China Removes Barley Tariffs on Australia
China has lifted the anti-dumping tariffs on Australian barley, marking a significant step towards normalizing trade relations between the two nations after a three-year period of strained ties.
China has lifted the 80 percent tariff it had imposed on barley from Australia, in a significant step to resolve the trade dispute.
The tariffs were imposed in May 2020 after China accused Australia of selling the grain below the cost of production and providing subsidies to Australian farmers. This resulted in a complete halt in Australia’s barley exports to China, causing damage to both sides.
Effective from August 5, 2023, China will officially remove the tariffs, which consisted of a 73.6 percent anti-dumping tariff and a 6.9 percent anti-subsidy tariff. The decision was based on China’s assessment of the changes in the local barley market.
As a result of China’s tariff roll-back, Australia has also chosen to discontinue its appeal to the World Trade Organization (WTO) on the matter. This development signals a potential step towards normalizing trade relations between the two countries in the barley sector and is expected to have a broader impact on their bilateral commercial relations.
The China-Australia barley dispute
China and Australia have long been prominent trade partners, complementarily engaged in various sectors, such as coal, agriculture, F&B, and services. For years, China served as Australia’s largest export market for barley, with an average yearly value of around US$1.2 billion between 2014 and 2019.
The dispute between the two nations emerged in May 2018 when China imposed anti-dumping and anti-subsidy duties on Australian barley, citing concerns about government subsidies distorting the market. These tariffs significantly impacted the Australian barley industry, causing exports to China to plummet from 6.5 million metric tons to just 440,000 metric tons in 2019-2020.
The trade tension resulted in an oversupply of barley in Australia, leading to financial hardships for Australian farmers who lost a substantial portion of their income. Additionally, Chinese importers found it impractical to purchase Australian barley due to the tariffs, prompting the industry to explore other markets.
The issue of tariffs is part of a broader context of trade and political tensions between the two countries. China has also imposed restrictions on several other Australian export sectors, such as wine, coal, timber, and lobster. While some progress has been made, including the resumption of the coal trade, the resolution of the wine and barley tariff disputes has been more complex, involving the WTO.
To address China’s imposed duties, Australia filed a WTO case in December 2018, arguing that the tariffs violated WTO rules and were unjustified. This legal action marked a significant escalation in the trade dispute, with potentially lasting effects on the Australia-China trade relationship.
The dispute had profound implications for businesses and individuals in both nations. Australian barley farmers faced severe challenges in finding alternative markets, while Chinese beer and livestock producers experienced higher costs due to the increased price of Australian barley, a crucial ingredient in their products.
On March 20, 2023, the China Barley Association submitted an Application for Review and Investigation of Anti-dumping and Countervailing Measures on Barley to China’s Ministry of Commerce (MOFCOM). In their application, they claimed that the situation in China’s barley market had changed and requested MOFCOM to review the necessity of continuing to impose anti-dumping and countervailing duties on imported barley from Australia. They further urged for the cancellation of these measures based on the review results.
On March 27, MOFCOM notified relevant parties, including the Australian Embassy in China and the Australian Grains Industry Market Access Forum, about receiving the review application. They shared a public copy of the application and an unclassified summary of the confidential information.
In response to these developments, on April 11, Australia made the decision to suspend its complaint against China at the WTO. This move aimed to reopen the Chinese market to Australian barley after three years. The suspension came after an agreement between the Australian government and China, in which China pledged to review its duties on Australian barley for a period of three to four months. In exchange, Australia agreed to temporarily suspend the WTO dispute. However, Australia’s Foreign Minister Penny Wong made it clear that if the duty was not lifted at the end of the review period, they would resume the dispute in the WTO.
The Australian government is hopeful that this resolution will pave the way for resolving other trade disputes and eventually lead to the reopening of the Chinese market to various Australian products. The Grain Producers Australia, representing barley exporters, welcomed this development and appreciated the efforts of Anthony Albanese’s government in stabilizing the trade relationship with China.
On April 14, MOFCOM issued a Notice on Launching a Review of Anti-dumping and Countervailing Measures against Imports of Barley from Australia. The review began on April 15, 2023, specifically focusing on the need for continuing the anti-dumping and countervailing duties on imports of barley from Australia. During this review, interested parties had the opportunity to submit written comments and provide corresponding evidence within 20 days from the date of the announcement.
Resolution in sight
On August 4, 2023, China’s MOFCOM officially announced that the anti-dumping and anti-subsidy tariffs on Australian barley would be terminated starting August 5, 2023, marking the end of nearly three years of imposing 80.5 percent duties.
The Australian government reacted with a sense of accomplishment and relief upon hearing the news of China’s decision to remove anti-dumping tariffs on Australian barley imports. Foreign Affairs Minister Penny Wong hailed the outcome as a “great success for our nation and barley producers,” emphasizing that it was the result of collective efforts from both government officials and the industry. She expressed gratitude to her department officials and industry representatives for their patience throughout the resolution process, as well as acknowledging the role played by the WTO in achieving this positive result.
Australian Trade Minister Don Farrell underscored the significance of the tariff removal, highlighting the great financial losses suffered by the Australian barley industry since the imposition of Chinese tariffs in 2020, estimated to be around US$1 billion annually. With the tariffs lifted, Australian barley growers and exporters can now re-enter the Chinese market without facing additional duties.
Farrell emphasized the government’s commitment to resolving disputes with China through dialogue rather than confrontation. He praised the “template” that was used in collaboration with the WTO to resolve the barley trade issue, indicating that it could also be applied to help address the ongoing dispute over wine tariffs.
Implications for China-Australia bilateral trade and businesses
The removal of anti-dumping and anti-subsidy duties on Australian barley marks a significant development for Australian farmers as it enables them to resume exporting to China.
With the tariffs lifted, Australian barley farmers now can compete more fairly with other global barley producers, leading to positive economic impacts for Australia. The removal of tariffs by China is expected to boost the barley industry by approximately AU$ 200 million (US$135.87 million) per year.
For Chinese buyers, the removal of tariffs means they can now purchase Australian barley at a reduced cost. Historically, Australia supplied over 70 percent of China’s barley imports, making the potential increase in demand for Australian barley in China a noteworthy outcome for allied sectors.
As demand rises, the price of Australian barley could also increase, resulting in higher income for Australian barley farmers. Consequently, the trade deal holds benefits for both Australian farmers and Chinese buyers, fostering a mutually advantageous trade relationship.
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