Australia's relationship with China took a turn this week, with the Acting Prime Minister Penny Wong announcing the federal government has asked the World Trade Organization to suspend its appeal on Beijing's decision to apply tariffs to Australian barley.
While farmers and exporters have broadly welcomed the gesture, it is unclear whether it will be a turn for the better.
What's going on with Australia's trade to China?
If you think back to Mother's Day 2020, the pandemic was kicking off around the globe, and the former Coalition government had called for an inquiry into the origins of COVID-19.
China accused Australian farmers of dumping barley and subsidising grain growers, whacking an 80 per cent tariff on a trade that was worth $1.5 billion in 2018.
Dumping is the suggestion that Australian farmers were selling barley for cheaper than it cost to produce.
Having imposed similar tariffs on Australian wine, banning several meatworks, and halting timber, coal and lobster imports, China locked in the barley tariffs for five years in late 2020.
Farmers consistently maintained the barley tariffs were unfair, and the Australian government made the decision to appeal to the World Trade Organization, a first for any Australian farm export.
It's a costly and lengthy process.
The WTO acts like an independent umpire and had been due to hand down a ruling any day now — widely anticipated to be in Australia's favour.
But this week, the Australian government decided to suspend the appeal.
Why did Australia suspend the WTO appeal?
Australia has effectively put the umpire's decision on hold.
The federal government says China has promised to conduct an expedited review of the tariffs over the next three months.
It is confident that the review will put an end to the tariffs and allow Australia to commence its barley trade with China quickly.
If that doesn't happen, Australia says it will resume the WTO appeal.
For now, the Australian government says it wants to settle the dispute by dealing directly with China and claims the decision to suspend the appeal is an act of goodwill.
How quickly could barley trade resume?
Assuming China decides to drop the tariffs on barley in the next three or four months, grain traders say Australian exports of barley to China could resume very quickly, with contracts possibly locked in before Christmas.
At the time the tariffs were introduced, the grains industry estimated a lost premium of approximately $30–$50 per tonne or up to $500 million a year.
Even though Australia has had little trouble finding new markets for its barley, China had typically paid more for the grain than any other market using it to brew beer and spirits, as well as to feed livestock.
Despite the loss of the Chinese market, good seasons and other geopolitical factors, such as the war in Ukraine, have meant Australian farmers have had some of their most profitable years in recent times.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said that in 2022-23 Australia produced the third largest barley crop ever recorded, with the average farm income for West Australian crop growers soaring to more than $1.5 million.
Western Australian growers are the most reliant on export markets.
So what does this mean for other Australian farm exporters?
Australia's wine industry is watching closely.
Its appeal to the WTO — almost a carbon copy of the barley dispute — continues with winemakers desperate to resume trade with China as soon as possible.
Lobster and timber exporters have also been locked out of China since 2020 due to China's quarantine requirements.
For several Australian abattoirs, the block on trade with China is due to labelling, contamination, and COVID-19-related concerns.
Importantly, Australia recently resumed coal exports to China and many other farm exports remain unaffected by Beijing's sanctions.
It remains one of the most valuable markets for red meat, dairy, and wheat.
What does it mean for the broader Australian-China relationship?
First of all, resuming the trade hasn't happened, so that's a big if.
But assuming it can return to pre-pandemic relations, the resumption of the barley trade would help Australia's relationship with China continue to thaw.
After years in the deep freeze, there have been several signals that the relationship is mending — such as meetings between Anthony Albanese and Xi Jinping and other ministerial hook-ups.
While China's other sanctions, such as quarantine and labelling complaints, could be addressed with the stroke of a pen, the WTO is considered a much larger stumbling block.
So if shipments of Australian barley could follow coal and sail into Chinese ports once more, it would add significant momentum to the trade relationship.
There's no doubt Australia's relationship with China is about more than grains or lobsters.
Australia's standing with the global superpower continues to ebb and flow with Pacific allegiances, AUKUS deals, and TikTok bans punctuating the relationship. For now, farmers believe trading barley is of great benefit to both countries. How Beijing responds during the short-term suspension will show if it agrees.
