• Transcript, E&OE
Topics: The dispute with China over Australian barley exports.
17 May 2020

David Speers: Simon Birmingham, welcome to the program. Look, you don’t really believe that these trade sanctions from China have nothing to do with Australia calling for an inquiry into the virus, do you?

Simon Birmingham: Hello, David, it’s good to be with you. I can fully understand, given the very unhelpful remarks, such as those made by Ambassador Cheng a few weeks ago, why it is that people would seek to draw links and why those questions have been asked, not just here in Australia but in China and around the world. Ultimately, Chinese authorities have responded to those questions and they’ve been clear that, in relation to the barley matter, in relation to the beef matter, these are long-standing issues, and that they are regulatory trade matters in the way in which they’re handling them. So we take that at face value and we are engaging and responding in good faith.

Our Government has now lodged a comprehensive response in Beijing to the Chinese authorities in relation to their claims of dumping of barley in the Chinese market. We’ve done so backed up over a period of time by more than 10,000 pages of evidence, economic analysis, pricing analysis, and of course, clearly demonstrating that our barley producers, like all Australian farmers, operate free of Government subsidy, are some of the most productive and efficient in the world and that’s why they can produce large volumes, competitively priced for the world market.

David Speers: Okay. I want to come to that official response from Australia in just a moment. Can I ask, though, whether- I know you’ve been trying all week to talk to your counterpart in China. Has he or anyone returned your call?

Simon Birmingham: We’ve made a request for me to be able to have discussions with my Chinese counterpart. That request has not been met with a call being accommodated at this stage. I’d make

the point, David, that the Australian Government is always open for thoughtful and engaging dialogue with our international partners, including where we may disagree. And it is ultimately up to them as to whether or not they decide to reciprocate in kind

David Speers: Well, this is the point. Your counterpart, has any junior official called you, texted you, Whatsapped you? Has there been any communication over this with you?

Simon Birmingham: Well, government to government, we’ve had lots of communication. Our officials continue to engage in dialogue. We continue to of course work through at the diplomatic levels. All of that work, appropriately, occurs.

David Speers: But at the ministerial level, this would seem to be a problem, right? I mean, we’re meant to have this Comprehensive Strategic Partnership. What’s that worth if you can’t get a phone call right now?

Simon Birmingham: And David, as I said, the Australian Government is open for dialogue with our partners around the world, including where we disagree or where we have difficult issues to discuss. We will do so in an open, clear and thoughtful manner…

David Speers: Yeah, but, with respect, it doesn’t sound like they’re getting anywhere at that level. I’m saying, at a Ministerial level, let alone a leadership level, you can’t get through.

Simon Birmingham: Well, minister-to-minister, we are open for that dialogue as well, David. Now, it’s not a reflection upon us…

David Speers: You’re not getting a return call. What’s this Comprehensive Strategic Partnership meant to be about?

Simon Birmingham: The Comprehensive Strategic Partnership frames our engagement in a whole range of ways. Yes, in the economic sphere and in the trade portfolio, and we also cooperate in a number of other matters in terms of factors that deal with matters to do with drug smuggling or matters to do with regional health cooperation, especially in areas like malaria and so on. But…

David Speers: All right, but my point is these agreements don’t allow you to talk to each other on the phone.

Simon Birmingham: Well, the call ought to be returned, David. But as I say, it’s not a reflection upon the Australian Government. We are open to have that discussion, even where there are difficult issues to be discussed, at any time. It’s for our counterparts around the world to decide whether or not they agree to the same standards of open dialogue and discussion.

David Speers: All right. You touched on the Australian response to the threat to impose these tariffs on Australian barley. So has that now been lodged in Beijing, this response?

Simon Birmingham: It has been lodged. It’s a comprehensive response. We had already provided in conjunction with industry, initial responses in what has been an 18-month-long process around this anti-dumping case. Our response we’ve now put in place, as I say, is one built upon refuting claims of subsidy. The idea that somehow the payments that the Australian Government makes to upgrade irrigation infrastructure in the Murray-Darling Basin in any way impacts on barley prices in China, just doesn’t stand the test of any analysis. Our barley that goes to China is largely a product of dry land irrigation, predominantly coming out of Western Australia and the west coast of South Australia. It’s not coming out of the irrigated areas of the Murray-Darling Basin. Looking at pricing factors and all of the other technical arguments you would make in relation to an anti-dumping dispute.

David Speers: Would Australia be open to, as some in the industry have suggested, allowing China to put a tariff on the low-grade barley, but on the malt barley used in making beer, keep that tariff-free?

Simon Birmingham: That’s not something we’ve countenanced in the Australian Government response. Our view is that, very clearly, Australian barley lands in China at commercially competitive prices, based entirely on market factors. That there’s no subsidy involved, there’s no dumping involved. This is simply a commercial farming operation getting on with business and there’s no justification for duties to be applied on any of our barley products.

David Speers: So if they do put duties or tariffs on these barley products, given that Australian position and submission, what will you do if China goes ahead with these tariffs? Will you take them to the World Trade Organisation?

