(The opinions expressed here are those of the author, a columnist for Reuters)
LAUNCESTON, Australia (Reuters) - If China was looking to send a political message to Australia by effectively banning the import of a commodity, then barley fits the bill almost perfectly.
China on Monday imposed what it termed anti-dumping and anti-subsidy duties totalling 80.5% on Australian barley imports from May 19, a move likely to end trade that has been worth between $980 million and $1.3 billion in recent years.
Australia’s official reaction has so far been muted, with Agriculture Minister David Littleproud saying the government will consider approaching the World Trade Organization for a ruling on China’s action.
The official reason for the tariffs is that Australia is dumping barley and damaging China’s domestic industry. Finding anyone who believes this is the sole motive behind the duties would be a challenge.
Rather, the move is seen as Beijing’s ongoing expression of displeasure over Canberra’s role in pushing for an international investigation into the origins of the novel coronavirus, and China’s initial handling of the outbreak that has turned into a pandemic, slamming economies around the world.
Beijing has already suspended imports from four of Australia’s largest meat processors, affecting about 20% of the country’s beef exports to China, while its ambassador to Canberra has hinted at wider actions.
The action on barley fits a pattern of Chinese diplomacy, whereby countries that offend Beijing are punished as a lesson, and hopefully brow-beaten into submission.
Now that Australia’s call for an international probe of the coronavirus has been taken up by numerous other countries, Beijing may feel it has done enough, for now.
While Australia’s barley farmers will undoubtedly be impacted by the tariffs, and may not easily find alternative markets, it’s probably more important what China hasn’t done.
Barley represents a miniscule part of Australia’s overall trade with China, and is a commodity that Beijing can easily source from other suppliers.
Australia’s total exports to China were worth A$194.6 billion ($126.5 billion) in the 2017/18 fiscal year, according to official data, meaning barley is around 0.5% of the total.
If China was determined to send a stronger message to Canberra it would no doubt target exports that were of more value, but that it could still source competitively from other suppliers.
IRON ORE ELEPHANT
Top of mind is liquefied natural gas (LNG), of which Australia is the world’s top producer, accounting for 9.7 million tonnes of China’s imports of 19.8 million tonnes in the first four months of the year, according to Refinitiv ship-tracking data.
LNG is a market suffering from oversupply, however, partly due to the economic slowdown caused by the coronavirus, but mainly due to a massive increase in output getting ahead of demand.
If China chose to halt imports of Australian LNG, it could probably make up the difference from other major suppliers such as Qatar and the United States.
Coal is another area where Australia is vulnerable to Chinese action, especially on thermal coal where there are numerous alternative suppliers such as Indonesia, Russia and South Africa.
For coking coal used in steel-making, China is more reliant on Australia, with about half of its imports coming from Down Under, and it would be difficult to source enough from other seaborne suppliers such as Canada and the United States.
It’s not just commodities that China could target, with Chinese students and tourists an important source of income for Australia, at least prior to the coronavirus curtailed travel.
The big daddy of China’s trade with Australia is iron ore, though, with China importing 232.7 million tonnes from Australia in the first four months of the year, about 68% of its total.
The other major supplier is Brazil, currently battling mining disruptions caused by the coronavirus pandemic, and other than the South American country there is no nation that can come close to meeting China’s needs.
The conventional thinking is that Australia is more reliant on China when it comes to trade, but imagine if Canberra banned iron ore exports, even for a short period of three months, or placed a substantial export tax on shipments.
That is a significant threat to China’s 1 billion-tonne-a-year steel industry that is heavily dependent on Australian ore, a raw material it cannot get elsewhere and of which it would rapidly run out given any kind of stoppage.
In other words, in the unlikely event of a massive escalation, Australia does hold some cards in its relationship with China, having the ability to devastate not just the steel industry, but all the downstream sectors reliant on it, such as construction, infrastructure and manufacturing.
It’s likely that neither country wants to escalate much beyond barley, and the issue may fizzle out, especially if Beijing thinks its bully-boy tactics have worked, and Canberra thinks it has stood up to China without inflicting too much damage on itself.
Editing by Tom Hogue
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