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Australia temporarily suspends appeal against China tariffs

Shares in Treasury Wines Estates, Australia’s largest producer, have jumped by almost 5% as the country agrees to suspend its appeal against penal tariffs imposed by China.

Canberra’s Foreign Minister Penny Wong and Trade Minister Don Farrell announced over the weekend that Australia would suspend its World Trade Organisation appeal against Chinese tariffs for three months in return for China conducting a review of its punitive actions against Australian products.

China confirmed that it will review its tariffs on Australian barley, but that the process could also extend to Australian wines, said the ministers.

This is giving rise to hopes that the key China market will gradually reopen to Treasury’s wines.

Before the effective ban imposed by Beijing at the end of 2020, China accounted for more than 30% of Treasury’s wine exports from Australia.

The Australian Strategic Policy Institute has reported that China made 73 coercive actions between 2020 and 2022 against Australia.

That sprang from Australian demands for an international investigation of whether the coronavirus pandemic originated in China combined with condemnation of Beijing’s treatment of ethnic minorities.

The imposition of a 172% surcharge on Treasury’s wines made them uncompetitive in China, especially the top tier Penfolds range, which was the object of surging demand (and inevitable faking) from the emerging middle classes.

Treasury was forced to reshape its business plan, including greater focus on the US, where it sold off a range of commodity wines to pave the way for premiumisation.

Throughout, chief executive Tim Ford avowed that Treasury would “never give up on China” and his revised strategy involved supplying that market from other sources, notably the US and France and vineyards in China itself.

Last year it effectively doubled its production capacity in France by purchasing the 390-hectare Haut-Medoc estate Château Lanesson.

Treasury also focused on developing prime South East Asian markets such as Thailand and Vietnam, where demand for its premium ranges has since burgeoned.

As and when China does reduce its tariffs on Australian-produced wines, Treasury will re-enter the market in phases to ensure it continues to supply its markets throughout Asia after restructuring production and closing some Australian facilities.

As recently as February 2023, Ford told investors that Treasury was “working under the assumption that China will remain closed”.



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