The federal government has agreed to suspend its appeal to the World Trade Organization over Chinese government tariffs on Australian barley just before the international body was due to hand down a finding over the dispute.
In May 2020, China imposed tariffs of 80 per cent on Australian barley for five years, crippling a trade worth up to $1.5 billion a year.
The former Coalition government appealed that decision to the WTO, rejecting China's claims that Australia had used subsidies to distort the market.
Industry sources said the WTO was due to hand down a finding on the tariffs within days, with most observers predicting the panel would firmly back Australia in the dispute.
However, on Tuesday afternoon, the Foreign Minister Penny Wong announced that China had promised to conduct an "expedited review" of the tariffs over the next three months and that, in return, Australia would "temporarily suspend" its WTO action over the same period.
"The government is seeking to expedite the resolution of this matter. Obviously, we retain our rights in the WTO if we're not able to get agreement," she told journalists in Adelaide.
She said that bilateral negotiations might help Australian barley producers get back into the Chinese market much faster.
"This would potentially deliver a result in a shorter timeframe than if we simply proceeded through the WTO," she said.
She also said if the agreement provided a successful pathway to lift barley tariffs, then Australia hoped to follow a "similar process" to reverse tariffs on Australian wine.
"Obviously, stabilisation and the resolution of trade issues will take time, but we are pleased that constructive dialogue has resumed," Senator Wong said, adding that Australia would continue to work within the WTO "to protect and preserve the rights of Australian exporters.
Negotiation is Australia's 'preferred method', trade minister says
Trade Minister Don Farrell said Australia's "preferred method" of resolving trade disputes was "to discuss and negotiate with our trading partners".
"And, on this occasion, we have sought dialogue with our Chinese counterparts to see if there's any possibility of resolving these impediments through sensible dialogue," he said.
One Australian government source stressed that the suspension was temporary and that Australia could resume its WTO action after the review.
They said they were "confident" that China would reverse the tariffs during the three-month review, but would not say if Beijing had given any concrete commitments.
The announcement “warrants cautious optimism", said Shadow Foreign Affairs Minister Simon Birmingham and Shadow Trade Minister Kevin Hogan in a joint statement.
They stressed that Australia should “expect nothing less” than “full removal of the tariffs that China imposed on Australian barley”.
“As with recent engagements between Australia and China, the ultimate value of this process will be judged on the outcomes achieved,” they said.
“In this instance, that outcome should be the complete and unconditional removal of tariffs on Australian barley and wine tariffs, which should never have been imposed in the first place.”
Grain producers welcome move
The Director of the Australia-China Relations Institute (ACRI) Professor James Laurenceson said the Albanese government was "bending over backwards to provide Beijing with a face-saving off-ramp in the barley dispute case at the WTO".
"Whether Beijing comes to the party is up to it. But there can be no suggestion of anything other than Canberra being driven by diplomacy," he said.
Grain Producers Australia Chair, Barry Large, backed the government's strategy and said the organisation "looked forward to a positive outcome" from China's review of the tariff.
"Barley is an important rotation crop for Australian growers and any optimism on the future outlook is good," he said.
"This process to reach a resolution would be significantly shorter than if the WTO process continued."
The issue arose after the Chinese claimed Australia had been dumping barley below the cost of production, which the industry has always strongly denied.
It led to a shutdown of trade, which had a huge impact on grain farmers, with 2021 estimates that Australian grain growers lost $30 to $40 a tonne for feed barley when China imposed the tariffs.
Victorian grain grower and Grains Producer Australia spokesman Andrew Weidemann welcomed the decision, saying his organisation always opposed the WTO action.
Mr Weidemann said his group had been lobbying for a negotiated outcome with the Chinese, which "looks likely to be on the table".
He said it was "the first positive step" in four years, since the tariff was suddenly imposed on Australian barley, which effectively ended the trade between the two countries.
“The Chinese culture means that we have to save face somehow, and this is the first positive step towards it,” Mr Weidemann said.
Despite his optimism, Mr Weidemann was also cautious about the deal, which includes Chinese authorities reviewing the tariffs over the next three months, and Australia reserving the right to resume its WTO action if they're not lifted.
“It's still no guarantee that this will get across the line [and] the duties will be removed,” he said.
“Our contacts in China have been voicing their hope we would eventually [be] able to trade barley with them again.
“To have China back in the barley market, along with all the other new markets we've developed, it only bodes well for the barley industry in Australia.”
Additional reporting: Warwick Long
