Barley: The trade war turned diplomatic long game

By Melissa Coade

Tuesday June 15, 2021

grain-silo-barley
Resolution with China over 80.5% tariffs on barley exports will likely take a long time. (Image: Adobe/golubsergei)

Last May China imposed an 80.5% tariff on Australian barley for five years, prompting Australia to seek redress at the World Trade Organisation (WTO), but experts warn the road to resolution is likely to be long and arduous.

When news first broke that China had launched an anti-dumping investigation into Australian barley exports in 2018, much to the chagrin of the local industry, there was some sense that the fracas could spill into other commodities. It did, and by 2021 Australian thermal coal, wine, beef and lobster to China joined barley as imports that our largest trading partner was scrutinising under anti-dumping and other measures.

The political move hit Australian industry where it hurt, with China being the biggest customer of local barley comprising 68% of national exports to the top ten barley markets. On China’s part, access to high quality barley in other markets continues and it makes the very effective point that it can do without Australia’s barley supply — for now that appears to be indefinite. 

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As the University of Newcastle’s Professor Lisa Toohey and co-author Associate Professor Weihuan Zhou explain in their piece for The Conversation, China could choose to extend the barley tariff beyond 2025 and a win at the WTO could be years down the track. But seeking a formal resolution from the international body is a sensible approach when negotiations in trade disputes have deteriorated in the way they have between Australia and China. 

More than a trade dispute

Addressing a press conference in Cornwall, England, at the weekend, prime minister Scott Morrison referred to the open knowledge  — even among G7 nations — that Australia has been in ‘a position of tension with China for some years’. He addressed a list of 14 grievances China raised with Australia last December, which included claims that Canberra was responsible for the independent media’s ‘unfriendly or antagonistic’ reports on China, as well as accusing Australian members of parliament for ‘racist attacks against Chinese or Asian people’. 

“There is not a country that would sit around that [G7 open session] table that would seek a concession on any of those 14 points as something they also would tolerate,” Morrison said.

“There are differences in world view here and they may never be able to be resolved. But living with China, which is the goal, also requires us to be very clear about what our values are and what our principles are and how our countries are run and how we will continue to run, free of interference.”

Morrison told reporters that the solution was to be patient, focused on clear goals and resolute on returning to a place where dialogue between Australia and China can occur once again. However the PM also added that he would refuse to engage with China ‘at the price of any of the issues that are set out on those 14 points being conceded’. 

Australia’s deteriorating capacity to negotiate with China is further being underscored in the slow evolution of its barley trade dispute.

Adjudicators wanted

Professor Toohey spoke to The Mandarin about what will follow in the WTO process now that Australia has chosen this path to deal with the trade dispute. She says the fact China vetoed the first request to establish an adjudication panel in April indicates some attempt to negotiate further. Latest developments though, suggest that efforts to work out the difficulties via negotiations have again failed. 

“[Australia and China have] made a genuine attempt to negotiate and to resolve the dispute between them and they’ve refined what actually we’re arguing about, but they haven’t reached a decision — and that’s really common,” Toohey says. 

“Now they actually have to get around to establishing the panel and work out who’s going to be on it.”

In May Australia made its second request for the WTO to establish a dispute settlement panel concerning its barley dispute with China. The latest request was announced in a joint statement from agriculture, drought and emergency management minister David Littleproud and trade, tourism and investment minister Dan Tehan. 

In acknowledging that China’s barley tariffs on Australian exports have ‘effectively stopped’ trade of the commodity between the two nations, Tehan and Littleproud said the next phase of the WTO process was to appoint panel members to adjudicate the dispute. 

“Australia remains open to further discussions with China with a view to resolving this issue,” the statement read.

“The government will continue to vigorously defend the interests of Australian barley producers using the established system in the WTO to resolve our differences.”

According to Toohey, a decision will be made about whether to have three or five panellists appointed to adjudicate and then the WTO Secretariat will propose panel members.

Once a panel shortlist is provided to both nations, then their teams of public servants will set about reviewing the credentials of the would-be members, including past speeches or articles they may have penned on a relevant subject. Given the highly technical questions concerning the Australian barley dispute, Toohey believes the policy boffins will want subject matter experts appointed to the panel.

“There’s lots of issues about the nitty-gritty of anti-dumping and countervailing duties, which is not everybody’s cup of tea. It’s extremely technical,” Toohey says.

“They would be looking for someone like retired government officials, or they might even be serving the trade officials from a different country — someone who has the background experience of going to understand the dispute. 

“But also there will be a political factor as well. You wouldn’t agree with someone who you thought was likely to be clearly one way or the other.”

Worth the wait

Despite the fact that a WTO adjudication is no quick fix, Toohey maintains that it is an appropriate and desirable mechanism to dealing with the issues Australia and China have. She notes that it often takes years for a dispute to move from decision to appeal to compliance action (panels are meant to decide within nine months of being established), and that this protracted action is more likely in the case of Australia and China.

“A particular feature of the WTO system is that it’s not designed to compensate the country for loss that they suffer as the result of a trade action,” Toohey says. 

“The WTO is about making sure that countries comply with the law and so the main remedy you get is that a country has to change its laws and procedures and comply.”

Although Australia’s position before the WTO will be that it has not subsidised any barley exports (it has included 27 different aspects in its complaint requesting the panel), that position is difficult to prove expeditiously. And even if a decision is made in favour of one country,  appeal decisions can take over 90 days to be handed down. Then, should a WTO ruling be determined as final, a losing party can request up to 15 months to comply.

“The WTO is a really important forum for resolving issues between partners. This system is quite mature in that it’s not an offensive act to bring a dispute against someone,” Toohey says.

“It sends the message that we’re willing to use international rules and international law to deal with our grievances, and that we want things to be focused on what the law is and not on political games.”

 


READ MORE:

Australia can repair its relationship with China, here are three ways to start

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