Australia to Challenge China at the WTO as Tensions Escalate

(Bloomberg) -- Australia will challenge China at the World Trade Organization over Beijing’s decision to impose hefty tariffs on its barley exports, a further sign of deteriorating relations between the two key trading partners.

Trade Minister Simon Birmingham said Wednesday that the government had advised counterparts in Beijing of its intention “to request formal consultations with China.” The dispute process could take years to be resolved, but the organization should recognize that the tariffs are “not underpinned by facts and evidence,” he said.

“We will make this formal request to the WTO tonight,” Birmingham told reporters. “WTO dispute resolution processes are not perfect, and they take longer than would be ideal, but ultimately, it is the right avenue for Australia to take.”

China hit Australian barley with tariffs of over 80% in May after accusing the country of dumping the grain and subsidizing its growers. The duties could cost Australian producers about A$2.5 billion ($1.9 billion) over the next five years, according to estimates from GrainGrowers, an industry group.

“We are highly confident that based on the evidence, data, and analysis that we have put together already, Australia has an incredibly strong case to mount,” Birmingham said.

A spokesman for China’s foreign ministry declined to comment specifically on the case, telling reporters at a briefing in Beijing Wednesday to contact the relevant department. A representative for the Ministry of Commerce didn’t respond to an earlier request for comment.

Lengthy Process

WTO dispute settlements can often be a drawn-out process and the results are not expected to be known for months at least. A recent case involving China and America took about two years, when a panel ruled in September that the U.S. broke global regulations when it imposed tariffs on Chinese goods in 2018.

Relations between China and Australia have been fraught since 2018 when Canberra barred Huawei Technologies Co. from building its 5G network on national security grounds, and worsened this year after Prime Minister Scott Morrison’s government called for an international inquiry into the origins of the coronavirus. Beijing accuses Canberra of being a puppet of the U.S. and of meddling in its internal affairs.

It’s a marked reversal in the once cordial relationship that saw Australia host a state visit by President Xi Jinping in 2014 and sign a comprehensive free-trade agreement a year later.

Trade Curbs

So far this year, China has hit Australia with a raft of trade restrictions on products including copper, wine, timber and lobster amid deteriorating diplomatic ties. While some products, like wine, have been hit with anti-dumping and anti-subsidy duties, others including lobsters and logs have faced delays at customs or increased inspections for pests.

On Wednesday, China reiterated calls for Canberra to act to improve relations.

“The Australian side has taken some discriminatory actions against Chinese companies in violation of international practices,” said Wang Wenbin, a spokesman for the Ministry of Foreign Affairs. “We hope the Australian side will take China’s concerns seriously and take concrete actions to correct such discriminatory actions.”

Wang had listed a day earlier some of the problems China sees, including the ban on Huawei and the government’s halt of a dozen investments by Chinese companies in Australia.

Further Challenges

Birmingham didn’t rule out the possibility of raising further WTO challenges against China, saying that anti-dumping claims made by Beijing against the Australian wine industry that could push tariffs to over 200% had similar criteria to those made about barley, and that the government has the ability to respond.

He added that Beijing’s actions have increased the risk profile of doing business with China for companies all over the world.

Coal is also being impacted. More than 50 vessels carrying Australian coal have been stranded off China after ports were verbally told in October not to offload such shipments. China’s National Development & Reform Commission on Saturday appeared to formalize those curbs after giving power plants approval to import coal without restrictions, except from Australia, according to a Global Times report.

If this proved to be correct, such a ban would also breach WTO rules and the free-trade agreement that China and Australia signed in 2015, Morrison told reporters Tuesday. At a briefing on Wednesday, the NDRC didn’t address the latest development with Australia, preferring instead to point to efforts to rein in coal prices over the winter.

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