China has imposed an 80% tariff on Australian barley imports and banned beef shipments from four major producers in the country over compliance issues, delivering blows to both Australia’s agricultural industry and the two markets’ trading relationship.

“Australian barley has been dumped and subsidised, which caused substantial injury to China’s industries,” Chinese commerce minister Zhong Shan told reporters on May 25. Dumping occurs when a seller exports a product to another country below market price, driving out competition.

The outcome of Beijing’s investigation into the dumping of Australian barley, which began in 2018 and was concluded on May 18, means that Australian producers now face a 73.6% anti-dumping tariff and a 6.9% anti-subsidy tariff applied to all their barley exports to China.

Australian trade minister Simon Birmingham has indicated Australia may appeal the decision. In a statement earlier this month, he said: “We have worked with the Australian grains industry to mount the strongest possible case against China’s anti-dumping investigation.”

Those who represent Australia’s agricultural industry are frustrated with the measures. “China is Australia’s largest barley market, almost 50% of our barley worth about A$917mn is exported to China each year,” says Tony Mahar, CEO of Australia’s National Farmers Federation (NFF), a non-profit industry association. According to Mahar, claims that Australia engaged in dumping were “unsubstantiated”.

Meanwhile, imports from four Australian abattoirs have been suspended by Chinese authorities over labelling and health certificate requirements. Patrick Hutchinson, chief executive of the Australian Meat Industry Council, says the four banned meat producers make up approximately 20% of Australian beef exports to China.

Australia relies heavily on China for the purchase of its natural resources, which include agricultural products as well as iron ore, natural gas and coal. In 2018, Australia exported A$136bn and imported A$78bn-worth of goods and services to and from China, according to Australia’s trade department (Figure 1).

It is an “anomaly” for a developed country like Australia to have such a high dependence on commodity exports to China, says Rebecca Harding, an independent economist and chief executive of trade data company Coriolis Technologies.

 

Figure 1: Australia’s top trade partners (A$bn)

 

Ulterior motives

The policy action by China follows Australia’s calls for an inquiry into the source of Covid-19 – widely believed to have originated in China’s Hubei province.

When rumours of the inquiry – now backed by more than 100 countries – first surfaced, it was met with an angry response from Beijing. “The so-called independent review proposed by the Australian side is political manoeuvring in essence,” foreign ministry spokesperson Geng Shuang said on April 23.

While China insists its policy action and the inquiry are unrelated, some believe China’s trade moves are in retaliation to the inquiry, and that this may not be an isolated event.

“China will try to assert itself more vociferously on the international stage than it has been – tariffs on Australian barley will be just one example. We’ll see this repeated as we go forward as countries challenge China over the virus,” Elizabeth Stephens, managing director of Geopolitical Risk Advisory, a global risk and data company, tells GTR.

Stephens says the inquiry is “very valid and fair”. “One of the reasons it’s been received quite as negatively as it has in China is because of the US describing coronavirus as the ‘China virus’, that’s antagonistic. If the US would take a more conciliatory approach, we might have received a more favourable response from China.”

Coriolis Technologies’ Harding says that China has a hold over Australia – and others – because of trade dynamics and that, at some point, Australia will have to offer a truce as it is economically reliant on the Asian giant.

She also points out that Australia-China relations were deteriorating before the pandemic. “You need to look a lot earlier than that to find where relations started to deteriorate. It is almost at the same time as Trump’s relationship with China began deteriorating,” she says. “10 years ago, Australia was keen on a relationship with China, but the whole alteration in the fabric of global trade since Trump was elected has affected Australia’s attitude towards China. It’s something that has been building.”

“Trade with China has grown more complex since the start of the pandemic,” says Sydney-based Lisa McAuley, CEO of Global Trade Professionals Alliance (GTPA), a non-profit organisation for trade professionals. “Recent measures implemented by China vis-a-vis Australia’s imports can be an indication that trading may not go back to the same conditions before the pandemic.”

Nevertheless, she tells GTR that “contention on tariffs about a specific product or number of products is unlikely to stop the entire exchange between both countries, given mutual interests”. She adds: “Countries will not stop trading with China overnight due to their experiences in the past five months.”

Harding says that Covid-19 has become inextricably “linked into trade policy and it has been Donald Trump that has done that”.

Over the past few months, US President Donald Trump has made it clear that he is “not happy” with China over the Covid-19 pandemic and, at the end of last month, made fresh tariff threats to China. “We signed a trade deal where they’re supposed to buy, and they’ve been buying a lot actually, but that now becomes secondary to what took place with the virus,” he told reporters on April 30. “The virus situation is just not acceptable.”

Using tariffs as a means of getting foreign policy objectives achieved is “really risky” right now, says Harding. “You end up creating an economic situation that we can little afford because of Covid-19.”