Australia-China dispute erupts over beef and barley exports

China has threatened major tariffs on barley while restricting imports of beef in what it calls an ordinary trade dispute but the Australian government suggests is ‘economic coercion’.

Concerns are mounting that Australia’s agriculture sector could suffer as the country’s diplomatic row with China over the coronavirus crisis continues, with beef and barley producers caught in the crossfire.

Jingye Cheng, the Chinese ambassador to Australia, told the Australian Financial Review in April that Chinese consumers could boycott Australian goods and services if Canberra continued to push for an independent inquiry into the origins of the covid-19 outbreak.

China then issued an ultimatum on May 10, giving Australia 10 days to explain why it should not impose tariffs on Australian barley of up to 80 percent.

This followed an 18-month investigation by China into claims that Australia had been dumping barley onto the Chinese market by exporting it at prices cheaper than the domestic market.

Australia’s federal trade minister Simon Birmingham denied this claim last week, saying: “Whilst Australia respects China’s right, as with any nation, to undertake domestic investigations into anti-dumping matters, we do not accept that there is a prima facie case, let alone a conclusive case, to find dumping by or subsidy of Australian producers.”

Trade tensions escalated this week as China blacklisted four major Australian beef exporters, for what Chinese foreign ministry spokesman Zhao Lijian said was the detection of “repeated violations of inspection and quarantine requirements agreed by Chinese and Australian authorities.” Some of the issues are centered around incorrect labeling of products.

These claims have been disputed by the exporters and the Australian government, which has sought urgent talks with its Chinese counterparts.

The four meat processing facilities prevented from exporting to China are two Queensland abattoirs run by JBS Australia in Toowoomba and near Ipswich, as well as the Kilcoy facility in Queensland and the Northern Co-operative Meat Company at Casino, New South Wales. The Kilcoy abattoir is owned by Chinese interests.

The Chinese foreign ministry has described the barley investigation as a “normal trade remedy investigation,” and has denied claims from the Australian side of “economic coercion.”

In a statement this week, Zhao said: “China’s position on its relationship with Australia is clear and consistent. Sound and stable China-Australia ties serve the common interests of both, but it takes efforts from both sides to ensure such a relationship.

“We hope Australia can work with us to uphold mutual respect, equality and mutual benefit and strive to advance bilateral co-operation and mutual trust, as is in keeping with the two sides’ comprehensive strategic partnership.”

One market source with ties to the beef sector described the developments to Agri Investor as “highly concerning” and expressed hope the Australian government would stand up to China, with the People’s Republic requiring protein imports to make up for a shortfall following the spread of African swine fever in 2019.

Another market participant expressed a desire for caution on the part of the Australian government and hoped that tensions would not escalate to the point where other sectors could be dragged in.

But they pointed out that a similar dispute, officially linked to labeling of meat products, occurred in 2017 involving some of the same meatworks but was resolved relatively quickly.

The four facilities that have been blacklisted account for more than 30 percent of Australia’s beef exports to China, a source told Agri Investor. Australia’s beef exports to China amounted to just over A$2.6 billion ($1.7 billion; €1.5 billion) in 2018-19, around 25 percent of Australia’s total beef exports of A$10.8 billion, according to figures from the Department of Foreign Affairs and Trade.

China accounted for a much higher proportion of barley exports at around 57 percent, or A$591 million of the A$1.04 billion total.

A spokeswoman for the Australian Meat Industry Council, which represents meat processors, described the dispute as a “trade and market access issue” that was being dealt with by the Australian government. The council said Australia’s export sector had fared “exceptionally well” during the coronavirus pandemic due to preparedness measures implemented by exporters.