Dark clouds for barley farmers

Australia’s trade minister says there will be no tit-for-tat as Australian barley exports to China are hit with an 80% tariff

19 May 2020 | Marcus Reubenstein

In a process which began over two years ago, China has followed through with plans to place heavy tariffs on Australian barley exports.

The implementation of new tariffs comes into effect from today but Australia’s Trade Minister, Simon Birmingham, says it is not necessarily linked to current China-Australia diplomatic tensions.

Speaking from Adelaide, he says, “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.”

Though Australian barley growers have been expanding their overseas markets, China remains the most lucrative export market, in 2018 its estimated worth was $1.5 billion.

No dialogue with China

Despite the timing having been flagged since 2018, there are still concerns in trade circles that the minister has yet to speak with his Chinese counterpart over the issue.   

“I think it’s very disappointing that China has to date refused to schedule minister to minister discussions,” says Birmingham.

“Australia is always up for a conversation with any of our global counterparts, we do so even when issues are difficult, even when we may have disagreements, because the best way to resolve disagreements or to work through difficult issues is to talk about them, and that’s why we’re up for a discussion and it’s disappointing that others aren’t up for it.”

Commenting on the Chinese refusal to speak directly with the Trade Minister, a former Australian diplomat says, “You can’t just call the Chinese up when there’s problem and expect them to answer the phone.” He added dialogue needs to be constant in order to maintain the China relationship.

Australia says there’s no export dumping

In 2018 China’s Ministry of Commerce cited 32 direct and indirect Australian agricultural subsidies which it said allowed Australian producers to dump barley onto the Chinese market.

It says this has allowed Australian exporters to sell barley into China at below cost.

However, Australia’s grain industry is standing firm that it has not been dumping grain onto its biggest barley export market.

Says Brett Hosking, Chairman of Australian Grain Growers Board, “Australian Farmers are the least subsidised in the world, we should probably be going to the government asking for more assistance.”

In an interview with ABC television Hosking, a barley grower from Victoria, added:

“We need to speak to China and engage them and we need government to be doing it at the moment.”

Brett Hosking, Chairman of Australian Grain Growers

Hosking also eluded to growing concerns among rural exporters that a number of government backbenchers are undermining trade with their constant attacks on China.

“Are there times when I wish some politicians would close their mouths?”, he says. “Absolutely.”

Renegade backbenchers shooting from the hip

One of the more outspoken China critics in government is Queensland backbench MP George Christensen who serves as chairman of the Joint Standing Committee on Trade and Investment Growth.

In promoting his committee’s activities, there are serious concerns in senior government and trade circles about his attacks on China, not simply because of their tone but because a number of his statements are patently false.

Christensen falsely asserts that China is Australia’s largest foreign investor when official trade figures reveal China is only the ninth largest foreign investor in Australia with just 1.8% of total foreign investment.   

Furthermore, on his website Christensen does not rely on Australian government data on economic engagement with China, instead among his sources he lists The American Enterprise Institute and The Heritage Foundation. Both of these are Washington DC-based conservative political lobby groups and publish no data on trade.

Despite his public assertions, Christensen does not enjoy the unanimous support his Trade committee, with other members privately accusing him of undermining its legitimacy by “freelancing” his views which are often opposed to that of his own government.

A government source says his rhetoric plays well with rank and file party members in Queensland but many of his parliamentary colleagues think of him as a “bull in a China store”.

Industry wants “respectful” engagement with China

The Grains Industry Market Access Forum, Australian Grain Exporters Council, Grain Growers Australia, Grain Producers Australia and Grain Trade Australia, today issued a joint statement on the tariffs. They maintain that their producers are not shipping heavily subsidised product into the Chinese market.

Clearly, there is solidarity at the top of the industry which is calling on pragmatism and diaologue from political leaders.

Its statement reads, “We call on the Australian government to support Australia’s farmers and exporters by engaging deeply with China in a respectful and meaningful way to resolve the issue and to concurrently and immediately pursue the WTO Dispute Settlement process to the fullest extent possible.

“The Australian barely industry’s relationship with China began in the 1960s. We very much hope a timely and amicable resolution can be agreed including the removal of duties to enable trade to be re-established for the benefit of industries in both countries.”

Trade diversification a China motive

According to trade and investment consultant Alistair Nicholas, China’s move on tariffs is part of a longer strategy which extends back several years before the COVID-19 crisis.

In a recent editorial he wrote, “Beijing is possibly thinking far more strategically and longer-term about its suppliers across a much broader range of products. Although Canada is the main winner of China diversifying its sources of barley away from Australia, Beijing approved Kazakhstan as a supplier of barley the same week it initiated its anti-dumping action against Australia in 2017.”

Australia too engages in trade blocking

Despite the Free Trade Agreement, Australia is certainly not innocent when it comes to penalising exporters in China. According to independent trade analysts, Global Trade Alert, Australia far more often punishes Chinese exporters than rewards them with tariff and quota changes.

In 2019 there were 16 Australian market interventions adversely impacting China and just two that were of benefit to Chinese exporters.

Over the past decade Australia has placed almost twice as many restrictions on Chinese exports as policy adjustments to boost exports.

Steel products were second on the list with 16 interventions, Chinese exporters of some steel products now face Australian tariffs of up 144%.

Australia’s own Productivity Commission has singled out national trade policies reporting, “Australia is one of the most prolific users of anti-dumping measures in the world.”

According to the Commission in 2018-19 the Australian government forked out a net total of $12.1 billion in tariff protection and subsidies to industry, with $1.7 billion going to agricultural production.

Escalation of trade dispute unlikely

In a report published last week, Melbourne-based trade consultancy, ITS Global says, “Although concerning for the industries targeted, there is little evidence that Australia can expect further escalation of similar trade policy actions. The broader picture of Australia-China trade is very positive. 

“2019 was Australia’s biggest ever year for sales to China, which purchased 38% of all Australian exports, a figure that has doubled in just ten years. The China-Australian Free Trade Agreement has provided market access improvements and a legal framework to support this growth. “