Australia's wine, lobster exporters see no 'clear reason' to let China go, despite prolonged trade spat

Tensions between China and Australia have been frayed since the early days of the coronavirus, with an initial political spat between Beijing and Canberra expanding into a trade dispute. Post reporter Kandy Wong recently attended the 12th Australia-China Youth Dialogue, and her four-part series looks at various aspects of the relationship.

Nearly three years on from devastating import tariffs and informal bans that have cost some as much as 70 per cent of their sales, Australia's wine and lobster exporters still see no "clear reason to let go of a big customer like China", especially after a recent softening in diplomatic relations.

Australian wine and lobsters firms have been some of the hardest hit since trade bans and tariffs were imposed by Beijing in 2020, in what was widely seen as retaliation for calls for an inquiry into the origin of the coronavirus by the previous administration in Canberra.

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But having found various means to maintain some sort of business in the Chinese market, albeit not to the same extent as before, wine and lobster exporters are now hoping for a more conducive trade environment after President Xi Jinping met Australian Prime Minister Anthony Albanese last month on the sidelines of the Group of 20 summit in Indonesia.

"There's not a clear reason to let go of a big customer like China, from the business perspective," said Simon Wu, president of the Australia-China Friendship Society of Western Australia.

Lobster and wine exporters have tried to diversify their export markets over the past few years, he added, with their relatively small size making them particularly vulnerable to the fallout from the political skirmish.

Australian lobsters have enjoyed somewhat of a rebound after a lacklustre 2020 and 2021 by exploiting so-called grey channels, according to industry insiders, although these avenues are seemingly not an option for wine exporters.

An Australian-based industry insider, who asked to not be named due to the sensitivity of the issue, said that Australian lobster exporters have mostly made their way back to the Chinese market by going through Hong Kong and Vietnam as China still unofficially bans imports of the crustacean from Australia.

In July 2021, quoting multiple trade sources, the Post reported how Australian rock lobsters were being flown from Australia to Hong Kong - where they are allowed - before being smuggled across the border into mainland China via speedboat.

Figures from global supplier Selina Wamucii, an end-to-end platform for sourcing food and agricultural produce from cooperatives, showed that the approximate wholesale price range for Australia lobsters has been between US$59.64 and US$64.02 per kilogram in 2022.

This represents an increase from US$59.30 per kilogram in 2017 to the same level of US$64.02 per kilogram seen in 2018.

Domestically in Australia, an oversupply of rock lobsters - as they could not be exported to China - led to prices tumbling by around 50 per cent to US$70 per kilogram last year after having hit a low of between US$30 and US$50 in 2020, according to the Australian Broadcasting Corporation.

Rock lobsters are among Australia's largest seafood exports by value, along with salmon, abalone and tuna, according to the Department of Agriculture, Water and the Environment.

"Since 2017-18, China has been the largest market for Australian seafood," according to the government's seafood-export outlook earlier this year. "Trade disruptions with China have shifted some products to Hong Kong, Japan, the United States, Taiwan, Vietnam and Thailand."

Meanwhile, government industry group Wine Australia said in October that shipments to China had plunged by 92 per cent to A$21 million (US$14.3 million) in the year ended September 30.

"Our company lost 70 to 80 per cent of sales since the import tariff was implemented," said a wine exporter in Australia, who asked not to be named due to the sensitivity of the issue.

"Even if we can enter the Chinese market again, we'll need to deal with more competition as other countries have filled the hole, and the whole world is experiencing weak consumption sentiment due to the slowing economy."

The exporter, who sees the talks between Xi and Albanese as "positive", has opted to "endure" the tough business situation by attempting to bypass the tariffs by exporting small batches of wine to China in the hope they attract less attention than larger amounts.

China has also used a variety of trade and bureaucratic tools to also bar Australian barley, beef and coal from entering its market since 2020.

For Australian wine, this saw Beijing apply duties of between 116.2 and 218.4 per cent on containers of up to two litres in March last year following anti-dumping investigations, with the tariffs set to remain in place until 2026.

"The most realistic scenario that might come out of the talk between Albanese and Xi would be a reduction of tariffs, while the most ideal scenario is lifting the tariffs totally before 2026 after top-level leaders have communicated," said an Australian wine exporter surnamed Zhang, who asked not to be fully identified due to the sensitivity of the issue.

According to Zhang, his profits have dropped by 50 per cent since China's import tariffs were implemented.

"Some will still import wine into mainland China through Hong Kong, as certain smaller ports in the north of China don't strictly follow the procedure of customs clearance," he added.

"They'll mark up the price of wine, but the increment is lower than the tariff."

Larger ports, including those in Shanghai and Beijing, are often stricter in enforcing customs rules, he added.

"In that case, our products will get stuck at the ports for at least 15 days. And time is money," he added.

Australia lodged a formal complaint against the wine tariffs with the World Trade Organization in June last year, with the global trade body later agreeing to set up a panel to address Canberra's complaint in October 2021.

This article originally appeared on the South China Morning Post (SCMP).

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