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While financial markets are being dominated by COVID-19-related headlines and fresh US-China tensions, our local barley industry is facing its own challenges.
Last week, the People’s Republic of China announced a massive 80 per cent tariff on Australian barley imports, effective immediately. Chinese officials said after a year and a half of investigation, it discovered that Barley has been imported against trade rules.
This deals a heavy blow to our barley producers given China accounts for roughly half of our barley experts in a typical year. The Australian barley industry was worth $1.5 billion in 2018.
At the forefront of China’s accusations are claims that Australian barley farmers have been selling barley into China for cheaper than it costs to produce — a practice known as “dumping”. This makes it tough for local Chinese producers to compete with the price of our grain.
China also claims Australian farmers are subsidised by the Australian Government to grow barley.
Australia’s response
Trade Minister Simon Birmingham said China’s decision is not based on good analysis of facts or law. He said China’s decision was made “without a proper understanding of the facts or the evidence”.
According to the Organisation for Economic Co-operation and Development (OECD), Australian farmers are among the least-subsidised in the world.
While China claims that the Australian Government’s initiative to pay farmers in the Murray-Darling Basin to upgrade water infrastructure in return for giving up water rights is a form of subsidy, Minister Birmingham said this idea is “completely ridiculous”.
“It’s completely ridiculous to be listing things like the Murray-Darling Basin infrastructure upgrades as some sort of subsidy to barley exporters when the bulk of that barley comes out of Western Australia and South Australia and is firmly dry land for farming.”
Minister Simon Birmingham, May 2020
As for the dumping accusations, the Government said there is no evidence to support China’s claims that barley farmers had been dumping their product in the country.
Grain industry chiming in
The nation’s largest grain exporter, CBH Group, released a statement last week on behalf of the country’s grain producers, expressing the industry’s “deep disappointment” with China’s decision.
“For a number of years China has been Australia’s largest barley export market and Australia is the largest supplier of barley to China. This imposed duty makes Australian barley less competitive into the Chinese market and has placed significant downward pressure on barley values offered to Australian growers,” the statement said.
Further, CBH said the notion of dumping is “not consistent with the commercial realities” of Australia’s grain industry.
The industry’s statement reaffirmed that claims of dumping and subsidies are unsubstantiated and untrue.
So, if Australia is denying these accusations, why else would the tariffs have been put in place?
Tit-for-tat?
Given the timing of the tariffs, speculation immediately began to circulate that they were a retaliatory response from the Chinese Government after Australia’s push for an independent investigation into the true origins of COVID-19.
However, Minister Birmingham quashed these rumours by saying the result of the 18-month investigation was always slated for May 2020.
“The decision was always due by today, and so from the minute it started 18 months ago, the deadline for a decision was today, so there is some coincidence that exists around the timing,” he said last week.
However, while the Chinese government has officially denied any links between the barley tariffs and politics, Chinese Commerce Minister Zhong Shan linked the new tariffs to past trade disputes.
Minister Zhong said earlier this week China has only launched one investigation into Australian trade since 1972, while Australia has launched 100 investigations into Chinese trade over the same time period
Analysts are suggesting the new tariffs are Beijing punishment for past Australian steel and aluminium levies. However, China’s official stance is that there is no link between these levying duties and the barley tariffs.
How will Australian respond?
Minister Birmingham made it clear that Australia is not interested in a trade war.
“We don’t conduct our trade policy on a tit-for-tat basis. We operate according to the trade rules that we strongly support as a country, and we’ll continue to do that,” he said.
He said China has every right to impose and withdraw these tariffs at will, but the Australian Government will work hard to make sure China sees “common sense” and takes back the tariffs as soon as possible.
He said the Government will talk to the farming sector and Australian barley industry before making any decisions, but he did not rule out a World Trade Organisation appeal.
In the interim, Barley growers are scrambling to find new markets for their barley.
The day the tariffs were announced, Barley on the way to China was immediately diverted. The likes of Japan and Vietnam are potential destinations for the product, but CBH said diverting that much grain will be a challenge.
Not only is China Australia’s biggest buyer of barley, but Australia is also China’s biggest supplier of the grain.
