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Battles over Barley: Australia, China and the Tariff Wars

It promised to be bruising to both dignity and wallet. However brazen Australian politicians have been drumming up support for an international inquiry into the origins of the novel coronavirus, the first ones to be slapped in anger would have to be those in agriculture. Barley exporters find themselves facing a suffocating, and potentially market killing tariff, of 80.5 per cent. This Chinese tariff, as things stand, is set to be in place for five years. As the PRC accounts for half of Australia’s barley exports (worth $A600 million in 2019), the losses promise to be far from negligible.

The official explanation from China’s Ministry of Commerce was dry but damning. “The Ministry of Commerce conducted an investigation in strict accordance with China’s relevant laws and regulations.” The country’s own “domestic industry had suffered substantial damage” arising from subsidised Australian barley being sold in the country at below the cost of production; the measure, in effect, comprised an anti-dumping component (73.6 per cent) with the rest made up by an anti-subsidy.

Even before the measure, there were murmurings from PRC officials that evidence showing that barley had been “dumped” on the Chinese market by Australian farmers was scant. Nevertheless, investigations were initiated in November 2018. Beijing wished to teach Canberra a lesson. Australian exporters, members of industry and government submissions were duly made to MOFCOM seeking to rebut any claims of dumping, arguing that their “grain industry operates in an open, commercial and competitive global market.” No countervailing subsidies were provided to Australian farmers, and exports sales were “made at values above the purchase price offered to growers, which is in turn above their cost of production”.

The outcome seemed pre-ordained. Officially, Australia remains a near fanatical devotee of open agricultural markets, touting free-trade with uncritical, newborn enthusiasm. (In a time of insular trade policies crowned by the US-China trade war, such a view seems charmingly anachronistic.) Other reasons were seen to be at play. Prior to the investigation, the PRC had watched Australian moves to muscle in on the supply of undersea internet cables between Australia, Papua New Guinea and the Solomon Islands. Beijing had initially tickled the interest of the Solomon Islands in doing the same, using its communications company Huawei as the potential provider.

But minds were duly changed; Canberra’s offer, outlined in its Memorandum of Understanding of July 11, 2018, was too good to refuse, despite Australia’s record on internet speeds being, to put it mildly, abysmal. As Australia’s then Prime Minister, Malcolm Turnbull, explained, “We spend billions of dollars a year in foreign aid, and this is a very practical way of investing in the future economic growth of our neighbours in the Pacific.” It was also a very practical way of shutting the door on Huawei as the conscience of charity was placated back in Australia.

The PRC subsequently noted the enthusiastic pledge by US Vice President Mike Pence that his country would work closely with Australia and Papua New Guinea to expand the Lombrum naval base on Manus Island to accommodate Australian guardian-class patrol boats. The base offered promise as yet another US-friendly port to project power. The announcement heralding the investigation came a few days later. The pundits wondered: startling coincidence, or punitive agricultural politics?

Beijing’s methods of economic retribution against those it finds fault with often avoid a dagger-in-the-front approach. Violations of the internal rule-book and regulations is preferable to a formal acknowledgment of punishment for a foreign policy disagreement. In 2017, South Korean conglomerate Lotte faced the closure of 74 of its 112 China-based supermarkets in apparent retaliation for Seoul’s installation of the US-backed Terminal High Altitude Area Defence (THAAD) missile defence system. Lotte also seemed a plausible target, given its role in signing a deal suppling the ROK’s Defence Ministry with the land upon which to install the missile batteries.

The PRC also has another card to draw upon. Australia, that self-described paragon of free trade, has been unhesitant in deploying its own economic retaliations ostensibly to protect local industries Canberra claims have been injured. These take the form of anti-dumping and countervailing measures, both of which result in additional duties. Even the World Trade Organization permits their use in cases of material injury, provided there is a causal link between the damage and the act of dumping. Those deemed deserving of such treatment by Australian officials find their way onto the Dumping Commodity Register. The current list is impressively long, featuring extant tariffs or ongoing inquiries into imposing them on Chinese wind towers, A4 Copy paper, aluminium zinc coated steel, ammonium nitrate, clear float glass, PVC flat electric cables and railway wheels. The list goes on and includes, it should also be said, numerous other states.

