China has sent a strong message to the Australian Government, implementing a staggering 80 per cent tariff on barley imports.
It’s a move that could seriously damage the barley sector which is Australia’s third most valuable export to China, valued at around $1.5 billion per year.
While a decision from China’s investigation into anti-dumping claims was expected this month, it is likely that Australia’s position on an international enquiry into the origin of the Corona virus is a significantly influencing factor for the Chinese Government.
In addition to the new tariff on barley, the Chinese government also suspended imports from four of Australia’s largest red meat abattoirs earlier this month. The dairy sector also feels particularly vulnerable to the situation with China buying 33 per cent of exported dairy products per year, valued at $1 billion.
The situation adds insult to injury for many dairy farmers who have faced drought, low margins and supermarket price wars over the last few years. In 2019, the Australian dairy sector lost 500 farmers.
For dairy farmer Malcolm Holm, news of China’s increasing hostility dampens a strong seasonal outlook. His farm near Deniliquin received excellent autumn rains after several dry years.
“The country is looking really good,” he said.
“The dairy industry hasn’t had any clear air for years and years. And the recent drought has just exacerbated that. Farmers have felt the pressure whether they’re in the domestic or export market. In our region around the year 2000 we had 200 dairy farmers. Now we’re down to 40.”
Barley Background
In 2015, the China-Australia Free Trade agreement removed Chinese tariffs on Australian barley. The removal was accompanied by a clause – that China could impose a tariff if Australia was found to be selling barley into China at a cheaper price than Chinese domestic producers.
China has imported the lion’s share of Australian barley over the past few years. Between 2015 and 2018, Australia exported an average of 4.6 million tonnes worth $1.3 billion and representing 70% of Australia’s exported barley.
In 2018, the Chinese barley industry asked for the government to introduce an anti-dumping tariff on Australian barley of 56.14%. After China investigated the claim, they increased the proposed tariff to 73.6%. China’s ruling earlier this month accepted the 73.6% recommendation and added a “subsidy margin” of 6.9%.
Another factor in China’s aggressive response is Australia’s use of anti-dumping measures on imported goods from China, including Chinese steel. That the decision was due as Australia and its allies were calling for an investigation into the origins of COVID-19 was an act of terrible timing.
While there are legal avenues that can be pursued by Australia, the process is lengthy and a win is not guaranteed. Even if Australia was to win, China could reinvestigate anti-dumping claims and maintain their original position.
The tariffs will apply to four exporters – The Iluka Trust, Kalgan Nominees Pty Ltd, JW & JI McDonald & Sons and Haycroft Enterprises.
The tariffs came into effect from May 19thand will apply for five years.
Sources: Sydney Morning Herald, The Conversation, Australian Financial Review
Image by Williamsangelack shared under a CC3.0 license.
