14/05/2020 - 10:14

Farmers in China trade crosshairs

14/05/2020 - 10:14

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Barley growers in WA’s south are most exposed by growing trade tensions between Australia and China.

Jeffrey Wilson says WA barley growers will be hit hard by the trade dispute. Photo: Gabriel Oliveira

Barley growers in WA’s south are most exposed by growing trade tensions between Australia and China.

Grain growers in the Great Southern will be hardest hit by a Chinese government plan to levy tariffs on Australian barley, recent data suggests.

Barley growers were the first to be targeted in a growing trade dispute, with beef producers following and those in the dairy and wine sectors fearing they could be swept up in the fracas.

The trade battle follows heightened political tensions.

China has been highly critical of Australian calls for an independent inquiry into its handling of the COVID-19 pandemic.

In response, Ambassador Jingye Cheng suggested Chinese consumers would be less likely to buy Australian products as a result of the dispute.

Grains Industry Association of Western Australia numbers show about 1.9 million hectares of barley crop was to be grown in WA for the upcoming summer harvest season, with planting well under way.

The area east of Albany could be particularly affected, with GIWA reporting a more sizeable barley crop this year than the area planted to wheat.

Growers shipping through Albany have allocated 60 per cent more hectares for barley than wheat, GIWA’s numbers show.

Early in May, the Chinese government announced a tariff of up to 80 per cent on Australian barley, after a 12-month World Trade Organisation investigation into dumping claims.

‘Dumping’ refers to a country exporting a product overseas for a price below the domestic price, effectively the trade equivalent of predatory pricing.

At the time of writing, the federal government had just days to convince China to change course.

WA will be particularly hard hit, as the state produces about 80 per cent of Australia’s barley exports.

Barley sales to China were worth $805 million in the 2019 financial year, according to Agriculture Minister Alannah MacTiernan.

Perth USAsia Centre research director Jeffrey Wilson said the WTO would be unlikely to uphold the new tariffs, but WA farmers will nonetheless be severely affected in the interim.

Dr Wilson said one problem for WA growers was that barley sold to China was used to make beer, while buyers in other countries predominantly wanted lower value feedstock.

“For farmers, it’s a pretty vicious kick in the guts,” he said.

China lodged a dispute about barley in November 2018, arguing Australian growers were charging a higher price in the local market.

May was the deadline for China to raise the stakes or withdraw.

Dr Wilson said the east coast drought had created unique circumstances, with WA grain trucked across the country and fetching high prices from desperate farmers.

To be considered dumping, Australian growers would have to be selling locally at a persistently lower price, he said.

A second claim was that Australian barley was subsidised through water allocation rules in the Murray-Darling Basin, despite most of the grain being grown thousands of kilometres away in WA.

“Many of the things in the complaint are, in my view, without merit,” Dr Wilson said.

But that will be cold comfort to WA farmers, who would need to wait between two to four years to the WTO to resolve the disagreement, he said.

Ms MacTiernan said the state government had approached the local Chinese diplomatic representative to press for a solution, highlighting the close trade relationship.

Trade Minister Simon Birmingham said the government had worked with industry to mount a strong argument against China’s claims.

In the interim, Indonesia is a possible alternative buyer, Dr Wilson said.

He said that would be boosted by a new free trade agreement coming into force, which would mean the first 500,000 tonnes of grain was duty free with a 5 per cent tariff on the rest.

The barley would most likely be used by Indonesian cattle farmers as feedstock, as the country does not grow much of its own grain.

The challenge here would be building relationships in a new market, particularly difficult in the climate of a pandemic, Dr Wilson said.

China’s second move was to impose restrictions against four Queensland abattoirs for sanitary reasons, which Dr Wilson said accounted for about a third of the beef trade between the two countries.

The sanitary ruling might take two years to lift while scientists investigate. Using sanitary restrictions was a common move in international trade, particularly against Australia, he said, because the biosecurity regime here is very tight.

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