Australia will formally ask the World Trade Organization to mediate barley dispute with China

A photo taken on Dec.14, 2020 shows a paddock of barley being harvested on a farm near Inverleigh, some 100kms west of Melbourne.

WILLIAM WEST | AFP | Getty Images

SINGAPORE — Australia will formally request the World Trade Organization's involvement in an ongoing trade dispute with China.

Beijing this year slapped anti-dumping and anti-subsidy duties to the tune of 80.5% against Australian barley. That is just one of several measures China has undertaken against Australian exporters in 2020.

Simon Birmingham, Australia's trade minister who is moving to the finance portfolio, said Australian officials in Canberra, Beijing and Geneva advised their Chinese counterparts on Tuesday of his country's intention to "request formal consultations" with China over the tariffs on barley.

"We will make those formal requests through the WTO tonight," Birmingham said, according to a transcript of his remarks at a press conference on Wednesday. He explained Australia's decision to involve the WTO was taken following "extensive consultation" with the country's industry.

'Thwarted' dialogue attempts

Australia's government and officials have exhausted all avenues in their attempts to engage China in a dialogue to iron out trade issues, Agriculture Minister David Littleproud told CNBC.

There has been mounting evidence that this has more to do around geopolitical issues and our sovereignty ... rather than technical trade matters.

David Littleproud

Australia's Agriculture Minister

'Independent umpire'

Bilateral relations between Canberra and Beijing soured earlier this year after Australia supported a growing call for an international inquiry into China's handling of the coronavirus pandemic.

"There has been mounting evidence that this has more to do around geopolitical issues and our sovereignty, and decisions we've made around our sovereignty and our principles and values in Australia —rather than technical trade matters," Littleproud said.

"We intend to go the independent umpire, the WTO, and ask them to arbitrate this because we strongly and vigorously will defend the fact that we have not dumped barley into the Chinese market. Nor do we subsidize Australian farmers," he added.

Littleproud explained Australia will not compromise on its sovereignty just as it does not expect other nations to do the same. China needs to understand that "the world is watching, watching their actions and the actions that they take here," he said, adding it is important for Beijing to start a dialogue with Canberra promptly.

Last month, reports said that the Chinese embassy in Australia handed over to several news outlets a list of Beijing's grievances that included Canberra's decision to ban tech firm Huawei from the 5G network in 2018 as well as blocking Chinese foreign investment deals in the country.

Future of Australian exports

Chinese media outlets this week said China's top economic planner granted approval to power plants to import coal without clearance restrictions, except for Australia, Reuters reported. In turn, Canberra urged Beijing to clarify the reports.

Coal is Australia's third-largest export and Prime Minister Scott Morrison said China's shift away from Australian coal imports would be a "lose-lose" situation that will be bad for the environment, according to Reuters.

While China had been an important destination for Australian thermal coal, making up as much as 30% of total exports from Down Under in 2018, that market share has been falling ever since, according to analysts at ANZ Research. They said in Tuesday note that Australian exporters have found additional buyers in South Korea, Vietnam and Japan and they are expected to hold up "relatively well" despite the Chinese ban.

Beijing has also yet to hit Australia's main export — iron ore. Analysts say that is likely due to the lack of alternatives available.

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