Australia and China Resolve Barley Dispute, Improving Trade Ties

Australia and China have reached an agreement to end a long-standing trade dispute over barley imports. In 2018, Beijing imposed anti-dumping and anti-subsidy duties on Australian barley that suddenly halted its exports to China, causing significant losses for Australian barley farmers. The removal of the tariffs – set to come after a review period – will allow Australian barley farmers to compete on a more level playing field with other producers in the global market. On their part, Chinese buyers will be able to purchase Australian barley at a lower cost. Further, the resolution of this dispute can set a precedent for other trade disputes between the two countries, including China rolling back its market restrictions on the import of Australian wine.

UPDATE (May 19, 2023): According to China’s ambassador to Canberra, Chinese imports of Australian timber have been scheduled to resume from May 18, 2023. Ambassador Xiao Qian announced that the Chinese customs authority has officially informed the Australian Minister of Agriculture about the change.  Additionally, discussions are underway regarding a potential visit by Australian Prime Minister Anthony Albanese to Beijing. The timber trade between the two countries, which previously amounted to approximately A$600 million (US$399 million) annually, had been largely halted since late 2020. Thus, this comes as a positive development, in a series of events signaling a warming of relations between the two countries.

UPDATE (April 17, 2023): On April 14, China’s Ministry of Commerce (MOFCOM) issued the Notice on Launching a Review of Anti-dumping and Countervailing Measures against Imports of Barley from Australia to clarify relevant matters. The MOFCOM has decided to review the anti-dumping and countervailing measures applied to imports of barley from Australia starting from April 15, 2023. The review is on the need for the continuation of anti-dumping and countervailing duties on imports of barley from Australia. Any interested party may submit comments in writing and provide corresponding evidence within 20 days from the date of the Announcement.

In a major breakthrough for the Australia-China trade relationship, the two countries have reached an agreement to resolve their long-standing dispute over barley imports. This comes after years of tensions between the two major commodity trade partners, with China imposing anti-dumping and anti-subsidy duties on Australian barley in 2018, and Australia subsequently initiating a World Trade Organization (WTO) case against China over these tariffs.

The amicable resolution of the Australia-China barley dispute is a win for both countries, with the potential to unlock new opportunities for businesses and individuals involved in the bilateral trade. The positive development may give a reason for optimism for those invested in the future of China-Australia relations.

Our analysis delves into the tangible benefits and outcomes of this resolution, and how they may impact the wider business landscape.

Background

China is one of Australia’s main trading partners, with the two countries engaging in significant trade in various sectors, including resources, agriculture, and services. Before the dispute arose, the country had been the largest export market for Australian barley, with an average value of about US$1.2 billion per year between 2014-15 and 2018-19.

However, in May 2018, China announced that it was imposing anti-dumping and anti-subsidy duties on Australian barley, claiming that Australian farmers were receiving government subsidies that were distorting the market. The imposition of these tariffs had a significant impact on the Australian barley industry, with exports to China dropping to just 440,000 tons in 2019-2020, from 6.5 million tons in the previous year. This led to a surplus of barley in Australia, and a significant loss of income for Australian barley farmers.

The tariffs made it infeasible for Chinese importers to buy Australian barley, leading to a halt in exports to China, and forcing the industry to seek other markets. The dispute over tariffs is part of wider trade and political tensions between the two countries, with China imposing restrictions on several Australian export sectors, including wine, barley, coal, timber, and lobster. Although some progress has been made in recent months, such as the resumption of the coal trade, the wine and barley tariff disputes have been more complex due to the involvement of the WTO.

In response to China’s imposition of duties, Australia initiated a WTO case against China in December 2018, arguing that the tariffs were unjustified and in breach of WTO rules. The case was seen as a significant escalation of the trade dispute between the two countries, and many analysts predicted that it would have a lasting impact on the Australia-China trade relationship.

The dispute also had significant implications for businesses and individuals in both countries. Australian barley farmers were hit hard by the tariffs, with many struggling to find alternative markets for their crops. Meanwhile, Chinese beer and livestock producers faced higher costs due to the increased price of Australian barley, which was a key ingredient in their products.

Resolution of the dispute

On March 20, 2023, the China Wine Association submitted to the MOFCOM an Application for Review and Investigation of Anti-dumping and Countervailing Measures on Barley, claiming that the situation in China’s barley market had changed, requesting the MOFCOM to review the necessity of continuing to impose anti-dumping and countervailing duties on imported barley from Australia and cancel the measures based on the review results.