Behind the shrill calls of the free-trade enthusiasts lies a qualifying hypocrisy, with a general acceptance that such rules shield, according to international trade academic Simon Lacey, “Australian import-competing industries from the full and potentially crushing impact of free trade with China.” But the Australian Productivity Commission thinks otherwise, arguing that there are “no convincing justifications for these measures, and they reduce the wellbeing of the Australian community.”

The wounding consequences of China’s barley play have been acknowledged by Australia’s farmers and certain politicians. In the rueful words of the Western Australian Agriculture and Food Minister Alannah MacTiernan, “These tariffs effectively close WA’s largest barley export market and could result in a direct loss of up to $200 million to Western Australian farm incomes this coming year from reduced barley values and reduced wheat prices, as more farmers turn to wheat crops.” The barley growers of the state had “been caught up in a much larger issue.”

A joint statement from the Grains Industry Market Access Forum, Australian Grain Exporters Council, GrainGrowers, Grain Producers Australia and Grain Trade Australia did not shy away from the scale of the decision. “For a number of years China has been Australia’s largest barley export market and Australia is the largest supplier of barley to China.” The duty rendered Australian barley uncompetitive in the Chinese market.

The federal agricultural minister, David Littleproud, resists any suggestion that the barley wars are part of a broader trade conflict, or that the decision was linked to Canberra’s zealous pursuit of an independent COVID-19 inquiry. Local producers, and the Australian public in general, have to be reassured that adventurism has not been the cause. “The reality is they are separate.” The investigations into Australian barley had “started 18 months ago, well before COVID-19 came into place and this was the juncture, coincidentally, of when it had to come to a decision.”

This view was not shared by former Australian foreign minister, Alexander Downer. Never one to let the plight of the wounded cloud his judgement, he was content that “we haven’t caved in and been bullied by [China] and we’ve got the investigation that we’ve wanted.”

This move in the barley market have pushed other exporters up the ranks. France, Canada, even Argentina, seem like candidates for malt barley; the Black Sea appeals for feed barley. Australia, for its part, is considering the WTO for redress, something it did to India over claims of sugar subsidies. (That process grinds on in interminable slowness.) “China, we think in this case, has made errors of fact and law,” claims trade minister Simon Birmingham. But the hefty elephant in the room remains Canberra’s willingness to storm Beijing’s barricades on behalf of its chief security sponsor. This is coming across more as an act of misguided allegiance than valiant heroism.

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23 comments

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  1. Jack Cade

    If Kevin Rudd or Julia Gillard had fronted up for the US in its quest to embarrass China, they would have been crucified by the Murdoch rodents. Can you imagine the excoriating articles the talking toilet brush snd Abbottophile Greg Sheridan would write? The thundering from the Nats? the editorials in The Australian?Scummo’s leading the charge might have been admirable under the circumstances if it had been suggested diplomatically and quietly, if it hadn’t been so blatantly a display of licking Uncle Sam’s arse.
    What would Trump have done if Scummo had said ‘No, I won’t do it? Cancel our airplane order? Close down Pine Gap?
    It is almost certain that China would have instigated its own investigation and would likely have welcomed a WHO investigation anyway. They wouldn’t like to risk another epi/pandemic. When you know that someone whose wrath you’d rather not provoke has large corns, you don’t tread on their toes. The outcome of Morrison’s wilfully treading on China’s toes was absolutely predictable.
    Watch out for the USA to offer to fill as much of China’s barley needs as it can. After all, the ANZUS treaty is actually the ANUS treaty.
    Alls fair in love and trade war.

