When a Chinese foreign ministry spokesperson identified “positive comments” in a speech by prime minister Scott Morrison earlier this week, Australian exporters might have wondered whether the bilateral relationship might finally be turning a corner.
That hope was swiftly crushed on Friday, when China’s Ministry of Commerce (MOFCOM) announced anti-dumping duties of 107-212% on Australian wine exports.
Australian winemakers had already been on their toes for weeks after reports at the beginning of November suggested an informal ban had been placed on wine and six other Australian products. Now they are reeling.
The share price of Australia’s largest exporter, Treasury Wine Estates, plunged more than 10% and the prospect of Australian wines doubling or tripling in price does not bode well for their future in what had annually been a $1.2bn market.
These tariffs are the latest in a sweeping array of trade barriers and disruptions imposed by the Chinese government this year on industries including barley, lobster, coal and cotton.
Beijing makes no secret of its many political and national security disputes with Canberra. But while Australian ministers have criticised Beijing’s trade measures as “economic coercion”, Chinese authorities consistently rely on legal and regulatory grounds to justify each new barrier.
The new wine measures continue this trend, coming three months after China launched an investigation into allegations that Australian winemakers had been receiving illegal subsidies and selling their products in China at predatory prices. MOFCOM’s decision is premised on a preliminary finding that Chinese winemakers have suffered substantial harm as a result.
However, on average Australian wine is among the most expensive in China and Australian winemakers consistently deny any wrongdoing. Agriculture minister David Littleproud on Friday described the tariffs as “quite outrageous”.
Yet by using a highly technical international trade law remedy, Beijing can disrupt Australian trade without clearly violating its international obligations.
Anti-dumping rules have long been considered susceptible to misuse because they can be undertaken with minimal evidence and the relevant international trade laws and procedures are open to broad interpretation.
While they are technically designed to prevent unfair trade practices, they can also be used to shelter domestic industries from foreign competition or for the more nefarious purpose of strategic retaliation.
While some argue Beijing’s new measures may be a response to Australia’s own use of anti-dumping duties against China, Chinese officials are increasingly direct that politics is at the heart of the matter. It’s impossible to imagine that Australia changing its own trade policies would solve the problem.
This is the second time China has imposed anti-dumping restrictions on Australian exports this year. Barley growers were hit with anti-dumping and anti-subsidy duties totalling 80.5% in May. They will remain in place for five years, and have brought what had been an average annual trade of more than $1bn since 2014 to an abrupt halt.
However, there is one notable difference between the measures on barley and the new duties that will affect wine. Whereas the barley duties came at the end of a completed 18-month investigation, the wine investigation is ongoing. It is for this reason that MOFCOM’s finding is “preliminary” and the new measures are described as “temporary”.
This arguably gives Beijing more scope to unwind the measures. Unlike reversing the barley tariffs, which would require an admission that a concluded investigation had led to inaccurate findings, decreasing or removing the duties on wine would be easier to explain as they are based on preliminary and thus incomplete evidence. In April 2018 China removed a temporary 176.8% anti-dumping duty on US sorghum only one month after it was imposed when political relations briefly improved.
Canberra has 10 days to try and appeal the decision directly with MOFCOM. If that fails, and the duties remain in place, Littleproud said the government will “exhaust all avenues available to us through the WTO”.
But legal appeals take time, and even if Australia is successful the damage to the wine industry will already have been done.
Earlier in November both China and Australia signed the Regional Comprehensive Economic Partnership (RCEP), a new trade deal supposed to showcase the region’s commitment to what Beijing describes as an “open, fair and win-win multilateral trading system”.
But this episode should provide another reminder that global rules only work if, in the words of trade minister Simon Birmingham, governments abide by their “spirit” and not just their “letter”.
If Australia’s largest trading partner is determined to impose economic punishments, the rules-based system will offer little defence.
If legal solutions are not forthcoming in the short term, Australia might need to seek political ones. Recent gestures from the incoming Biden administration and other allies suggest a collective approach to countering Chinese economic bullying might be the next best option.
• Darren Lim is a senior lecturer at the ANU School of Politics and International Relations. Victor Ferguson is a PhD candidate at the ANU School of Politics and International Relations