China is threatening to slap a tariff of near eighty percent on Australian barley and this seems to be a reprisal for the Australian governments push for an investigation into the source of the Coronavirus outbreak that sent the world economy into lockdown.
High quality malting barley is a grain crop concentrated on farms in South Australia and Western Australia and last year the drought affected crop was worth $600 million. This tariff move comes at a critical time as the grain industry prepared to sow seeds for the coming years harvest. China is by far the biggest world market for this particular grain crop.
China is alleging that Australian farmers produced barley at a price lower than its " normal " level through 2014, 2015 and 2016, undermining local markets. It is threatening to impose either a duty of 73.6% or 6.9% as a punative duty. Australia has ten days to respond.
Australia respects China's right to investigate any anti dumping measures, but it does not accept that there is a prima facie case to answer, let alone a conclusive issue. If this tariff goes ahead Australia would most likely appeal the move and the case would go to arbitration and drag on for several years.
Clearly, this grain issue is being used as a threat to try and influence Australia to back away from that demand for an enquiry into the source of the Coronavirus pandemic. It is an election year in the United States and President Trump sees political advantage in pushing blame for the outbreak on China. US intelligence agencies are pointing to a suspicious phone shutdown at a Chinese environmental laboratory in Wuhan province which suggested an emergency about the time the virus first appeared. The Chinese response to the outbreak was secretive and slow and the Communist government is desperate to shut down any international investigation into the pandemic's source.
Such is the danger of trading with a super power. China can make a spurious claim and effect a tariff as a political move without fear of retaliation. The last thing we want is a trade war because that would be to our disadvantage. China buys vast quantities of our iron ore, coal and natural gas but it is also sending its young people to Australian universities and Chinese travellers are the backbone of our tourist industry. The all powerful Chinese government could choke off that flow by making travel to Australia " difficult " !
In this instance our barley farmers might be wise to consider sowing a different crop. This disruptive tariff may evaporate if sanity prevails but we are facing a world food shortage and our broad acreage farms are suppliers of what is in short supply. If a crop change here leaves China short on barley next year that would be an appropriate outcome to that tariff imposition.
Even super powers find that ill considered trade moves bring unintended consequences !
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