China to lift tariffs on Australian barley after 3 years

China's Ministry of Commerce said on Friday it would drop anti-dumping and anti-subsidy tariffs on Australian barley imports that had been in place for three years affecting billions of dollars of trade, as the two nations repair strained ties.

China and Australia agreed in April to resolve their dispute over barley imports, with Canberra to suspend a case at the World Trade Organization (WTO) over Beijing's anti-dumping and countervailing duties on barley, while China promised to speed up a review into the tariffs.

The tariffs will be dropped starting on Saturday, China's Ministry of Commerce said, citing a changing situation in China's barley market without providing further details.

The barley decision puts a spotlight on the few remaining Australian products restricted by China, including wine, which also faces tariffs, as well as unofficial restrictions on lobster and meat exports from certain abattoirs.

"This outcome demonstrates the importance of the WTO dispute mechanism in defending the interests of Australia's world-class producers and farmers," three Australian ministers said in a joint statement. "We have been clear that we expect a similar process to be followed to remove the duties on Australian wine."

Rabobank senior grains analyst Dennis Voznesenski said the decision would be positive for Australian barley prices and farmers with malt quality barley were especially likely to attract a premium over recent prices.

"Market players who are going to be shipping barley to China may ask for a premium due to risks involved as there are going to be some concerns, if for example, China goes back on its decision," he said.

The Australian dollar was up 0.34% to US$0.65715 after the announcement, having risen to as high as US$0.65875 earlier in the session, recovering from a two-month low it hit on Thursday.

Grain Producers Australia CEO Colin Bettles welcomed the decision, calling it a win for Chinese consumers and industry as well as local exporters.

Tensions easing

Relations between the two major commodity trade partners had deteriorated in 2020 after Australia called for an inquiry into the origins of Covid-19, triggering reprisals by Beijing including anti-dumping duties on Australian wine and barley.

Beijing implemented tariffs totalling 80.5% on Australian barley in May 2020, wiping out imports of the grain by the world's biggest beer market, worth as much as US$1.31 billion (about RM6 billion) a year.

That prompted a formal complaint by Australia to the WTO in December that year, as well as a separate case over wine tariffs that is still being pursued.

Tensions between Canberra and Beijing have eased since the centre-left Labour party won power in Australia last year.

Chinese purchases of Australian coal resumed in January after almost three years, while Beijing in May also announced it would start importing Australian timber again.

Australian Grape & Wine CEO Lee McLean said the barley decision was a very positive step for the country's relationship with China.

"We hope this may provide a template for removing the duties on Australian wine," he said.

In the case of barley, Chinese buyers had turned to Canada, France and Argentina to replace Australian supplies over the last three years, while Australian sellers shifted exports to feed barley markets in the Middle East.

Those trade flows are likely to shift again after China drops the tariffs, with its barley buyers expected to begin purchases of the new Australian crop harvested in October for arrival by year-end.