The recent decision by China to drop anti-dumping tariffs on barley imports from Australia was welcomed by the latter, leading to calls for an end to all remaining trade restrictions, most notably those involving wine. The development is indicative of gradually stabilizing commercial ties between these two significant trading entities.
China’s Ministry of Commerce announced on Friday that the anti-dumping and anti-subsidy tariffs on Australian barley would cease as of Saturday. The import duties, originally instituted approximately three years ago, were set at an exorbitant 80.5%, effectively severing an annual trade worth as much as A$1.5 billion ($986.25 million). This action had prompted Canberra to lodge a case with the World Trade Organization (WTO).
This significant breakthrough on barley imports comes on the heels of a resumption in trading of commodities such as coal and timber. The decision shines a light on the limited number of Australian products still under China-imposed restrictions, including wine – which is also subject to tariffs – as well as lobster and meat exports from select abattoirs facing unofficial restrictions.
The Australian Trade Minister, Don Farrell, stated on Friday that Chinese trade restrictions, which as of last May affected approximately A$20 billion worth of annual trade, have now reduced to an impact on only about A$2 billion of exports. “We intend to leverage the barley process as a template for resolving the wine issue, which is still ongoing. Our aim is to resolve all of these outstanding matters,” Farrell stated to the press post-decision.
The relationship between these two crucial commodity trade partners suffered a severe blow in 2020 when Australia requested an inquiry into the origins of COVID-19. Beijing retaliated with countermeasures, including imposing anti-dumping duties on Australian wine and barley.
However, tensions have eased between Canberra and Beijing following the victory of Australia’s centre-left Labor party last year. There has been a noticeable resumption of Chinese purchases of Australian coal and timber this year. Moreover, the resolution on the barley tariffs sets a positive tone for a potential visit by Prime Minister Anthony Albanese to Beijing later this year, although a definitive date is yet to be confirmed.
According to the Ministry of Commerce, the barley tariffs will be removed starting from Saturday. It highlighted the increasingly robust demand in China’s beer market and the country’s inability to meet consumption needs with its domestic barley supply as primary reasons for the decision.
In response to the announcement, the Australian dollar increased by 0.34% to $0.65715, after having risen to as high as $0.65875 earlier in the same session. This recovery followed a dip to a two-month low the previous day.
Australia’s wine trade with China used to generate an annual revenue of A$1.2 billion, as per data from industry group Australian Grape & Wine. Its CEO, Lee McLean, interpreted the cessation of the barley tariffs as a positive development.
Post the decision on barley, Treasury Wine Estate’s (TWE.AX) shares rallied, reversing earlier losses to end 2.7% up, even as the broader market remained flat. The Australian government, while deciding to terminate its barley dispute at the WTO, has not yet withdrawn a separate complaint against China’s tariffs on Australian wine, which can reach up to 218%.
The barley market has also experienced its share of fluctuations. Dennis Voznesenski, Rabobank’s senior grains analyst, suggested that the barley decision would be favourable for Australian prices. He also indicated that Australian farmers with malt-quality barley were likely to secure a premium over recent prices. “Market players shipping barley to China may request a premium due to the associated risks. Concerns would arise if, for instance, China decided to reverse its decision,” he explained.
The tariff removal was hailed by Grain Producers Australia CEO, Colin Bettles, who called it a victory for Chinese consumers and industry as well as Australian exporters. Chinese buyers, who had turned to Canada, France, and Argentina for barley supplies over the last three years, are expected to revert to Australian sources. At the same time, Australian sellers, who had shifted their barley exports to Middle Eastern markets, are also likely to readjust their trade flows.
The end of the barley tariffs paves the way for a realignment of trade flows. It is anticipated that with the tariffs dropped, China’s barley buyers will commence purchases of the new Australian crop harvested in October, ensuring its arrival by the end of the year.
The bilateral relationship between Australia and China has seen significant tension and resolution over the past years, especially in terms of trade. With the removal of tariffs on Australian barley and the resumption of trade in coal and timber, a foundation has been laid for further normalization of trade ties. However, restrictions on other products, including wine, continue to cast a shadow on these relations. As Australia uses the resolution process of the barley issue as a template for other ongoing disputes, it remains to be seen how trade relations between these two nations will evolve in the future.
The broader geopolitical implications of these trade dynamics are also important to consider. The relationships between nations in the Asia-Pacific region, and indeed the world, are often influenced by trade ties. The developments between Australia and China could have ripple effects on other nations and international organizations like the WTO.
In the era of globalization, no nation operates in a vacuum, and actions taken by one country often have profound impacts on others. The decision of China to lift the barley tariffs is a significant development in global trade, but its long-term implications for Australian producers and global markets remain to be seen. As the situation unfolds, the world will be watching closely.
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