China said Thursday it would lift punitive tariffs on Australian wine, as trade ties improve between the two countries after years of tension, with Canberra soon afterwards announcing it would drop its case against Beijing at the World Trade Organization. 

Duties were imposed on key Australian exports such as wine, barley and beef in 2020 after Canberra legislated against overseas influence, barred Huawei from 5G contracts, and called for a probe into the origins of the Covid-19 pandemic.

But trade restrictions have tapered since Australia's center-left government won the election in 2022 and adopted a less confrontational approach.

"In view of changes in the market situation of the relevant wines in China, it is no longer necessary to impose anti-dumping duties and anti-subsidy duties on imports of the relevant wines originating in Australia," the Chinese commerce ministry said in a statement.

It added that the tariffs would be lifted on Friday.

Tariffs and barriers have already been removed for commodities including Australian coal, timber and barley.

The foreign ministers of both countries met this month in a sign tensions between the countries were improving. 

"The re-entry of Australian bottled wine into the Chinese market will benefit both Australian producers and Chinese consumers," Australian Prime Minister Anthony Albanese, Foreign Minister Penny Wong and Trade minister Don Farrell said in a statement Thursday.

"The removal of duties means that Australia will discontinue its legal proceedings at the World Trade Organization," the politicians said.  

The statement added that Canberra would continue to lobby for the removal of remaining trade restrictions, including on rock lobster and beef from some abattoirs. 

'Positive step'

Before the trade restrictions were imposed, China was the largest destination for Australian bottled wine, accounting for 33 percent of export revenue in 2020, data from the Australian government shows.

The tariffs added up to 200 percent to the cost of Australian wine shipped to China, and effectively halted trade worth $1 billion a year. 

Australian winemakers responded by turning to other Asian markets, including Hong Kong and Thailand.

Melbourne-based Treasury Wine Estates chief executive Tim Ford said the announcement was a positive step for the Australian wine industry and wine consumers in China. 

He said the company, which owns luxury wine brand Penfolds, looked forward to reestablishing its foothold in the China market.

"China is willing to continue to strengthen dialogue and cooperation with Australia based on the principles of mutual respect, equality and common benefit," Beijing's foreign ministry spokesperson Lin Jian told reporters at a regular briefing Thursday.

While bilateral trade has made some recovery, the two countries remain at odds in strategic areas.

Last month, Australia said it had expressed its "outrage" after Beijing handed a suspended death sentence to Chinese-Australian dissident writer Yang Jun.

Australia and its allies are also seeking to parry China's expanding reach in the South Pacific.

Canberra and Washington were jolted into action after Beijing signed a secretive security deal with Solomon Islands in 2022.

Australia also supports the United States and Asian countries in opposing Beijing's sovereignty claims over the South China Sea.