Are We Prepared for a Trade War with China?

Experts are voicing out their concerns over beginning of a trade war between both the countries, one that could have widespread, devastating effects.

Although speculations over the initiation of a trade war have been ruling for last few days, Australia’s Federal Agriculture Minister has clarified that the nation is not in a trade war and will not retaliate to China’s tariff act. Australia is unlikely to be drawn into tit-for-tat actions with China by levying punitive restrictions on trade, the Minister stated.

Also Read! Brewing tensions between China and Australia: What could be at risk?

Having said that, let us discuss the set of events that are inflaming tensions between Australia and China:

China Imposes 80% Tariff on Australian Barley Exports

Escalating diplomatic tensions, China has recently levied an anti-dumping duty of ~73.6 per cent and an anti-subsidy duty of ~6.9 per cent on the Australian barley exports for about five years. The tariffs will be applied on domestic barley exports from 19^th May 2020.

Australia’s drought-affected grain farmers are likely to bear the brunt of the imposition of the tariff.

Although experts view China’s decision as a punishment against Australia’s support towards an independent probe into the origin of COVID-19, China claims the move as a reflection to months-long anti-dumping investigation against Australia for dumping or subsidising barley in China.

As per Australian Export Grains Innovation Centre or AEGIC, Australia is a significant feed and malting barley exporter, accounting for around 20 per cent of the world’s feed barley exports and 30 to 40 per cent of globally exported malting barley. Moreover, China is one of the major markets for Australian barley, taking in over 50 per cent of barley exports.

Consequently, Australia’s barley exports are likely to be hard hit with the latest imposition of tariff, wiping out massive sales into the lucrative market and halting billion-dollar trade between the two nations.

Australia is likely to appeal to the World Trade Organisation (WTO) on the belief that China’s import tariff decision is non-justified in line with anti-dumping practices. Additionally, the country is expected to seek alternate markets to reduce trade dependence on China.

China Suspended Beef Imports from 4 Australian Companies

China’s tariff decision came just days after the country suspended beef imports from four largest meat processors of Australia, including Kilcoy, JBS Beef City, Northern Cooperative Meat Company and JBS Dinmore.

All these four companies account for over 30 per cent of the Australian beef exports and have been banned on the basis of alleged breaches of China’s health and labelling certificate requirements.

As a result, these four Australian abattoirs have been restrained from accessing the Chinese market, causing a ripple of unease in the domestic nation.

However, the suspension of these four players didn’t come as a surprise as these companies were a part of the similar suspension of six facilities that occurred in 2017 when China banned beef imports from Australian meatworks over labelling non-compliance.

Coronavirus Inquiry Against China Intensifying Clashes

What’s worth noting is that China has a historic track record of punishing countries using trade measures, challenging the nations’ ideological demands. The conflicting outcomes between the two nations reflect China’s reaction to the repeated demand for an international enquiry into coronavirus origin.

Australia’s push for a coronavirus enquiry has been backed by a coalition of sixty-two countries, including New Zealand, Japan, Russia, Indonesia and all the twenty-seven EU member states.

The draft resolution by multiple countries against China has been proposed on the grounds of China’s unwillingness or inability to be open about the origin of COVID-19. The enquiry has been put forward at the World Health Assembly meeting, in which China’s President, Mr Xi Jinping has backed a comprehensive review of coronavirus pandemic.

However, the President highlighted that his country would support any such review after bringing the outbreak under control, stressing to conduct the investigation in an impartial and objective manner.

Besides, Mr Jinping made a pledge to contribute USD 2 billion over two years to battle the pandemic, especially for developing countries. He also ensured that China would make any COVID-19 vaccine developed in the nation a “global public good” as its contribution to pandemic response.

He further emphasized that China has already provided all the relevant data with regards to pandemic to the WHO and other countries across the globe in a most timely fashion.

Although the Chinese President and WHO has agreed over occurrence of the review demanded by Australia and EU nations, the probe is expected to intensify diplomatic tiff between Australia and China over the coming months. With China already hitting Australian farmers with punitive tariffs, will these trade tensions escalate further with Australia’s retaliation or not needs to be watched out for.