As someone with around 15 years of experience in developing the China wine market and its wine media, I am regularly asked by Australian brand owners for a view on the current situation. I do not pretend to be an expert on foreign affairs, but I do perhaps offer a perspective that Australians with little or no experience in China might find valuable. Here are my thoughts on the trade conflict currently being played out before our eyes.
There’s every reason for those involved in Australian wine exports to be concerned at what’s happening on the China front, where wine is one of the several industries apparently targeted – but unofficially so – by the Chinese government for a kind of lingering import ban.
But what do we actually know?
There has been no official announcement from China. Any such declaration would put China immediately in the firing line of the WTO and would be a clear breach of the Australia-China Free Trade Agreement – if indeed China’s government felt obligated to abide by either of these. Instead, there has been what observers and participants describe as a coordinated plan of apparently randomised disruption at the customs level that has prevented even a single container of Australian wine from being cleared into China over the last 2 weeks. A raft of different reasons is being provided to justify these disruptions.
We know that China’s Ministry of Commerce has denied that any action, official or unofficial is being taken against Australia.
We also know that the China-based importers of Australian wine were given a solid week or more of a heads-up period to warn their agencies against sending additional wine to China.
In Australia ships have been unloaded and cargo has been returned to their makers. Around 50-60% of wine shipments intended for China have not sailed.
We know that the industries presently being affected by these actions account for around $6 billion worth of Australia’s $150 billion export trade to China. Iron ore, our principal export to China by value, is not yet affected and is not expected to be affected in at least the short term.
The Chinese government is fully aware how much of a raw nerve is our wine trade to its market. Why? Because wine, not infant formula, despite its relatively small value of 1.2 billion AUD is the popular expression of this country’s reputation and face in China today. And at least half of that value is gained by Chinese citizens importing Australian wine into China to gain permanent residency into this country. The Chinese government knows this, and it also knows the impact any issue involving wine has upon all the industries that support its making, its related regional infrastructure, tourism and hospitality activities and the jobs they provide.
We know that China’s Ministry of Commerce has initiated dual investigations into the alleged dumping of Australian wine in China and support from Australian government bodies that provides excessive and unfair advantages to Australian wine in the China market. Calling a spade a spade, we also know it would be extremely unlikely that either of these claims would be substantiated in a fair and independent enquiry.
We have also become aware that major Chinese wine producers are deeply frustrated by the ability of major Australian wine producers to deliver massive volumes of very drinkable product onto their shores at very competitive prices and quality levels they simply cannot match.
Politically, we know from repeated statements from Chinese state-controlled media that the Chinese government is deeply upset that of all the countries on this earth, Australia was the first to demand an enquiry into the origins of the Covid-19 pandemic and how it became transmitted outside China’s borders. China has also wondered aloud at the messaging and timing behind Australia’s participation of joint naval exercises in the South China Sea.
We also know, as perhaps Stern Hu could attest, that ever since 2008, when Kevin Rudd told the Chinese government in perfect Mandarin that its views on human rights in Tibet were out of step, that relationships at top level between our countries have been strained. This strain has been exacerbated by the constant, shouty attempts by junior Australian politicians to condemn China’s treatment of other minorities, the Uyghurs in particular.
Outside Australian government circles we have not been made aware by any attempt, public or otherwise, by the Chinese government to voice international criticism towards the Australian government for its approach to either its own indigenous peoples or informal migrants to this country.
We are also aware of the serious trade blockages that resulted in 2018 after Malcolm Turnbull attempted to echo Chairman Mao in what my well-placed friends in Shanghai then described as ‘schoolboy Chinese’. This, they said at the time, was an unbelievable insult that would attract punishment. It did.
We also know that from such previous disputes that the Chinese government has no wish whatsoever either to answer the phone calls of or meet with Australia’s Minister for Trade, Simon Birmingham.
On the other side of the coin, and importantly so, Australia has been on the receiving end of some very encouraging recent rhetoric from several very highly placed officials and ex-officials within the Chinese government, including the former Ambassador, Madam Fu Ying.
And finally, we know that Australia has chosen in recent days to announce it is inching ever closer to a formal military alliance with Japan. Timing is everything.
So that’s what we know. Confused, perhaps?
What about what we don’t know? We don’t know how long China intends to inflict this ‘punishment’ upon Australia. We don’t know if the recent signing of the Regional Comprehensive Economic Partnership will bring the countries any closer, since we’re aware of China’s willingness to put aside such agreements when it feels the need to.
We don’t know whether or not Australia can indeed do anything material to resolve the issue for we do know that several experienced commentators are saying that China is clearly intent on making an example of Australia, as a direct consequence of the actions it has taken of its own volition.
Sensibility would suggest there might be 150 billion reasons to encourage our Prime Minister to extend his trip to Japan in a Beijing-like direction, but we don’t know the thoughts of the PM on this matter. Publicly, he has been remarkably quiet on the subject over recent months. This might be either a good or a bad thing – we don’t know that either. But experience suggests that communication is indeed the first step towards the resolution of any dispute, small or large. And China is only interested in talking to the top guy.
What might we conclude? That China is seeking to flex its muscles towards Australia for our consistent pattern of loud and unconventional diplomacy towards it, an intent amplified by Australia’s actions concerning defence and the South China Sea. We can see that from a Chinese perspective, Australia is throwing in its lot with the US. In this regard however, Australia has bucked at some recent requests from Washington, displaying a sense of its own individuality and even winning praise from Beijing in the process.
Unless checked, Australia and China have embarked on courses that must inevitably result in an ever-increasing scale of dispute and reaction. Neither country benefits from this approach. As their government is deeply aware, Chinese people do not want their country to be regarded as any kind of pariah by the rest of the world. And one might hope the Australian government is deeply aware that now, more than ever before, this country desperately needs China’s foreign exchange.
While it’s entirely absurd to make any meaningful prediction over how long this standoff might last, I will still make one, which I feel is perhaps an equal measure of hope and reality. It’s obvious that China wants to use trade to teach Australia a significant lesson, and it will be a very significant lesson indeed if our industries involved so far in this process are locked out of the China market until after the coming Chinese New Year. By that time, the point will have been well and truly made and China might well decide to extend an olive branch this way.
The Chinese government is anything but stupid. We know it has a perspective that is considerably more long-term than any in the western world, but it neither wants or needs to be hated by the rest of that world. We know that would seriously upset its own people, many of whom earn their livings by trading with Australia. My thoughts are with the million-plus residents and citizens in Australia of Chinese origin, who might be feeling a sense of vulnerability these days. Governments aside, we do know that there is no standoff between the peoples of Australia and China.
In response to this issue, I have teamed up with two highly experienced partners, David Thomas and Andrew Stark, to provide an information-based resource intended to assist wine brand owners develop enduring marketing strategies across the entire Asia region. Click here to visit AsiaWineHub.com.