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Australia rules out trade war retaliation with China despite barley tariff escalation

Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Australia, May 14, 2020. EPA
Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Australia, May 14, 2020. EPA

Australia has ruled out retaliating for China's tariff of over 80 per cent placed on its exports of barley, insisting that the two countries have not entered into a trade war.

Late on Monday night, China confirmed an 80.5 per cent tariff would be placed on barley exports from Australia after concluding its 18-month anti-dumping investigation, which ruled Australia imports had hurt its domestic market.

Earlier in the investigation that began in November 2018, Chinese authorities had proposed a tariff of 56.14 per cent, but there have been some suggestions the more than necessary levy was further evidence the move was tied to Australia's political position on the international coronavirus inquiry.

"No, there's no trade war. In fact, even today, I think you have seen that there's increased demand for iron ore out of China," Agriculture Minister David Littleproud told various Australian media outlets on Tuesday. "The reality is they have used a process, quite fairly, around a belief that we have not been fair in our trade."

The tariff, by nature, needed to be high enough to exclude Australian barley from the Chinese market, but the earlier 56.14 per cent would have sufficed, said Weihuan Zhou, an international economic lawyer at the University of New South Wales Law's Herbert Smith Freehills CIBEL Centre

"As I originally speculated, the tariff has some connection with Australia's position on Covid-19," said Zhou. "The rate might be very different [outside of Covid-19]."

Both countries have a history of levying additional duties on their respective exports, but still enjoy a free-trade agreement on many products.

"Frankly, it will be disappointing for many Chinese breweries and other consumers in China of Australian barley," added Littleproud.

"They'll pay a price through higher barley prices there, or through substandard product they'll get from other countries and we will have to work very hard with our barley producers in Australia to find new market opportunities for them, particularly over the coming months, before we get to harvest time this year.

"And importantly, we will be pursuing those with a range of different partners, including Indonesia, where we have some 500,000 tonnes of feed grains coming online on July 5 in terms of tariff-free access there."

Australia's major agriculture industry bodies, including the National Farmers Federation (NFF), have also expressed their frustration over the action saying claims of dumping, where a product is exported and sold at a price lower than the price in the importing market, were unsubstantiated.

"This is a massive blow to Australian grain growers, who are right now nearing the end of their winter planting," NFF chief executive Tony Mahar said.

"China is Australia's largest barley market, almost 50 per cent of our barely worth about A$917 million is exported to China each year.

"The new tariffs will significantly curtail and, most likely stop, exports of Australian barley to China by artificially increasing the price, until the situation can be resolved."

Mahar added that Australian grain growers were the least subsidised in the world and that there was no reason for Australia to dump barley.

"They operate in a free and competitive global market. The idea that Australian barley has been dumped in China doesn't match the realities of Australian grain production," he said.

"Export sales are made at prices above the purchase value offered to farmers, which in turn surpasses their cost of production."

The Grains Industry Market Access Forum, Australian Grain Exporters Council, GrainGrowers, Grain Producers Australia and Grain Trade Australia have called on the Australian government to support farmers by "engaging deeply with China in a respectful and meaningful way" and to protect a trade that has been ongoing since the 1960s.

As the barley trade tensions escalate, the Chinese embassy in Australia took another aim at Australia's position on the coronavirus inquiry, the suspected trigger for the barley tariff.

In a statement released on Tuesday morning it said it was a "joke" for Australia to be vindicated by international support for a coronavirus inquiry after more than 100 countries at the World Health Assembly (WHA) agreed to sign a motion for the investigation.

The statement said the draft resolution to be adopted by the assembly was totally different to Australia's proposal of an independent review.

"To claim the WHA's resolution a vindication of Australia's call is nothing but a joke," the statement said.

Chinese President Xi Jinping addressed the assembly on Monday, saying China had "acted with openness, transparency and responsibility" during the Covid-19 fight.


Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Australia, May 14, 2020. EPA
Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Australia, May 14, 2020. EPA

Australia has ruled out retaliating for China's tariff of over 80 per cent placed on its exports of barley, insisting that the two countries have not entered into a trade war.

Late on Monday night, China confirmed an 80.5 per cent tariff would be placed on barley exports from Australia after concluding its 18-month anti-dumping investigation, which ruled Australia imports had hurt its domestic market.

Earlier in the investigation that began in November 2018, Chinese authorities had proposed a tariff of 56.14 per cent, but there have been some suggestions the more than necessary levy was further evidence the move was tied to Australia's political position on the international coronavirus inquiry.

"No, there's no trade war. In fact, even today, I think you have seen that there's increased demand for iron ore out of China," Agriculture Minister David Littleproud told various Australian media outlets on Tuesday. "The reality is they have used a process, quite fairly, around a belief that we have not been fair in our trade."

The tariff, by nature, needed to be high enough to exclude Australian barley from the Chinese market, but the earlier 56.14 per cent would have sufficed, said Weihuan Zhou, an international economic lawyer at the University of New South Wales Law's Herbert Smith Freehills CIBEL Centre

"As I originally speculated, the tariff has some connection with Australia's position on Covid-19," said Zhou. "The rate might be very different [outside of Covid-19]."

Both countries have a history of levying additional duties on their respective exports, but still enjoy a free-trade agreement on many products.

"Frankly, it will be disappointing for many Chinese breweries and other consumers in China of Australian barley," added Littleproud.

"They'll pay a price through higher barley prices there, or through substandard product they'll get from other countries and we will have to work very hard with our barley producers in Australia to find new market opportunities for them, particularly over the coming months, before we get to harvest time this year.

"And importantly, we will be pursuing those with a range of different partners, including Indonesia, where we have some 500,000 tonnes of feed grains coming online on July 5 in terms of tariff-free access there."

Australia's major agriculture industry bodies, including the National Farmers Federation (NFF), have also expressed their frustration over the action saying claims of dumping, where a product is exported and sold at a price lower than the price in the importing market, were unsubstantiated.

"This is a massive blow to Australian grain growers, who are right now nearing the end of their winter planting," NFF chief executive Tony Mahar said.

"China is Australia's largest barley market, almost 50 per cent of our barely worth about A$917 million is exported to China each year.

"The new tariffs will significantly curtail and, most likely stop, exports of Australian barley to China by artificially increasing the price, until the situation can be resolved."

Mahar added that Australian grain growers were the least subsidised in the world and that there was no reason for Australia to dump barley.

"They operate in a free and competitive global market. The idea that Australian barley has been dumped in China doesn't match the realities of Australian grain production," he said.

"Export sales are made at prices above the purchase value offered to farmers, which in turn surpasses their cost of production."

The Grains Industry Market Access Forum, Australian Grain Exporters Council, GrainGrowers, Grain Producers Australia and Grain Trade Australia have called on the Australian government to support farmers by "engaging deeply with China in a respectful and meaningful way" and to protect a trade that has been ongoing since the 1960s.

As the barley trade tensions escalate, the Chinese embassy in Australia took another aim at Australia's position on the coronavirus inquiry, the suspected trigger for the barley tariff.

In a statement released on Tuesday morning it said it was a "joke" for Australia to be vindicated by international support for a coronavirus inquiry after more than 100 countries at the World Health Assembly (WHA) agreed to sign a motion for the investigation.

The statement said the draft resolution to be adopted by the assembly was totally different to Australia's proposal of an independent review.

"To claim the WHA's resolution a vindication of Australia's call is nothing but a joke," the statement said.

Chinese President Xi Jinping addressed the assembly on Monday, saying China had "acted with openness, transparency and responsibility" during the Covid-19 fight.



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