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Agreement reached with China to resolve barley dispute

Local grain growers and exporters had a win earlier this week with Ministers Penny Wong and Don Farrell announcing that the Australian Government has reached an agreement with China that creates a pathway towards resolving the dispute over Australian barley.

The federal government has officially asked the World Trade Organization to suspend its appeal on Beijing’s decision to apply tariffs to Australian barley. In response, China will undertake an expedited review of the barley trade impediments that they installed in 2020.

What happened in 2020 to our barley trade?

Back in 2020 as the pandemic was beginning to show its global impact, the former Coalition Government had called for an inquiry into the origins of COVID-19.

Around that same time, China accused Australian farmers of dumping barley and subsidising grain growers, imposing a tariff on the barley trade.

After imposing similar duties on Australian wine, banning several meatworks, and halting timber, coal and lobster imports, China locked in the barley tariffs for five years to 2025.

Since 2020, China’s 80.5 per cent duties on Australian barley have effectively blocked exports to that market, worth about $916 million in 2018-19.

As a recourse to these unprecedented tariffs, the Australian Government made the decision to appeal to the World Trade Organization – a first for any Australian farm export.

How can the World Trade Organization help?

The World Trade Organization (WTO) effectively acts as a trading umpire. On 21 December 2020, Australia’s request for dispute consultations was circulated to WTO members.

The Australian Government claimed that the duties imposed by China on our barley trade were inconsistent with provisions under the WTO’s Anti-Dumping Agreement, the Agreement on Subsidies and Countervailing Measures, and the General Agreement on Tariffs and Trade (GATT) 1994.

By requesting WTO consultation, the Australian Government formally initiated a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.

Trade Minister at the time, Simon Birmingham, said that the WTO request was the “appropriate next step” to escalate the matter to the global trade body.

“We ask the independent umpire to adjudicate and ultimately help settle those disputes,” said Simon Birmingham.

He added that Australia remained open to solving the dispute outside of the WTO case “if both parties are willing to come to the table”.

Following recent conversations, China has agreed to undertake a review of the duties over a three-month period. This agreement came in response to Australia pausing the WTO intervention request.

The federal government is confident that this review period will put an end to the tariffs and allow Australia to recommence its barley trade with China.

If that doesn’t happen, however, Australia will resume the dispute in the WTO.

What’s the timeline for resuming trade?

If the Chinese review goes the way the Australian Government hopes, the barley duties could be dropped in the next three or four months. After this, grain traders say, the resumption of exports could happen before Christmas.

When the tariffs were introduced, the grains industry estimated a lost premium of approximately $30–$50 per tonne or up to $500 million a year.

Grain Producers Australia Chair Barry Large said that while other export markets had purchased Australian barley over the past two years, and trade for other important Australian grains such as wheat has continued with China, growers would welcome the return of the China market.

“Barley is an important rotation crop for Australian growers and any optimism on the future outlook is good,” he said.

“We welcome the Labor Government’s constructive dialogue and positive progress towards stabilising the relationship with China and creating this process and opportunity to recommence the barley trade.”

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said that in 2022-23 Australia produced the third largest barley crop ever recorded, with the average farm income for West Australian crop growers soaring to more than $1.5 million.

National Farmers’ Federation Chief Executive, Tony Mahar said it was hoped the development in the barley trade would be reflected in other sectors.

“We also hope this development is another step forward in recalibrating our relationship with China and will mean progress will also advance on removing trade barriers for rock lobster and wine,” he said.

Australia’s wine industry – also locked out of China since 2020 – currently has an appeal with the WTO, with winemakers desperate to resume trade with China as soon as possible.

Sources: WTO, BBC, Grain Central, Senator the Hon Penny Wong, NFF, ABC, Farm Online

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