China's restrictions on Australian beef, barley seen as retaliation for support of coronavirus probe

Australian Prime Minister Scott Morrison speaks to the media during a press conference at Parliament House in Canberra, Australia, May 11, 2020. EPA

In the space of a few days, China has dealt heavy blows to both Australian barley and beef industries, raising suspicions that Beijing is using trade to punish Canberra for lending support to the international call to investigate the origins of the coronavirus pandemic.

The restrictions on Australian beef and barley may also pave the way for China to increase imports of the two agriculture products from the United States, helping it meet its purchase obligations under the phase one trade deal amid rising pressure from Washington, some analysts said.

Between Sunday and Tuesday, China confirmed it would likely impose a devastating tariff of just over 80 per cent on Australia's barley exports due to anti-dumping allegations, while also then suspending beef exports from four major meat processing plants in Queensland and New South Wales.

The moves raised suspicions in Australia that China is using technical requirements to punish Canberra for its political position, as it is suspected of having done to other nations in the past.

Late last month, Australia's push for the independent international inquiry into the origins of the Covid-19 outbreak was blasted by Beijing as a political manoeuvre to smear China, prompting Chinese ambassador Cheng Jingye to warn that upset Chinese consumers could stop buying Australian wine and beef.

There is precedent for China using technical requirements to block imports from countries with which it has political differences. In March 2019, China's imports of canola from Canada's largest exporter, Richardson International, were blocked after customs officials detected "harmful pests" in one shipment.

There was widespread belief that the ban was in retaliation for the Canadian government's arrest on behalf of the US of Meng Wanzhou, the chief financial officer of the Chinese technology giant Huawei, an accusation the Chinese government denied.

In 2010, China imposed import restrictions on Norwegian salmon soon after jailed political activist Liu Xiaobo was awarded the Nobel Peace Prize in Oslo.

On Tuesday, Chinese Foreign Ministry spokesman Zhao Lijian said the ban on Australian beef imports was due to violations of "inspection and quarantine requirements" discovered by customs officials.

Zhao then launched into an explanation of China's position on an investigation of the coronavirus' origin, urging people to "carefully read" the full text of ambassador Cheng's remarks, while also denying there was any connection with the ban on beef imports.

The toll on Australia's agricultural exports from the Chinese restrictions would be heavy, especially since the A$1.3 billion (US$846 million) barley trade to China accounts for around half of Australia's barley exports, prompting a plea from the Australia's National Farmer's Federation on Tuesday.

"Two thirds of Australia's farm production are exported. Almost one third of this, 28 per cent, is exported to China, including 18 per cent of our total beef production and 49 per cent of our barley," federation president Fiona Simson said. "China is an important market for a range of commodities including wool, cotton, grain, dairy, seafood and horticulture.

"However, we recognise in relationships as significant as that between Australia and China, from time to time, issues do arise. When they do, it is important that both parties work together in a respectful manner to, as soon as possible, resolve the challenge, to an end that is satisfactory to both."

Experts said that China's move, while seen by many in Australia as retaliation for taking the lead in calling for an international probe into the origins of the virus outbreak, could turn out to be a strategic move by China.

"On Monday, I thought there may be some connection between the recent Covid-19 incident [and barley], but the beef suspensions confirmed my suspicion that they are related," said Weihuan Zhou, an international economic lawyer at the University of New South Wales Law's Herbert Smith Freehills CIBEL Centre.

Zhou said this would help China seize the opportunity to buy more from the US instead, thereby fulfilling its commitments under the phase one deal, as both barley and meat products are allowed to help it meet its requirement to buy US$12.5 billion in US farm products in 2020 and US$19.5 billion in 2021.

Zhou added the caveat that how much barley and beef China can buy from the US would depend on how much the US was able to export, noting that US was not a big barley exporter in recent years.

The now intensified row had stepped up a notch last weekend when Australian grain groups heard from China's Ministry of Commerce (Mofcom) that it was forging ahead to impose tariffs on Australian imported barley as a result of an 18-month anti-dumping and countervailing duties investigation. The move prompted the Australian government to say it would defend its position through the World Trade Organisation.

While there were suggestions that it was a politically motivated move by China, a statement on the Mofcom website in November said the investigation would last six months and conclude on May 19.

Zhou said China's decision to impose tariffs was entirely reasonably, although "on friendlier grounds" China could have opted to pursue the anti-dumping problems though industry groups or diplomatic channels. Additionally, it could also have chosen to impose a lower tariff rather than opt for a much higher tariff than was initially suggested by its investigators.

The China-Australia Free Trade Agreement, which stipulates zero tariffs for barley, has no standing as an anti-dumping investigation overrides the agreement, Zhou added.

And while Australia's beef trade is less reliant on China, accounting for just 20 per cent, the 300,000 tons sent to China last year forms a large part of the livelihood of many premium cattle farmers.

"We are concerned that the suspensions appear to be based on highly technical issues, which in some cases date back more than a year," Trade Minister Simon Birmingham and Agriculture Minister David Littleproud said in a statement.

"We will work with industry and authorities in both Australia and China to seek to find a solution that allows these businesses to resume their normal operations as soon as possible."

Perth USAsia Centre research director Jeffrey Wilson said the tit-for-tat moves had the hallmarks of the start of a "trade war" between the two countries, but whether the situation escalated would depend on how Australia responded.

"It's a bit of a semantic matter. I would argue that China has declared a 'trade war' against Australia, but Australia has not retaliated yet. So to what extent can you call it a 'war' if only one side is presently fighting?" he said.

Zhou from the University of New South Wales also flagged that just as the anti-dumping investigations concerning barley was long in the works, it was not the first time China had put a ban on beef exports. In 2017, six meat processors were also temporarily suspended over similar labelling problems.

"Following so closely on the heels of recent remarks by the [Chinese] ambassador, some will almost certainly see an element of retaliation in the barley and beef announcements," said Michael Clifton, chief executive for the think tank, China Matters.

"Canberra will no doubt be pressing hard for the sensible engagement needed to resolve both issues. We can only hope that Beijing shares Australia's enthusiasm for a timely and diplomatic resolution."