The Australian government has reached a deal with China that may lead to the removal of tariffs on Australian barley that were introduced at the height of diplomatic tensions in 2020.
While the axing of the tariffs is not guaranteed, the Australian government presented the snap review as an important “pathway” to resolve one of the most complex trade disputes between the two countries.
The foreign affairs minister, Penny Wong, and the trade minister, Don Farrell, announced that China had “agreed to undertake an expedited review” of its tariffs on Australian barley over the next three to four months.
In return, Australia had agreed to temporarily suspend its challenge against the tariffs through the World Trade Organization dispute process.
China imposed punitive tariffs of more than 80% on Australian barley in 2020, arguing the move was needed to level the playing field because the sector gained subsidies and Australian barley was being “dumped” cheaply on the Chinese market.
Australia always rejected those claims and the previous Morrison government initiated a WTO challenge. The announcement on Tuesday appeared to be aimed at giving China an off-ramp to drop the tariffs without the risk of a formal ruling against the measures.
Wong, who is acting as prime minister while Anthony Albanese is on leave, said the government would resume the WTO dispute process if China did not remove the barley tariffs at the end of the review period. The review is expected to take three months but may extend to a fourth month if required.
Farrell said the move was “a sign of goodwill” and reflected Australia’s desire to pursue discussions to “resolve our outstanding issues with China”.
“We hope that this will be template for then moving on to the other areas of dispute, in particular in respect of Australian wine, which is also subject to very high tariffs,” Farrell said.
China had previously been the largest export market for Australian barley, so the tariffs brought significant pain to the industry. The value of barley exports from Australia to China had averaged about $1.2bn per year between 2014-15 and 2018-19.
Briefings to the former government said the steep tariffs had “effectively eliminated Australian barley as a feasible option for Chinese importers, and exports to China effectively ceased after the tariff’s introduction”, forcing the industry to find other markets.
The plans come amid ongoing efforts to “stabilise” the relationship between Australia and China, which hit a low point in 2020 amid severe trade and political disputes.
The Chinese government rolled out hefty tariffs, unofficial bans or other restrictions against a range of Australian export sectors in 2020, including wine, barley, coal, timber and lobster.
While some progress has been made in recent months, such as the resumption of the coal trade, the wine and barley tariff disputes were considered more complex, given the involvement of the WTO.
A WTO panel’s ruling on barley was due to be handed to the parties by the end of last month, and this was to be shared with other countries three weeks later.
But Wong said the deal would “potentially deliver a result in a shorter timeframe than if we simply proceeded through the WTO”.
The chair of GrainGrowers, Rhys Turton, said it was “heartening to see a resolution of constructive dialogue between the two governments”.
“We are hopeful that this process will result in a positive outcome for Australian growers,” Turton said.
The opposition leader, Peter Dutton, said Beijing should not have introduced the trade measures in the first place and he would be “very pleased if the sanctions are lifted”.
The shadow ministers for foreign affairs and trade, Simon Birmingham and Kevin Hogan, said the announcement “warrants cautious optimism”. They called for “the complete and unconditional removal of tariffs on Australian barley and wine”.
Comment has been sought from the Chinese embassy.
Farrell and the Chinese commerce minister, Wang Wentao, met virtually on 6 February and agreed to enhance dialogue at all levels to pave the way to a timely and full resumption of trade.
Farrell is expected to travel to China to meet in person with Wang in coming weeks, although a date has not been announced.
China’s foreign ministry confirmed on Monday evening that its vice-minister of foreign affairs, Ma Zhaoxu, would “visit Australia and Fiji this week at their invitation and hold the new round of political consultation between the officials of the foreign ministries of China and Australia”.
