China launches countervailing duties investigation on Australian wine
The Chinese Ministry of Commerce (MOFCOM) has formally launched a countervailing duties investigation on Australian wine, according to the national association of winegrape and wine producers, Australian Grape & Wine.
The anti-dumping investigation was officially initiated on 18 August 2020 but the countervailing duties investigation as part of this request was announced by MOFCOM on 31 August 2020, according to AGW.
This is a major blow for Australian exporters as China is the biggest market for Australian wine, with exports of over $1bn.
AGW says it will collaborate with wine businesses and the Australian Government to ensure “we cooperate fully throughout the investigation process”. The association does not “believe that the Australian grape and wine sector has a case to answer and that any investigation will demonstrate this”.
University of New South Wales law expert Dr Weihuan Zhou says the move should not be seen as a further escalation of diplomatic tensions.
“Rather, it is more likely a typical tit-for-tat action in the narrow field of anti-dumping, as a response to Australia’s longstanding practice of treating China as a non-market economy in a series of anti-dumping investigations in the past decade.”
Dr Zhou said this marks China’s second anti-dumping action against Australia, while Australia currently has 18 (out of 27) anti-dumping measures on China.
“China has been considerably less aggressive in the use of such measures. But, given that China accounts for $1.1 billion in sales and is Australia’s largest export market for wine (ie, nearly 40% of Australian wine), this investigation will have significant impacts on Australian wine producers and exporters who may not find an alternative market of a comparable size. In comparison, Chinese importers may find it relatively easier to switch to other sources such as France,” Dr Zhou said.
Professor Wang said China’s imports can be affected by the drop in its foreign reserve that is related to the COVID-19 outbreak. “Domestic industry that suffers from economic slowdown in China may file new anti-dumping investigation applications. They can affect products that are not daily necessities but face fierce competition in the Chinese market, since they can be imported from various states and be produced locally,” he said.
“New rules need to be included in larger trade agreements (particularly the RCEP) addressing trade tension issues. Some trade agreements (eg, the USMCA) provide for a binational panel arrangement to review a party’s determinations on dumping and countervailing duties. These rules provide a way to review trade remedy issues like those faced by wine exports.”
Explainer |
|
Anti-dumping If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be ‘dumping’ the product. Broadly speaking, the World Trade Organisation (WTO) Anti-Dumping Agreement allows governments to act against dumping where there is genuine (’material’) injury to the competing domestic industry caused by those dumped imports. In order to do that, the investigating government has to be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter’s home market price) and show that the dumping is causing injury or threatening to do so. Anti-dumping duties are imposed on an individual exporter basis but where there are many exporters, the examination may be limited to a few companies (‘sampling’) yet duties still applied widely across the entire industry. The Chinese Government will issue a detailed questionnaire to all interested parties that have registered, with a timeline for responses in 37 days. The questionnaire will be in Chinese and the responses must also be in Chinese. The responses will require a lot of detailed confidential information around cost of production and cost of sales. A non-confidential/public version of any questionnaires containing confidential information must be submitted. If the questionnaire is not completed to the satisfaction of MOFCOM, then the company will be deemed ‘uncooperative’. |
|
Countervailing duties Similarly, in response to an application from a domestic industry, a country can launch a countervailing duty investigation and ultimately charge extra duty (known as ‘countervailing duty’) on subsidised imports that are found to be hurting domestic producers. Countervailing duty can only be charged after the importing country has conducted a detailed investigation similar to that required for anti-dumping action. The investigation will necessarily examine Australian Government subsidy programs which may benefit the wine sector. CADA (the applicant) has cited a range of Australian Government programs, most of which were also raised in the Barley action (that culminated on 19 May 2020 with the Chinese Government imposing a combined anti-dumping and countervailing duty of 80.5% on Australian barley), with the addition of the Wine Equalisation Tax, the associated WET rebate and other wine-specific measures. |
Expanding beyond biscuits: Arnott's acquires Prolife Foods
The Arnott's Group has expanded its 'better-for-you' snacking portfolio with the...
FDA investigates PFAS in seafood
The US Food and Drug Administration (FDA) expands its investigation on per- and polyfluoroalkyl...
Cell-cultured quail moving closer to Australians' plates
FSANZ is undertaking a second round of consultation on a proposed approach to allow cell-cultured...
