Australia is taking China to the World Trade Organisation over its intensifying trade war. Here’s what you need to know.

Australia is bringing the World Trade Organisation to weigh into China’s trade offensive. (Bai Xu, Xinhua via Getty)
  • The World Trade Organisation (WTO) could soon rule on Australia’s long-running trade dispute with China.
  • Months on from China’s introduction of substantial tariffs on a range of Australian exports, Australia is formally requesting a review.
  • Sky-high tariffs have decimated Australian wine exports, falling by 97%, and now threaten more than half a dozen other export markets.
  • Visit Business Insider Australia’s homepage for more stories.

When the Chinese government hiked tariffs on Australian wine last year, it effectively tripled prices and all but decimated a $1.1 billion export market.

At the time it was but the latest front of a rapidly expanding trade offensive, that has come to threaten exports from barley and lobsters to timber, tourism, and even Australian coal.

Now Australia looks like it’s going to get an independent third party to review whether China’s justifications for doing it stack up. Here’s what you need to know.

What set this all off?

The trade dispute between Australia and its largest trading partner appears to have fairly innocuous origins.

The two had cultivated a $251-billion-a-year trade partnership, with Australia selling $168 billion worth of exports to China every year. To put that in perspective, that’s nearly a third of Australia’s entire trade with the rest of the world, according to DFAT.

While the relationship has enriched both nations, it began to sour last year as China began hiking tariffs and launching investigations into a variety of Australian exports. China alleged Australia had been manipulating the market via unfair subsidies and ‘dumping’ products into the market with artificially low prices.

Australian denials of any wrongdoing have done nothing to ease Beijing’s ire, nor has its back channelling. Canberra is of the belief that the trade offensive is politically motivated, ostensibly due to the Morrison government’s determination to support a global inquiry into China’s early handling of the COVID-19 pandemic.

Other Australian campaigns, including the banning of Chinese telco Huawei from working on Australia’s 5G network and termination of Victoria’ Belt and Road initiative, haven’t helped endear it to the Chinese Communist Party (CCP).

The tariffs are devastating some industries

Right now, the broadside affects a large number of products.

Australian wine is being taxed at up to 212% on entering the Chinese market, effectively doubling or even tripling prices. Given China buys around 40% of the Australian wine sent overseas, it is having an enormous impact in pricing Chinese drinkers into buying Australia’s competitors.

The latest Wine Australia figures published on Thursday show how devastating it has been for Australian winemakers, as exports fell by almost 97%. Between December and March, Australia sold just $12 million worth of wine to China. Over that same period last year, it had sold $325 million.

The country’s largest exporter has previously warned that without a resolution, China’s actions will cost jobs and hurt regional Australia.

Equally, 80% tariffs on Australian barley have had a similar effect. Prior to the hike, more than half of the country’s barley went to China. Now the industry is desperately trying to open up new business with Saudi Arabia, Mexico, Thailand and Vietnam among others.

When China put a ban on live lobster exports last year, it put the $750 million export market on ice. With lobsters selling for anywhere up to three times the price overseas, it has raised fears many fishers would walk away from the industry altogether without sufficient domestic demand.

It has also halted purchases of beef from six Australian abattoirs, timber from several Australian states, and introduced an informal ban on Australian cotton as well as threatening copper exports.

Temporary halts on importing Australian coal, the country’s second largest export after iron ore, has only raised the blood pressure in Canberra only further.

World Trade Organisation

With federal ministers indicating China was not picking up the phone, it now looks like Australia has little choice but to go through the WTO to find a resolution. In March, Trade Minister Dan Tehan promised to begin arbitrage process with the ruling trade body in Geneva to bring an end to the dispute.

This week it proposed an independent panel be set up by the WTO to review the tariffs on Australian barley. While China rejected the move, it looks like it may move ahead anyway next month.

Separately, Australia has raised similar prospects for wine exports as officials become frustrated at the lack of headway it is making with their Chinese offsiders.

While it will take time and will likely only inflame bilateral tensions further, it now looks like the only avenue for Australia to find a solution.