China Trade Tariffs

The Hon. A. PICCOLO (Light) (15:32): Last Friday, the Chinese government announced tariffs on Australian wine exports to China of between 107 per cent and 212 per cent. While the decision was not unexpected, it will hurt some producers immediately, and others later, depending on how much wine was just arriving or already on its way to China. For others, it will depend on how much wine was destined for China over the coming months and next year.

This year, 2020, was a low yield vintage which fortunately means many producers will not have a great deal of new stock on hand; nevertheless, this decision will have a negative impact. To say this decision will have a significant impact on the Australian wine industry is an understatement. The impact on grape growing regions and wine producers will vary according to their reliance on the Chinese market.

Some regions and producers have a greater proportion of their sales destined for the Chinese market, while others have a more diversified export profile. But irrespective of the different effect on different producers and regions, the industry as a whole will hurt. This decision will affect future investment plans and ultimately hurt jobs in the industry, from farm to crushing to warehousing to transport.

From my discussions with industry representatives in the Barossa, the Chinese tariff decision will affect some of the big tier producers who are highly geared to the Chinese market. Not only do they sell a greater proportion of their wines to China but also their product is labelled for the Chinese market rather than for the local market. Additionally their ability to diversify their export markets quickly is also limited. They will feel the impact quickly and hard. While diversification will help to insulate the industry from these types of shocks in the long run, developing new export markets can take years.

Australia is not the only player in the wine export market, and this decision in the short term will help our competitors. Whether it will mark a longer term trend or not, only time will tell. Developing new markets takes a great deal of time and resources, as new supply chains cannot be created overnight. Both their local workforces and growers who supply them with grapes will feel the impact of this decision.

Sadly, this will have a flow-on effect on all businesses in the Barossa, as there is less economic activity. Second-tier producers, who often sell in the premium markets, will feel the impact of the tariffs as consumers look at other brands and regions that may be more affordable. To date, they have been very successful in China on the back of the strong Barossa brand. The Chinese consumer likes Australian wines, and Barossa labels are highly regarded and sought after.

The third-tier group of producers are the Chinese-owned wine producers. Ordinarily, these companies would find access to the Chinese markets less challenging. This decision will impact on them and their future investment plans. Businesses are more likely to invest in new production and grow the industry when the economic environment is more certain. This decision significantly undermines certainty. While shocks to the industry are not new, with prices often fluctuating, this decision, when combined with the impact of COVID-19 restrictions, means the industry will feel the pain more so than in recent years.

While wine is not the only industry in the Barossa, it does provide a foundation for others, particularly tourism and the demand it creates for a range of local goods and services. When the wine industry is hurting, the Barossa as a whole hurts. So what can be done? At the national Chinese government level, it is up to our federal Liberal government to sort out this mess. Hopefully, they can do a better job than they have done to date.

While it is acknowledged that there is less scope for the state government to influence the decision by the national Chinese government, there are things they could do to help the industry retain some market share in China and help local producers position themselves to re-enter the market more strongly when the trade relationship with China is normalised.

As I previously mentioned, consumer demand in China of Australian wines is quite strong. They like our wines and the brand Barossa is well known. That Barossa brand needs to be protected. Consumer perceptions are important, particularly now. Accordingly, the Marshall Liberal government should immediately reverse its decision to reject the Barossa's request to remain GM free. Its clean and green branding is critical to the region. Secondly, the state government should provide support to local producers to maintain their marketing presence in China to help maintain their market share and brand presence in readiness for the markets to re-emerge. The Barossa deserves better and stronger political advocacy.

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