Interview with Nadia Daly, ABC the Business

Nadia Daly, journalist: In Victoria's Yarra Valley, winemaker Meg Brodtmann is hoping the Year of the Dragon brings some much-needed good fortune to an industry hit hard by Australia's trade war with China.

Meg Brodtmann, winemaker: We lost everything overnight. We had built a business in China.

Nadia Daly: Winemakers expect China will soon lift tariffs imposed four years ago after the middle kingdom promised to review them.

Meg Brodtmann: We're gearing it up for it to happen. So, the person that we employ in China, we've now got her back on board with translating all our marketing material back into Chinese, which we haven't had to do for a couple of years.

Nadia Daly: But Trade Minister Don Farrell told The Business the removal of tariffs is by no means guaranteed and he has a warning for his Chinese counterpart when they meet at the World Trade Organisation conference in two weeks.

Minister for Trade: We want the tariffs on Australian wines removed and if we don't get that, then we'll resume our WTO application ASAP.

Nadia Daly: He's referring to a dispute launched by Australia against the tariffs, which it suspended when China offered to review them.

Minister for Trade: Our agreement to suspend the WTO process was based on the successful removal of all of the tariffs.

Nadia Daly: Before the trade tariffs, China was our top export market, importing around 40 per cent of Australian wine per year, worth more than a billion dollars. The relationship hit trouble in April of 2020 when Australia called for an inquiry into the origins of COVID.

Tim Harcourt, economist: China felt very angry by that and they thought they would use economic coercion as a way of punishing Australia for the announcement.

Nadia Daly: In May of that year, China imposed an 80 per cent tariff on Australian barley. Next, it banned imports from some major Australian abattoirs over health concerns, followed by restrictions on cotton, timber, coal and copper. Then Beijing slapped tariffs of up to 212 per cent on wine and imposed inspections on seafood, killing the rock lobster market overnight. The diplomatic freeze lasted for about three years.

Tim Harcourt: China didn't want to choose industries important to them, like iron ore, natural gas and so on, because it's so important to their economy. But they wanted to make a statement which caused great harm to some key commodity exporters.

Nadia Daly: Economist and China expert Tim Harcourt says the sanctions backfired.

Tim Harcourt: Well, amazingly, at a macro level, the Australian economy chugged along better than most in the OECD.

Nadia Daly: Since the relationship has started to thaw, China's lifted some trade blocs. All that's left is wine, lobster and some abattoirs. The Prime Minister even visited the nation following the release of Australian journalist Chung Lei. But the relationship has hit another snag, with the Australian writer Yang Hengjun being handed the death penalty. The future of the lobster trade is still unknown. In South Australia fisher Kyriakos Toumazos has had a rough couple of years.

Kyriakos Toumazos, fisherman: China has been our predominant market for over four decades.

Nadia Daly: It's widely believed Australian lobster is slipping into China through grey or black channels like Hong Kong, where imports jumped 2000 per cent a month after the ban was put in place.

Kyriakos Toumazos: We supply product to destinations that are approved, which is Vietnam, Hong Kong, Taiwan, and we are not aware of what happens to that product after it lands. We are just being optimistic that over the calendar year of 2024, we will slowly start trading again with our biggest business partner rebuilding trade relations one step at a time.

Nadia Daly: Rebuilding trade relations one step at a time.