Title of article: China-Australia relations: winemakers up Hong Kong shipments

‘hoping the door will open’ as Beijing ponders lifting tariffs

Source:https://www.scmp.com/economy/global-economy/article/3252171/china-australia-
relations-winemakers-hong-kong-shipments-hoping-door-will-open-beijing-ponders

Date of the article: 16/02/2024

Date the commentary was written: 27/02/2024

Word count: 766

Unit of the syllabus to which the article relates: Global economy

Key concept being used: Interdependence

Theoretical Concepts: Trade barriers

Graphs to draw: Absolute and comparative advantage(PPC), effects of a tariff

AD/AS
China-Australia relations: winemakers up Hong Kong shipments ‘hoping the door will
open’ as Beijing ponders lifting tariffs
- China has been lifting trade barriers on other Australian goods as relations
improve, with expectations wine tariffs will be removed next month
- Data shows winemakers sent almost 2.5 million litres of wine worth US$65.5
million to Hong Kong in December, up from around 685,000 litres a month in
recent years
Australian winemakers have shipped millions of bottles of wine to Hong Kong in a bet
that China will soon lift tariffs on Australian imports and revive a trade worth
hundreds of millions of dollars, according to industry figures and trade data.

Australia sent wine worth almost US$800 million to China in the year to November
2020, when Beijing responded to a call in Canberra for an inquiry into the origins of
Covid-19 by blocking imports.

But China has been lifting trade barriers on other goods as relations improve and
Australian officials and industry expect a review of the wine tariffs begun by Beijing
last year will lead to their removal next month.

Australia’s government said in December it was confident the tariffs would be lifted in
early 2024. In November, Prime Minister Anthony Albanese was the first Australian
leader to visit China in seven years, hoping to improve relations.
A diplomatic confrontation over a suspended death sentence given by a Chinese court
to an Australian writer should not imperil progress on trade, Australia’s trade minister
said this week.
Trade data showed that Australian winemakers sent almost 2.5 million litres worth
US$65.5 million to Hong Kong in December, up from around 685,000 litres a month in
recent years and the most since September 2019. Among those shipping to Hong Kong
is DMG Fine Wine, whose brands include Handpicked and House of Arras.

Chief executive William Dong said DMG typically sold one or two containers of wine a
year in Hong Kong, but now had 10 in the territory, each containing around 12,000
bottles.

“We’re hoping the door to China will open and everything will go in … We are getting
everything ready to go,” said Dong.

Hong Kong is a trade hub and potential staging post for deliveries into mainland
China. It did not impose tariffs on Australian wine.
The shipments to Hong Kong are far below the roughly 10 million litres of wine a
month that Australia sent to China before the tariffs.

The number of shippers was also smaller, with Industry body Wine Australia saying
there were 531 exporters to Hong Kong in December, 138 more than a year earlier but
less than the 2,366 who exported to mainland China in December 2019.

China’s appetite for wine has fallen in recent years – part of a global trend of
declining alcohol consumption compounded in China by a change in preferences
towards beer and spirits – and rival exporters such as France and Chile have taken
Australia’s share of the market.

The loss of sales to China has contributed to a severe oversupply in Australia, where
the amount of wine in storage has risen to more than two billion litres.

But Australian winemakers said they were optimistic that they can become the biggest
shipper into China again within a few years.

“Lots of Chinese customers view Australian wine positively,” said Richard Burch, who
said his company, Burch Family Wines, had sent around 1,500 bottles to Hong Kong to
be used as samples for distributors in China if tariffs are lifted.

While less wine is being sold, Chinese drinkers are moving towards more expensive
bottles, preserving margins for winemakers.

The average value of Australian wine sent to China rose from roughly US$4 a litre in
2016 to US$10 in late 2020, and the bottles shipped to Hong Kong in December were
worth on average around US$26.50 a litre, customs figures accessed using Trade Data
Monitor show.

The value of wine sent to Australia’s two other main export markets, Britain and the
United States, is between US$1 and US$3 a litre.

The chief executive of Australia’s largest winemaker, Treasury Wine Estates, said
China was a “significant growth opportunity” for Treasury’s higher-priced Penfolds
wines.

Tim Ford said Treasury had not shipped wine for China to Hong Kong.

“What we plan to ship in this year ahead is sitting in the warehouses here in
Australia,” he told analysts on Thursday.
Other major producers of wine in Australia including Casella Family Brands,
Australian Vintage and Pernod Ricard did not respond to requests for comment.

Announcing its agreement with Canberra to resolve the wine tariff dispute in October,
China’s commerce ministry said China was willing to meet Australia halfway through
dialogue and consultation and to jointly promote the healthy development of
economic and trade relations.
https://www.clastify.com/ia/economics/64a95780701b5600
139b5965
No need for this link if, it is a link to the article.

