China’s retaliatory tariffs have limited impact Australian barley exports increase

Relations between China and Australia have hit rock bottom since last year, with the Chinese Communist Party imposing high tariffs on Australian barley and other agricultural products in retaliation, but the Wall Street Journal says these measures by Beijing have dealt limited blows to Australian farmers, who have explored new markets and inspired similar responses in other areas.

In April last year, the Australian government infuriated the Chinese Communist Party by calling for an international independent investigation into the Chinese Communist virus (coronavirus). China and Australia were then embroiled in a diplomatic spat, with the CCP threatening an economic boycott, but Australia saying it would not give in.

The CCP then launched a trade drive to curb imports of Australian beef, wine and coal, notably by imposing high tariffs of upwards of 80 percent on Australian barley.

Australian Barley Farmers Take Multifaceted Action to Counter Communist Tariff Shock

The Wall Street Journal said Australian barley farmers previously exported up to 70 percent of their crop to China. Despite being hit by high CCP tariffs, the industry has mostly weathered the tariffs, with increased barley exports and very few bankruptcies, suggesting that the impact of CCP trade pressure on certain industries has been limited.

Total Australian barley exports are expected to increase by 64% in the 12 months to October 2021. Traders have sought sales in other large markets such as the Middle East, though this brings painful trade-offs: Middle Eastern consumers mostly use barley for livestock feed, not for beer, and prices are typically lower.

Farmers have also shifted from growing barley to crops such as wheat, because China does not dominate Australia’s wheat trade. They seek a unified response, such as supporting Australia’s challenge to the Chinese Communist Party’s barley tariffs at the World Trade Organization, to prevent divisions that could be exploited by the Chinese Communist Party.

South Australian producer Andrew Barr plans to reduce the share of barley grown on his farm to 20 percent from about a third last year. That would be the smallest share of plantings he has allocated to the grain in 20 years on his farm.

Another strategy used by the Australian barley industry is to cultivate markets from the Middle East to Japan and Southeast Asia, and even as far away as Mexico. Even if the Chinese Communist Party removes tariffs, it would reduce the vulnerability of the Australian barley industry to a future blow in a diplomatic spat between China and Australia. Traders expect Saudi Arabia to become the largest market for Australian barley this year.

Barr said that while he was pleased to be able to sell barley to Saudi Arabia, he still hoped that the Australian barley industry would find more markets in South Korea, Japan, Vietnam, Thailand and India. These markets pay a premium for premium barley and are closer, distance-wise, than the Middle East, which means freight costs will be lower.

Other industries imitate the barley industry

Many of the strategies adopted by the Australian barley industry to survive are now being copied by exporters in other industries, such as Australian brewers and salmon farmers.

Australian winemaker and distributor Treasury Wine Estates Ltd. plans to ship wine allocated to China to other Asian countries, as well as the United States and Europe, in the face of a 169 percent tariff on wine imports imposed by the Chinese Communist Party. The company will also increase its marketing efforts in these locations.

Even industries that have so far been spared from the Chinese Communist Party’s restrictions are reacting. “Huon Aquaculture Group Ltd.”, an Australian fish farmer, decided early last year to ship salmon originally earmarked for China to the United States and said it expects to reduce sales to China even more in an effort to diversify its market away from the Chinese market.

For many, the reordering of the market away from China has long been a matter of Time, even if it causes short-term pain for exporters, the China Daily said.

Australian Lawmaker: Communist China Puts Politics Above Fair Trade

Beijing often uses its large domestic market as leverage to achieve its foreign policy goals. According to a report by the Australian Strategic Policy Institute (ASPI) last August, China has used so-called coercive diplomacy 152 times in the past decade, affecting 27 countries as well as the European Union. Since the beginning of 2018, 113 times have occurred, the report said.

“The current trade disruptions with China, whether with meat, barley, lobster or timber, are not isolated incidents.” The China Daily quoted independent Australian MP Rex Patrick as saying, “Rather, they are a deliberate pattern of punitive measures, with the Chinese Communist government putting politics ahead of fair trade.”

The report said that how the Australian barley industry resisted Beijing’s backlash could provide lessons for countries that have angered the Chinese Communist Party and had punitive tariffs imposed on them.

The China Daily previously reported that the Communist Party’s move to ban imports of Australian coal is exacerbating the crisis in China’s coal market, as evidenced by soaring domestic coal prices and supply shortages. The crisis is exacerbated by the cold winter.

Australia is the world’s largest exporter of coking coal for steelmaking and the second largest exporter of power coal for power generation. Australia is also the largest supplier of power coal to China. China has a shortage of power coal, but Communist Party officials are urging these companies to import more power coal from other places than Australia. Forcing Chinese buyers to pay a high premium for imports from further afield, in addition to the fact that power coal prices have risen 84 percent since the middle of last year.

From Norwegian salmon to Mongolian commodities, the Communist government has increasingly used China’s buying power to apply political pressure overseas in recent years, but the coal market suggests the ploy could backfire, according to the China Daily. Even as Chinese buyers heed Beijing’s demands not to buy Australian coal, Australian coal prices have rebounded as buyers from other big coal-consuming countries, including Japan and India, have stepped in.