Australia & China: Australian farmers fear new barley trade sanctions from China

Australian farmers fear China is on the brink of hitting them with heavy trade sanctions after Beijing failed to budge on its claims that exporters are dumping barley, The Australian Financial Review reported on February 27.

In what would be the second blow to a major export sector to China in a week, it is understood Australia has also failed to sway Chinese authorities on a related complaint about subsidies and tax breaks in the grains industry. Analysts in China warned it was another sign of Beijing using trade as political retaliation against Australia but was also based around genuine concerns about the market being flooded with cheap product.

The case has also caught the attention of the competition watchdog concerned about trading by senior figures in the industry who were aware of China's concerns before they became public. Analysts said tightening supplies from Australia into China were driving up prices of barley, which is used to make malt in beer.

In what would be the second blow to a major export sector to China in a week, it is understood Australia has also failed to sway Chinese authorities on a related complaint about subsidies and tax breaks in the grains industry.

China's Commerce Ministry, the government body responsible for overseeing the investigation, has not commented on the matter since December, while China's state-controlled media has also remained quiet.

The deadline for the federal government, exporters and producers to respond to China"s claims that Australian exporters were selling barley at artificially lower prices passed on Monday.

Reports last week that the port of Dalian in China's north-east had banned Australian coal imports have raised fears Beijing will use exports to punish Canberra over diplomatic spats.

The body co-ordinating the grains industry response fears provisional sanctions are imminent as Chinese officials have already had more than a fortnight to make a preliminary assessment of submissions on the anti-dumping claim from exporters, led by CBH, Glencore, Archer Daniels Midland and GrainCorp.

Grains Industry Market Access Forum (GIMAF) executive manager Tony Russell said there had been negative feedback from Department of Foreign Affairs and Trade officials working to avoid an escalation of a dispute that threatens exports worth billions of dollars.

The threat of sanctions dominated talk on the sidelines of a national grain industry conference in Perth this week.

Mr Russell said he would not be surprised if China responded this week

Analysts in China backed up their fears, saying China's coal restrictions showed it would not hesitate to slap tariffs on barley and other goods.

Ma Wenfeng, a senior analyst at the Beijing Orient Agribusiness Consultancy, who also advises officials on agricultural policies, said he also believed Australian barley faced tariffs of 5-10 per cent, with a decision imminent.

"The anti-dumping investigation will have an impact on China's barley import. However, there is a significant price increase in Australia barley this year which will restrain barley consumption in China. China's barley import would see a sharp drop even without the investigation," Mr Ma said.

Other trading sources in China said the barley case was another sign that China was unhappy with Australia and would use barley tariffs as a warning to Canberra over political issues such as cybersecurity and Huawei. Both Australia and China denied restrictions on Australian coal imports revealed last week were politically motivated.

Analysts expect the price of barley, used to produce malt to make beer, would rise as much as 20 per cent this year due to restrictions on Australian imports. Canada is a rival barley exporter to Australia but faces its own political problems with China at the moment.

Ukraine-based analysts have cast a shadow over Australia's anti-dumping defence by circulating data suggesting barley was exported from Australia at prices significantly lower than those prevailing in the global grains market.

GIMAF and other grains lobby groups have been alerted to the Ukrainian analysis, which relates to a period outside the timeframe of China's complaint through the World Trade Organisation lodged in November.

The barley bunfight has also attracted the attention of the Australian Competition and Consumer Commission with industry leaders in WA quizzed about any unusual trading by farmers who may have had knowledge of China's growing concern about imports.

The price being paid to WA farmers for their barley has plunged from about A$400 a tonne to below A$300 on the back of the trade fears and after a record 5.1 million tonne barley harvest in the state.

The price is being supported by demand in the eastern states where widespread drought has caused grain shortages and stymied exports.

China's claims annual barley imports from Australia grew by 67 per cent to 6.4 million tonnes valued at US$1.28 billion from 2014 to 2017 with the average price falling from US$288.72 a tonne to US$198.05 a tonne over the same period and that the 2017 import price was well below prevailing prices in Australia.

Mr Russell said both the dumping and countervailing duties claims were unfounded and Australia had put forward a strong defence, but it might take some time for the complaints to be resolved through the WTO process and in the meantime China could apply provisional tariffs.

China's Ministry of Commerce did not immediately respond to requests for a comment.

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