoming newsletter on this topic, including what the last 30 months of tariffs has taught us, the odds Australian can become the import leader again, and the Penfolds factor.

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