Commentary
This article discusses a resurgence in Australia´s exports to China as they anticipate
the lifting of tariffs imposed in response to political tensions. Despite a decline in
China's overall wine consumption and increased competition from other countries,
Australian winemakers remain hopeful about recapturing their market share in China.

The value of wine exports to China has risen, particularly for higher-priced bottles,
indicating a shift in consumer preferences. This article is related to the concept of
interdependence through the relationship between China and Australia in the wine
industry, where shifts in trade policies impact both nations' economies.
Figure 1: Market for Wine in China You can use the bold function
instead of highlighting.

Remember that you can use small letters in

the graph to show what the impact is on
the different stakeholders.

The figure illustrates the implementation of a tariff on wine in the Chinese market.
The imposition of a tariff is shown by P1 shifting upward towards P2, which leads to a
decrease in domestic imports from Q4-Q1 to Q3-Q2. This decline occurs because the
tariff raises the price of exported wine for the Chinese consumers, making it less

attractive compared to domestic wine. In response to the tariffs, Australian

The price of wine with the tariff is still lower than if the price
was only determined by consumers and domestic producers.
 Does this article discuss what would happen with theremoral of the tariff?

winemakers have redirected their exports to Hong Kong, described as a “trade hub”
with potential access to the mainland Chinese market. This strategic move aims for
Australia to capitalize on potential future tariff removals and reviving the trade
relationship between Australia and China, which connects back to the concept of
interdependence. As China imposed tariffs on Australian wine exports, it created an
opportunity for other wine-producing nations like France and Chile to take “Australias
share of the market”. This shift in the market poses significant challenge for the
Australian wine industry, as it not only impacts immediate sales but also raises
concern on Australia and China´s interdependent relationship in relation to trade. In
the article, the solution of the wine tariff dispute between China and Australia is that
China's commerce ministry expresses a willingness to meet Australia “halfway through”
in an effort to promote the healthy development of trade relations. This is recognizing
the interdependent nature of Australia and China's economies. Both countries are
aware that their economic prosperity is directly linked to the success of their bilateral
trade agreements. While the specifics of the agreement are not detailed in the article,
it suggests that there was progress made in resolving the tariff issue through
Is this not
negotiations between the two countries. An example of a possible solution would be discussed in the
for China to remove the tariff on Australian wine, illustrated in the diagram below. article?
Figure 2: Market for Australian Wine after the removal of a tariff

Which country benefits from this part of the trade agreement? Why? How?
 This graph illustrates the effect of the removal of the tariff on Austrailian exports to
China The removal of a tariff would lead to trade creation, which defined as the
redirecting of trade flows between two countries. Trade creation will occur when there
is a reduction in tariff barriers, leading to lower prices, shown by P2 shifting downward
toward P1. The cost of importing wine into China decreases, making it more attractive
for Australian producers to sell their wine in the Chinese market. As a result, imports
increase from Q3-Q4 to Q1-Q2.

Chinese consumers stand to benefit from increased access to a wider variety of wines
at potentially lower prices if tariffs are lifted. Producers, particularly Australian
winemakers, anticipate regaining lost market share and expanding their exports to
China. However, the government faces trade-offs as it navigates the different trade
policies. While the removal of tariffs may promote economic growth, it also results in a
loss of government revenue caused by tariff collections. The relationship between
China and Australia in the wine industry. Shifts in trade policies, such as the
imposition or removal of tariffs, have direct implications for both nations' economies.
This highlights the concept of interdependence, the connection of their economies
needs cooperation to address trade disputes and promote mutual economic prosperity.
The willingness of China's commerce ministry to meet Australia halfway through
negotiations demonstrates a recognition of their interdependent economic relationship
and the importance of maintaining healthy trade relations.
Economic growth in which country?

The article prioritizes maintaining the relationship between China and Australia in the
trade of wine , particularly in the context of the impact on both nations' economies. By
highlighting the potential resurgence of Australia's wine exports to China following the
anticipated removal of tariffs, the article underscores the importance of fostering
Have you discussed the impact that this will have on both
countries flout? What will happen to wine producers in China?
 healthy trade relations between the two countries. It emphasizes the interdependent
nature of their economies, where shifts in trade policies have direct implications for Repetition
stakeholders. The article highlights the prioritzation of promoting cooperation and
negotiation between China and Australia reflects a recognition of their shared
economic interests and the need to address trade disputes for mutual economic
prosperity.

The diagrams are correct but could be strengthen through the use of the small
letters to highlight how different stakeholders are impacted. Once this is done it will
impact the analysis and application of your commentary.
Overall your key concept is addressed adequately but could be strengthened by
avoiding repetition and being clear about who you are referring to - China or
Australia. This will also help with your evaluation.
Define 1-2 more words as this will strengthen your terminology.