Australian Prime Minister Anthony Albanese has announced the cessation of China’s punitive tariffs on Australian wine, effective Friday, 29 March. This significant development follows Australia’s recent hosting of China’s Foreign Minister Wang Yi for the first time in seven years, marking another milestone in the normalisation of political relations. The relaxation of wine tariffs adds momentum to an ongoing diplomatic thaw, signalling progress towards resolving bilateral trade tensions ignited during the coronavirus pandemic.
China’s shift on wine and other export categories suggests an acknowledgement that retaliatory trade measures have faltered as tools of economic strongarming. More fundamentally, and perhaps positively, it underscores the enduring demand for high-quality Australian products among Chinese businesses and consumers, transcending issues of diplomatic statecraft.
For nearly four years, Australian exporters endured the fallout of a diplomatic stoush. In 2020, China imposed prohibitive measures against AUD20 billion of Australian exports. Barley, beef, cotton, lamb, lobsters, timber, and wine were targeted. So, too, was coal, but notably not iron ore, which is critical for China’s infrastructure ambitions. Stemming from a rift over Australia’s advocacy for a global enquiry into the origins of COVID-19, tensions peaked when China’s Ambassador to Australia suggested that ordinary Chinese people may no longer want to “drink Australian wine” or “eat Australian beef.”
However, the reality is that ordinary people want to do just that.
With increasing affluence comes an increasing desire for the good things in life.
Setting politics aside, Australian exporters have earned a reputation for delivering what matters most in terms of product excellence. While “Brand Australia” might have fallen out of favour at a political level, it’s retained its status with Chinese consumers – who prioritise quality and trustworthiness.
Australia, renowned for its premium wines, has long been a prominent player in the global market. Over the last decade, China’s insatiable demand for wine translated into a willingness to pay premium prices.
At their peak, Australian wine exports to China comprised 18 per cent of total export volume and a remarkable 40 per cent of total value, amounting to AUD1.2 billion in exports. However, the imposition of tariffs exceeding 200 per cent effectively severed this lucrative trade stream, compelling Australian winemakers to explore alternative markets.
Now, as diplomatic dialogue resumes, the revival of Australia’s billion-dollar wine exports to China appears increasingly promising.
In recent years, Chinese consumers turned to French, Chilean, and Italian wines as alternatives. Concurrently, Australian exporters diversified their exports to European and Southeast Asian markets. This begs the question: to what extent will Australian wine exporters re-enter the Chinese market, and how can they reclaim lost market share?
Australia’s original success in China was more than just a testament to superior product quality. The wine industry built a deep understanding and insights into consumer preferences. Tailored advertising and education campaigns targeted the burgeoning affluent class. Strategic branding, labelling, and an unwavering commitment to quality resonated with Chinese consumers’ research-driven purchasing habits.
To reclaim their former market position, Australian exporters will need to reinvest in honing their Asia capabilities – enriching their skills, knowledge, and understanding of the contemporary business landscape. In an increasingly attractive yet fiercely competitive market, equipping themselves with practical insights into the Chinese market will be pivotal for long-term success and growth.
Australia’s past success in China underscores the importance of preparation, planning, and a deep-rooted understanding of local markets – essential qualities for any astute business venturing overseas in an ever-evolving global marketplace.
This opinion piece was written by Leigh Howard, the CEO of Asialink Business at the University of Melbourne, and one of Australia’s leading voices on international business.
*Disclaimer: The views expressed are those of the writer and do not necessarily reflect those of NHA – News Hub Asia.