On March 27, China’s MOFCOM notified relevant parties such as the Australian Embassy in China and the Australian Grains Industry Market Access Forum of the receipt of the review application and forwarded to them a public copy of the application and an unclassified summary of the confidential information. 

On April 11, Australia suspended its complaint to the WTO against China, in a bid to reopen the Chinese market to Australian barley for the first time after three years. The move came after the Australian government reached an agreement with China, under which China promised to review its duties on the grain for a period of three to four months, and Australia agreed to temporarily suspend the WTO dispute. Australia’s Foreign Minister Penny Wong clarified that if the duty was not lifted at the end of the review period, the dispute would be resumed in the WTO.

The Australian government hopes that this resolution will provide a pathway for resolving other trade disputes and lead to the eventual reopening of the Chinese market to a range of Australian products. The Grain Producers Australia, which represents barley exporters, welcomed this development and hailed the Labor government’s efforts to stabilize the trade relationship with China.

On April 14, China’s MOFCOM issued the Notice on Launching a Review of Anti-dumping and Countervailing Measures against Imports of Barley from Australia to clarify relevant matters. The MOFCOM has decided to review the anti-dumping and countervailing measures applied to imports of barley from Australia starting from April 15, 2023. The review is on the need for the continuation of anti-dumping and countervailing duties on imports of barley from Australia. Any interested party may submit comments in writing and provide corresponding evidence within 20 days from the date of the Announcement.

Implications for businesses and individuals in China and Australia

For Australian barley farmers, the removal of the anti-dumping and anti-subsidy duties means that they can resume exporting to China. The tariffs imposed by China in 2018 had effectively shut down the Australian barley trade, costing the industry around AU$2 billion (US$1.35 billion) in lost sales. With the removal of the tariffs, Australian barley farmers can now compete on a more level playing field with other barley producers in the global market. The trade deal is expected to benefit the Australian economy significantly. The barley industry itself is expected to see a boost of AU$200 million (US$135.87 million) per annum with the resumption of trade with China.

For Chinese buyers of Australian barley, the removal of the tariffs means that they can now purchase Australian barley at a lower cost. Before the dispute, Australia supplied over 70 percent of China’s barley imports, so this could increase demand for Australian barley in China. With the increased demand, the price of Australian barley could rise, which could in turn provide a higher income for Australian barley farmers. As such, the trade deal could benefit both Australian farmers and Chinese buyers.

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The resolution of the dispute also sends a positive signal to other industries affected by the trade tensions between Australia and China. For example, the wine industry was hit hard by tariffs imposed by China in 2020. However, there is optimism that the trade deal on barley could lead to a similar agreement on wine tariffs. In fact, Australian Senator Penny Wong stated in an interview that wine may be the “next” commodity to be addressed after the barley tariff review “works”. According to the Australian Bureau of Statistics, in 2020, wine was Australia’s fifth largest export to China, worth AU$1.2 billion (US$815.094 million), making it a key industry to watch in this context.

While some challenges remain as the tensions between Australia and China have not been completely resolved, the dispute resolution barely provides an opportunity for the two countries to rebuild trust and cooperation in the trade relationship.

Improving China-Australia relations: the business opportunities ahead

Since late 2022, China and Australia have been working towards improving their strained relationship, with the Australian Labor government holding discussions with Beijing to lift trade restrictions imposed due to political tensions. During the G20 summit in Indonesia in November 2022, Chinese President Xi Jinping met with Australia’s Prime Minister Anthony Albanese for the first time since 2016, which was seen as a significant step towards repairing the relationship.

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More recently, Albanese expressed his hope for a meeting between Australia’s trade minister, Don Farrell, and China’s commerce minister, Wang Wentao, with the aim of addressing and resolving the trade issues between the two nations. Following these declarations, China also reportedly removed all the remaining restrictions on Australian coal imports, indeed indicating a possible end in sight of the trade limitations.

As Beijing continues to focus on its reopening strategy post-COVID and resuscitating its economic growth, it is anticipated that the bilateral trade relationship between the two countries will continue to improve in 2023.

This article was originally published on April 17, 2023, and updated on May 19, 2023. 

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