  2. jon chesterson

    Morrison should wash his mouth out and do his dirty laundering scam on USA and the Trump administration, not China. This fake excuse of a PM needs to learn a little diplomacy, courtesy and intelligent foreign policy goes an awful lot further than his trigger happy mouth and brainless ego. He has himself to blame for the insult on our barley and beef industry and Australian farmers once again, but look how swiftly he will distance himself from any accountability for electoral purposes if nothing else. When will we actually have a proper, comprehensive, independent enquiry into any of the hundreds of Liberal scams and government corruption under the Morrison regime? Not just gross hypocrisy, but utter stupidity with an increasingly rational, competent and immensely more powerful neighbour, even considering their indiscretions; But there are precious few countries who can speak with legitimate authority, authenticity and integrity; and Australia is way way down that list close to the gormless mad ravings of the USA.

  3. M2

    I have it on good authority that China doesn’t want to communicate with the LNP anymore.And they will only lift the 80% Tariff on barley when Labor gets back in.

  4. Jon Chesterson

    That’s another fine mess you’ve gotten us into, which Labor has a long history of inheriting from the Liberals and turning around in the interests of all or almost, save a few wealthy corrupt bastards.

  5. wam

    They should operate like wheat and find somebodyto bribe? Perhaps they could arrange meetings through robb he is a master at chinese inducements? I imagine he still gets his $15000 weekly reward??

  6. Robert

    Can’t wait for the revelation that export will be continuing as usual from the Chinese owned farms

  7. Phil Pryor

    In the dictionary of Australian Political Perversion and Prostration, Sheridan might be an entry between Shame and Shithead. To be blunt, he is a romanist narrow minded ratbag with inflated tendencies to believing in his relevance. He is a talking turd, A bowel brained bastard who touches toes for Murdoch, the Great Patron of Self, Lies, filth, Phone Tapping, Coercer and leaner extraordinaire, the planet’s pox, plague, pestilence and perverted press peanut. Murdoch’s maggotty misfit lying hired scribblers are a disgrace to humanity. What egofixated turds, reinforced in stupidity by a saturation of superstition, as if they are blessed, anointed, sinproofed, special. Sheridan is as special as farts in a herd of cows. Avoiding facts if they are inconvenient, if they even exist, the propaganda flows like streams of diarrhoeic deliverance from death and destruction. Shitskulled scribblng scrotal scraping…

  8. Jack Cade

    I looked up the definition of Pecksniff in the Oxford dictionary. It’s a Dickens character, I think (I have never enjoyed any of Dickens books other than A Christmas Carol, but some of his names have come into everyday speech because the characters In the books are pretty good descriptions of people in the news. Uriah Heep? How about Gerard Henderson?
    But Pecksniff, according to the Oxford, means Unctuous hypocrisy, among others. Look it up, and see who you think it describes!

  9. Brozza

    Gump probably just increased his popularity with U.$. barley growers after getting some pompous, arse licking foreign sucker to do the anti-China rant for him, with predictable results.

  10. Jon Chesterson

    ASSUREDLY WHO NEEDS ALLIES LIKE THE TRUMP AND IDIOTS LIKE THE STUMP RUNNING OUR COUNTRY – OUR TWO BIGGEST LIABILITIES

    Do not however be surprised to find that Trump and the US have just screwed Australia as the likely main benefactor of China’s recent deal with the US on agricultural imports such as barley and beef. China just needed a plausible diplomatic excuse and dumb arse Stump Morrison stupidly provided it.

    Thank Stump and Trump, yes our so called PM and closest ally. The USA is the hidden enemy, not China!

    Is Trump Behind China’s Trade War with Australia? Australian Financial Review, 19 May 2020 https://www.afr.com/politics/federal/is-trump-behind-china-s-trade-war-with-australia-20200519-p54u82

  11. Matters Not

    Jon Chesterson – China’s concerns re Barley subsidies began some time ago as reported in the South China Morning Post of 21 December 2018.

