Australia inks deal to wind back China’s barley tariffs as trade relations thaw

China’s decision to review its trade restrictions on Australian barley has created a “face-saving off-ramp” towards the removal of billions of dollars worth of export bans, a leading expert says.

China has agreed to a three- to four-month “expedited review” of its trade tariffs on Australian barley in a deal that will see Canberra suspend legal action at the World Trade Organisation (WTO).

Announced on Tuesday by Foreign Minister Penny Wong, the move is regarded as the latest improvement in Australia-China relations after Beijing slapped about $20 billion worth of trade restrictions on Australian goods in 2019.

James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney, said the deal opens the door to resuming Australia’s barley export market “as discreetly as possible”.

He said Australia was expected to win its WTO appeal, but has instead opted to avoid “poking Beijing in the eye” to resume trade much faster.

“The Albanese government is bending over backwards to provide Beijing with a face-saving off-ramp,” Mr Laurenceson told The New Daily.

“There’s real value in that. If Beijing doesn’t take up the olive branch, there can be no accusation that Canberra has been anything other than a constructive partner.”

‘Template’ for ending disputes

Senator Wong said there has been “constructive dialogue” between Canberra and Beijing in recent months, with ministerial dialogue between the countries proving to be fruitful.

“This would potentially deliver a result in a shorter time frame than if we simply proceeded through the WTO,” Senator Wong told reporters.

Beijing’s 80.5 per cent duties on Australian barley have effectively halted an export market worth $916 million in 2017-18, the government said.

Under the deal, Beijing will review these duties in return for Australia suspending its WTO appeal against them.

However, if China fails to remove the tariffs after the review then Australia will resume its legal action in the WTO, Senator Wong said.

“Australia will continue to work within the WTO and other trade forums to protect and preserve the rights of Australian exporters as we seek to resolve disputes over trade,” she said.

Richard Maude, executive director of policy at the Asia Society, said this could become a model for removing trade restrictions on other goods, including wine, which is also the subject of an ongoing WTO appeal.

“The government hopes this will be a model for China’s trade restrictions to be lifted,” Mr Maude said.

“This is another strong sign that China is prepared to stabilise the relationship, despite its ongoing opposition to many Australian domestic and foreign policies.”

Trade Minister Don Farrell said on Tuesday he hopes the deal will be a “template for then moving onto other areas of dispute”.

“We are hopeful that at the end of that review process that the impediments that currently exist will be suspended and removed and that we can get back to normal [barley] trade with China,” he said.

Mr Laurenceson said that a much broader removal of China’s trade restrictions is now in sight, even if it’s taking a long time for Beijing to reverse its position.

“Today’s announcement is further evidence that Australia and China are continuing on a trajectory of the disruptive trade measures imposed in 2020 being removed, albeit very gradually,” he said.

Mr Maude said some trade restrictions – such as tariffs and anti-dumping charges – would be easier to roll back than non-official trade restrictions, but that the trajectory on trade with China has now turned positive.

“We’ve started to see the loosening of some restrictions. Coal has been getting back into Chinese ports … there’s been a few positive signals on China looking at the lobster market again too,” he said.

“It looks like we’re on the path to resolving more of these problems.”

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