China lifts tariffs on Australian barley as trade ties improve.

China lifts tariffs on Australian barley as trade ties improve.

China Drops Barley Tariffs in Effort to Repair Ties with Australia

Beijing/Sydney, August 4 – China’s Ministry of Commerce announced on Friday that it will be removing anti-dumping and anti-subsidy tariffs on Australian barley imports. This decision comes as the two nations work towards repairing their strained relationship. The tariffs, which have been in place for three years, have significantly impacted bilateral trade. The dropping of these tariffs signifies a positive step forward, but there are still other Australian products, such as wine, facing restrictions and tariffs.

The trade dispute between China and Australia began escalating in 2020 when Australia called for an inquiry into the origins of COVID-19. This move by Australia triggered retaliatory measures from China, including the imposition of anti-dumping duties on Australian wine and barley. In May 2020, Beijing implemented tariffs totaling 80.5% on Australian barley, effectively eliminating Australia’s barley exports to China, which were valued at around A$2 billion ($1.31 billion) annually. Australia lodged a formal complaint with the World Trade Organization (WTO) in December 2020 in response to China’s actions.

However, tensions between the two countries have started to ease in recent months. The center-left Labor party came into power in Australia last year, which has contributed to a more positive climate for bilateral relations. Chinese purchases of Australian coal resumed in January after a three-year hiatus, and in May, China announced it would resume importing Australian timber. These developments have hinted at a possible rejuvenation of the trade relationship between the two countries.

The decision to drop the barley tariffs comes after China and Australia reached an agreement in April to resolve their dispute over barley imports. As part of the agreement, Australia suspended its case against China at the WTO, while China promised to expedite its review into the tariffs. This resolution underscores the importance of the WTO dispute mechanism in safeguarding the interests of Australian producers and farmers.

The announcement of the removal of tariffs has been met with positivity in Australia, as it opens up opportunities for local exporters and benefits Chinese consumers and industry. Colin Bettles, the CEO of Grain Producers Australia, welcomed the decision, emphasizing that it is a victory for both Chinese and Australian stakeholders. Additionally, Australian Grape & Wine CEO Lee McLean expressed optimism that the barley decision could serve as a template for the removal of duties on Australian wine, another product facing Chinese tariffs.

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This development will likely have a positive impact on Australian barley prices and farmers. Dennis Voznesenski, a senior grains analyst at Rabobank, noted that malt quality barley is particularly likely to attract a premium over recent prices. However, there may still be some concerns among market players shipping barley to China, as there is the potential for China to reverse its decision or impose new restrictions in the future.

The Australian dollar responded positively to the news, rising by 0.34% to $0.65715. This recovery came after the currency hit a two-month low the previous day. The market’s reaction reflects the optimism surrounding the potential improvement in trade relations between Australia and China.

In terms of trade flows, the removal of barley tariffs is expected to impact the market dynamics of barley and its substitutes. Over the last three years, Chinese buyers turned to Canada, France, and Argentina to replace Australian barley supplies. Simultaneously, Australian sellers redirected their exports to feed barley markets in the Middle East. With China no longer imposing tariffs on Australian barley, it is likely that Chinese buyers will once again resume purchases of the new Australian crop, which will be harvested in October and arrive by year-end.

While the decision to drop barley tariffs is a positive step, Australia still seeks the removal of duties on other products, such as wine. The CEO of Australian Grape & Wine, Lee McLean, expressed hope that the barley decision could serve as a precedent for the elimination of tariffs on Australian wine.

In conclusion, the dropping of anti-dumping and anti-subsidy tariffs on Australian barley imports signifies a positive development in the China-Australia trade relationship. This decision not only benefits Australian barley farmers and exporters but also provides opportunities for Chinese consumers and industry. As tensions ease between the two countries, there is hope for further resolution of trade disputes and the removal of tariffs on other Australian products.

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