    China’s commerce ministry launched an anti-subsidy probe into Australian barley imports on Friday, ramping up pressure on suppliers and increasing uncertainty in the market after an anti-dumping probe announced last month. … The China Chamber of International Commerce has complained that barley was subsidised by the Australian government, allowing the grain to enter the Chinese market in large volumes at low prices, hurting domestic suppliers, according to a statement published on the website of China’s Ministry of Commerce.

    Australia must have known it was coming way back then. If not – then why not.

    https://www.scmp.com/news/china/diplomacy/article/2179119/china-opens-anti-subsidy-investigation-australian-barley

  12. Jack sprat

    Trump and china have played our hill billy politicians like a bunch of yokels .Now china can hold up their part of the bargain to increase US agricultural imports by 40 billion dollars to avoid further tariffs on Chinese exports to the US . At least this time our toadying to the US has only cost Australia in financial terms and not also in lives as it was in the cases of Vietnam,Afghanistan and Iraq .

  13. andy56

    Matters not, its a smoke screen. China’s investigation was a plausibly deniable scam. They wanted us to know that we were in their sights.
    Why? Simple, we made it known we supported the USA. We helped trump blow his horn. The chinese have learned from us. Yes us “pure of heart capitalists”. Divide and conquer, say one thing and do another, Invade when you have Superior numbers, spread your crazy ideology anyway you can. Well you get the drift. you teach a kid that the only way to negotiate is with a big stick, dont be surprised when he grows up and uses a big stick.

    So wTF did stupid from marketing do? Called their bluff. Even now they are in denial that its all due to our own stupidity. “we won” they chant, it only cost a $1.5b industry. I fear the cost may escalate.
    They have form. We kicked them out cause it was costing us $200m a year, never mind the $3b in turnover the car industry generated nor the engineering know how.
    Just letting the market do its thing has brought us to our knees. Blind stupid hubris will take our arms away and we will be singing, its only a flesh wound.
    These fuckwits are killing australia.

  14. Andrew Smith

    Good luck with seeking redress through the WTO, more evidence of the government not thinking this one through, thanks to our ally Trump and the US:

    ‘From January 1, 1995 until December 10, 2019, the world trading system had a relatively reliable referee. If one government reckoned that another had broken the rules, then instead of lashing out immediately on its own, it could complain to the World Trade Organization (WTO). After a first round of independent arbiters judged on which side was in the right, WTO members could appeal to the Appellate Body, which would deliver the final verdict. But now, because of the Trump administration’s refusal to appoint new members, that Appellate Body is defunct. Without a referee, the danger is that trade disputes blow up into trade wars.’

    https://www.piie.com/blogs/trade-and-investment-policy-watch/why-did-trump-end-wtos-appellate-body-tariffs

    Read somewhere (possibly more a rumour) that in private the Morrison government was really quite angry being led into this (by rolling over to the White House).

  15. Jack Cade

    As I hinted in an earlier post, as far as Uncle Sam is concerned, Australia takes it up the ANZUS.
    US motto is ‘never give a sucker an even break.’ We fight their wars, our news services act as if US news is OUR news, we buy their shit armaments and think they are our friends. How do they define suckers?

  16. Barry

    @andy56, the Libtards along with the Communist Sympathizing Party, aka Labor, have sold democracy and a viable economy out. As a nation, we decided to trade with China despite its appalling human rights record which I would rate much worse than the US and other Western nations. At least there is still a semblance of freedom in the West although the elite’s use of covid19 as an excuse to snuff-out basic human rights has brought us to the doorway to Orwell’s 1984 or, if you prefer, present-day-China. Last week I have watched predictative programming out of China, a subliminal message about quantum dot vaccine technology. One young Chinese serf was shown presenting himself at a medical check point, his wrist scanned for the quantum ‘barcode’ as evidence of being up to date with the vaccine schedule. Two days ago Murdoch’s Slavespeak Network, the ABC news, showed a row of young serfs presenting themselves to have their ‘barcode’ read. Keep your eyes open for this trend. Accept it at your peril.

