Australia reaches deal with China in barley dispute as trade ties improve

Alasdair Pal and Dominique Patton
Updated ·3 min read
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The crop is seen in a barley field at a farm near Moree, in New South Wales, Australia

By Alasdair Pal and Dominique Patton

SYDNEY/BEIJING (Reuters) - Australia has reached an agreement with China to resolve their dispute over barley imports, the two countries said on Tuesday, a latest sign of improving ties between the major commodity trade partners.

Relations between the two had been strained for years, and worsened after Australia called for an inquiry into the origins of COVID, triggering trade reprisals by Beijing including anti-dumping duties on Australian wine and barley.

But tensions have eased since the centre-left Labor party won power last year in Australia. Foreign Minister Penny Wong met her Chinese counterpart Wang Yi in Beijing in December, the first such visit by an Australian minister since 2019.

Chinese purchases of Australian coal resumed in January after almost three years, and imports of beef have accelerated.

Wong said Australia would suspend a case at the World Trade Organisation (WTO) over China's anti-dumping and countervailing duties on barley, while China hastens a review into the tariffs.

"China has agreed to undertake an expedited review of the duties imposed on Australian barley over a three-month period, that may extend to a fourth, if required," she told a news conference.

"In return, we have agreed to temporarily suspend the WTO dispute for the agreed review period."

The government expects a similar result in a second dispute on wine tariffs, she added.

BARLEY REBALANCING

China's ministry of commerce, which had imposed the barley tariffs for a five-year period, later confirmed it had reached a consensus with Australia to settle the barley dispute, adding China was willing to work with Australia to address concerns about each other's industries.

On Monday, meanwhile, China had said Ma Zhaoxu, a vice foreign minister, would visit Australia and Fiji this week to hold a new round of "political consultations".

The 80.5% duties on Australian barley all but wiped out imports of the grain by the world's biggest beer market, prompting a formal complaint by Australia to the WTO in 2020.

Until then imports had ranged between A$1.5 billion ($1 billion) and A$2 billion a year.

The Grain Producers Australia welcomed the move. "This process to reach a resolution would be significantly shorter than if the WTO process continued," said Chairman Barry Large in a statement.

China's duties on Australian barley prompted its buyers to turn to Canada, France and Argentina, while Australian sellers shifted exports to feed barley markets in the Middle East.

That trend could now be reversed.

"Rebalancing is what will happen," Brent Atthill, head of brewing consultancy RMI Analytics, said. "China will have more choices for buying and a better way to manage the war situation in (exporter) Ukraine."

In China, while most maltsters already have enough stocks for this year, resumption of trade in a few months would allow Australia's new barley crop, harvested from October, to reach China at the end of the year, said Yang Zhenglong, general manager at Malteurop China.

"Everybody is waiting for Australian barley to come," he said.

In France, new-crop barley premiums had already plunged at the end of March ahead of talks between China and Australia.

“It looks like Australian barley will go back into the Chinese market, which is bad news for other suppliers like France, but also Argentina and Canada,” a European trader said.

($1=1.4990 Australian dollars)

(Reporting by Alasdair Pal in Sydney, and Dominique Patton, Yew Lun Tian and Ethan Wang in Beijing; additional reporting by Gus Trompiz in Paris and Michael Hogan in Hamburg; Editing by Clarence Fernandez and David Holmes)