Australia reaches deal with China over barley dispute as trade ties improve

Australia has reached an agreement with China to resolve their dispute over barley imports, Foreign Minister Penny Wong said on Tuesday, in the latest sign of improving ties between the trade partners.

Relations between the two had been strained for years, and worsened after Australia called for an inquiry into the origins of COVID, triggering trade reprisals by Beijing including anti-dumping duties on Australian wine and barley.

But tensions have eased since the center-left Labor party won power last year in Australia. Wong met her Chinese counterpart Wang Yi in Beijing in December, the first such visit by an Australian minister since 2019.

Chinese purchases of Australian coal resumed in January after almost three years, and imports of beef have accelerated.

Wong said Australia would suspend a case at the World Trade Organization (WTO) over China's anti-dumping and countervailing duties on barley, while China hastens a review into the tariffs.

"China has agreed to undertake an expedited review of the duties imposed on Australian barley over a three-month period, that may extend to a fourth, if required," she told a news conference.

"In return, we have agreed to temporarily suspend the WTO dispute for the agreed review period."

The government expects a similar result in a second dispute on wine tariffs, she added.

China's Ministry of Commerce, which imposed the tariffs for a five-year period, did not respond to a request for comment.

"China is willing to work with Australia ... to advance the rebuilding of mutual trust between both countries and for bilateral ties to return to the right track," said foreign ministry spokesman Wang Wenbin on Tuesday.

He did not comment on the agreement.

On Monday, China said Ma Zhaoxu, a vice foreign minister, would visit Australia and Fiji this week to hold a new round of "political consultations".

The 80.5% duties on Australian barley all but wiped out imports of the grain by the world's biggest beer market, prompting a formal complaint by Australia to the WTO in 2020.

Until then duties had ranged between A$1.5 billion ($1 billion) and A$2 billion a year.

The Grain Producers Australia welcomed the move. "This process to reach a resolution would be significantly shorter than if the WTO process continued," said Chairman Barry Large in a statement.

China's duties on Australian barley prompted its buyers to turn to Canada, France and other markets.

Prices of barley have fallen since the start of the year, partly on hopes that Australia will resume imports.

"Everybody is waiting for Australian barley to come," said Yang Zhenglong, general manager at Malteurop China.

While most maltsters in China already have enough stocks for this year, resumption of trade in a few months’ time would allow Australia's new barley crop, harvested from October, to reach China at the end of the year, he added.

($1=1.4990 Australian dollars)