    This is what the de-humanization process of society looks like, accelerated by social distancing, which btw is supported by which scientific research paper(s) exactly? It’s by no coincidence that Big Brother returns to the blue screen soon. This is one vast experiment, a race to the bottom, where 99% of people are keen to bond to technology or to get an injection based on untested mRNA tech, supposedly to save their lifestyle and to save jobs that are never coming back! If people understood the mRNA tech has the potential to mutate DNA of future progency they might not be so quick to accept these untested chemical cocktails.

    And why is any of this happening – because the education system has done its job.

  17. andy56

    as if to reinforce what i have been saying, here is a statement by pompeo.

    “China’s been ruled by a brutal, authoritarian regime, a communist regime, since 1949. For several decades, we thought the regime would become more like us — through trade, scientific exchanges, diplomatic outreach, letting them in the World Trade Organization as a developing nation. That didn’t happen.”

    Let that resonate for a moment. Does this guy ever look in the mirror and understand what he sees?

  18. andy56

    Barry, through what prism are you looking through? Its not the same as mine. A sense of freedom in the west? WHO THE FUCK ARE YOU KIDDING? On so many levels we are still bound by medieval doctrines. China is saying to itself,” how lucky are we in these times”, they are the Bradbury of economics and good governance
    Appalling civil rights? They are worse than us? Apalling yes, worse than us? Fuck off. How many people in manus? How much damage around the world have we contributed to? Irag , Libya, afganistan, south america? Civil rights, great when our our rights are protected at the expense of others. One good thing DOES NOT excuse any bad. Pointing the finger at others when we are equally as culpable may satisfy our egos but does nothing to address the issues.
    “Stand up to the bully when he has control over you” is the current mantra. We decided to trade with china, We decided it was worth the risk. We decided that we would support USA all the way no matter how fucking stupid the request. We chose to decimate the barley trade. We are our own worst enemies because we allow ego to control our minds. We change like the wind. So who are we to criticise china? We fucked up, accept the responsibility.
    ” still a semblance of freedom in the West”. yea right, just look at Bezos and Musk and see how the workers are treated.
    America past legislation that 1/ means you cant not accept a job because there is corvid19 rampant in the plant because you wont get unemployment insurance 2/ you cant sue the company if you get covid19, they are have indemnity. Your choice to starve or catch the virus. To me this modern day Serfdom. The freedoms you allude to are illusory and only available to the relatively well off on this planet.

    I have more faith in humans. Revolution is how we clean the slate and we have form. The virus is an agent of change. In any period of change, the establishment wants to hold on. The upside is far greater than the downside but the danger with the downside is far greater. Staying put increases the size of the future problems because things like climate change and technology are genies we cant put back in the bottle, not matter how hard people like cavanan try.

    Barry, the picture you paint is tainted by too many zombie movies. Before you accuse china of bad behaviour, maybe you should look in our own back yard first. We set the standard, china just follows. Think about it, what fucking standard did we set? You want me to rattle off a list?

  19. guest

    An interesting bit of writing by Sheridan in The Australian today (21/5/20) exposed by the Loon Pond blog-site as a steal from the rightwing Henry Jackson Society in the UK.

    Well worth a read.

  20. Sunshine

    It makes me very sad how our government the LNP is treating our dear friends in China.

  21. paul walter

    They have never been concerned at the harm they do others in their obsessive quest for keeping power.

    The more fun- others pay for it.

  22. Jack Oliver

    Morrison is receiving copious amounts of freshly created money from the FED !

    Sadly – at the rate the US is printing and knowing that the purpose of COVID -19 is to create a ‘Force Majeure’ and renege on their obligations to China – well – the Zio/US economy will be toast by Christmas !

    Australia has sadly ‘lashed’ itself to that economy !!

    It could have been different – Australia has an estimated 16% of the worlds GOLD !

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