Scott Morrison is staring down a Chinese strike on wine exports worth more than $1 billion a year, declaring Australia’s sovereignty will never be ceded.
China has launched an investigation into whether Australian winemakers are flooding the country with cut-price plonk and drowning out local producers.
Chinese authorities will also examine whether Australian exporters are being propped up by government subsidies.
“We totally don’t accept any suggestion that there has been any dumping of Australian wine in China whatsoever,” the prime minister told reporters on Wednesday.
“We don’t believe there is any evidence to support that.
“There is no basis against the claims made against the Australian wine industry or subsidies or things of that nature.”
Mr Morrison pointed out Australian wines were the second most expensive in China.
Confirmation of the 18-month inquiry has shaken the share market but will have no immediate impact on winemakers.
The export threat comes after Australia led international calls for an investigation into the origins of coronavirus.
The wine spat is the latest in a long list of diplomatic sore points with China.
After slapping tariffs on Australian barley earlier this year, China has targeted the beef, education and tourism sectors.
There are fears Australia’s iron ore and coal exports could be next.
“We will never trade away our sovereignty in Australia on any issue,” Mr Morrison said.
“We will be consistent, clear and respectful and we will get on with the business.”
The relationship has been heavily strained by disputes over coronavirus, foreign interference legislation and the decision to ban Huawei from Australia’s 5G network.
Territorial claims in the South China Sea and Beijing’s security crackdown on Hong Kong have also weighed on two-way ties.
China is Australia’s largest trading partner but government backbencher Matt Canavan – the former resources minister – said Beijing could no longer be trusted in business relationships.
“The Chinese government has been threatening and bullying the rest of the world, not just in Australia, and we have to stand up to this and call it out for what it is,” Senator Canavan said.
“Every Australian business must be very wary and careful about how they interact with a country that is proving itself not to be trusted.”
South Australian senator Rex Patrick, who has been pushing for a broad-ranging inquiry into China, said the wine probe was politically motivated.
“This is a political issue, it is in effect coercion, and we need to work with a number of other countries to deal with this issue.”
Australian exports of food and agricultural products to China rose eight per cent in the last financial year.
But farm lender Rabobank has warned Australia’s exposure to China may have reached its peak and warned against concentrating too heavily on the market.