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Australia will suspend a complaint against China with the World Trade Organization after Beijing agreed to review steep tariffs on Australian barley, in the latest breakthrough that signalled the easing of trade tensions between the countries.
Penny Wong, Australia’s foreign minister, said on Tuesday that the suspension of the WTO appeal was a “sign of goodwill” as Canberra attempted to rebuild relations with its largest trading partner.
“We hope this will be a template for other areas of dispute,” Wong said, adding that if a barley settlement was reached, she expected a similar process over wine tariffs.
The review, which is set to take up to four months, follows improved relations between the governments over the past year aimed at easing trade and political disputes.
China imposed tariffs of up to 80 per cent on Australian barley in 2020 at the height of trade discord between the countries. About A$20bn ($13.3bn) worth of Australian goods — including coal, wine, lobsters and cotton — were hit with punitive sanctions and other import measures designed to disrupt trade.
Beijing levied tariffs retaliation after the Australian government, then led by Scott Morrison, called for an inquiry into the origins of the coronavirus pandemic in Wuhan, which inflamed bilateral tensions.
The move was expected to damage Australia’s export-led economy, but the booming price of minerals and natural resources has bolstered it in terms of trade.
David Uren, senior fellow at the Australian Strategic Policy Institute think-tank, said China’s rapprochement with Australia reflected Beijing’s desire to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a regional trade pact, as friction with the US mounts.
“My sense is that China’s priority is to gain entry to the CPTPP, so it needs Australia’s support,” he said. “It is able to forge trade agreements in a way that the US cannot.”
Barley was the first Australian product to be targeted with tariffs in 2020 and is the first to be formally put up for review despite signs that coal shipments have resumed between the countries.
China imported about A$1bn worth of Australian barley — used to make Tsingtao beer — annually prior to the sanctions, accounting for more than half of the country’s exports of the grain.
Beijing accused Australia of using subsidies, such as drought relief, to manipulate the market, prompting the WTO dispute.
Uren said barley was also targeted because of pressure from domestic producers in China, but there had been pushback from beer companies that used the Australian grain.
“The barley tariffs have had an impact on the flavour of the beer,” he said.
Australia’s barley producers have largely been able to shake off the impact of the Chinese tariffs after Russia’s invasion of Ukraine boosted demand.
But much of Australia’s grain that was previously used for Chinese beer has been diverted to Saudi Arabia for livestock feed, which commands a lower price.
Barley growers argued that the industry would have work to do if China reversed the tariffs to displace Canadian and Argentine barley, which has filled the gap left by Australian malts over the past three years.
Pat O’Shannassy, chief executive of industry body Grain Traders Australia, said it would represent a “fantastic outcome” if the tariffs were reversed in the coming months for growers and traders who had invested heavily in building relationships with Chinese partners prior to the dispute.
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