Simon Birmingham: I’ve publicly indicated that we reserve all rights in that regard. We will have a look if they do proceed to place duties in place at the arguments they make, and the rationale that they give. And based upon that, we’ll decide the next steps, which may involve a WTO dispute. Australia has used WTO disputes with other valued partners around the world in recent years. I’ve initiated them with Canada in relation to certain wine practices, with India in relation to certain sugar industry practices. This is about using the system that we strongly support of rules-based international trade, to ensure that where we think that things are operating outside of those rules, we call them out and we seek a resolution through the independent umpire.

David Speers: Now, this is the first time China has used anti-dumping provisions against Australia. Australia, by contrast, has used anti-dumping provisions against China many, many times. According to the Productivity Commission, Australia is, quote: One of the most prolific users of anti-dumping measures in the world. It’s resulted in tariffs of up to 144 per cent on Chinese steel. Can you honestly say that Australia hasn’t been guilty of a bit of protectionism to protect our own two steel makers?

Simon Birmingham: We have a comprehensive, but also a very transparent anti-dumping regime in place in Australia. Our anti-dumping commission goes through public inquiries, analyses evidence and ultimately is open to the same potential for challenge through WTO practices, as indeed, any decision levied against Australia is open to those challenges. So, yes…

David Speers: But we’ve used them, and when it comes to steel, on imports from India, South Korea, Vietnam, Singapore, Malaysia, Indonesia, Greece, Spain. Can you really say that we’re not guilty of a bit of protectionism here?

Simon Birmingham: And David, it has been globally recognised in recent years that there has been massive over-production of steel around the world. And that has led to a number of practices that distort the pricing of steel in the global environment. And that’s why we’ve seen dumping of certain steel-based products into the Australian market and caused that action to occur. And, as I say, it’s open to any of those parties against whom we’ve levied duties on that to take us to the WTO if they want. Australia responds to those claims. We have had one recently where Indonesia challenged an anti-dumping decision Australia made…

David Speers: And they won.

Simon Birmingham: …on a paper-based product. And it was a mixed determination, that’s right. They won on some points, we won on others, and we will respond and rectify those issues because we operate according to the global rule book, and that’s the way we play it.

David Speers: Let we ask you this: do you think China is a market economy?

Simon Birmingham: I think that China has an economy that, indeed, operates largely nowadays in more market-orientated principles, since more than 40 years ago Deng Xiaoping began the process of opening and reform. But clearly, it has a very large predominance of state-owned enterprises operating, sometimes in less transparent ways than others.

David Speers: Okay, but for these purposes of deciding anti-dumping decisions, is China, in your view, a market economy?

Simon Birmingham: Anti-dumping decisions we decide on a case-by-case basis. That’s the way our system works. So we will look at the evidence applying to any case…

David Speers: But you have to decide whether China is going to be treated as a market or a non-market economy. If it’s treated as a market economy, that makes life a lot easier for China.

Simon Birmingham: Well, when we’re making an anti-dumping decision, what we decide is whether or not a product is being subsidised unduly in its production in the country where it’s coming from. Or if it is being dropped in the Australian market at prices below that normal cost of trade in that home country. So these are very technical steps that we look at. The market conditions, including the nature…

David Speers: You also have to declare whether China is a market economy. Now, one of your predecessors, Mark Vaile, way back in 2005 as we began free trade talks with China, said Australia would declare China a market economy.

Simon Birmingham: And for the many Australian products that land in the Chinese market, it functions very much as a market economy. In talking about anti-dumping disputes, as I say, each of those cases is determined on their merits. Now, China is a valuable and important economic partner, not only to Australia, but to most of the countries of our region. Unsurprisingly, as its economy has grown so dramatically in recent decades, it is now, by far, the largest economy in our region, the largest goods market in our region, and therefore, the largest trading partner with many countries in our region, including Australia. That’s why we value engagement with that market, and are determined to continue to provide opportunities for Australian farmers and Australian exporters to do trade in that market, which has only continued to grow in recent years, including during the course of the start of this year as well.

David Speers: All right. China has agreed to buy more barley from the US as part of the thawing trade tensions between those two powers. Does that have anything to do with them wanting to buy less, do you think, from Australia?

Simon Birmingham: No, I think we’ve seen the US-China trade dispute play out over recent years. I’ve been critical of the way in which that occurred, outside of what I think are normally WTO-compliant rules and approaches, that the degree of might is right leverage between the two great powers of the world played off there. Now, they can play on different terms, perhaps, to how the rest of the world engages with either of them when it comes to trade. That’s why we’re such strong defenders of having a firm rules-based order in place. But in terms of the agreements they’ve struck, we’ll see exactly what that translates to in the future in terms of how it changes trade practices.

David Speers: Can I ask you a question a lot of people ask? Why haven’t we been able to diversify our trade beyond the Chinese market more? I mean, Australia is now more reliant on trade with China than when the Coalition came to office, despite other free trade deals being put in place. Why is that?

Simon Birmingham: David, partly I touched on that in the answer I just gave before, which reflects the market realities. China is by far the largest economy in our region, and therefore, is the largest trading partner with many, many of the countries in our region. That’s unsurprising when you have such a large economy there as they are. That said, we’ve seen some really strong growth in recent times as a result of trade deals that our Government’s done in other markets. Continued strong growth in Japan and Korea through those trade agreements. Strong growth emerging and demonstrating in countries like Vietnam and Canada, parties to the Trans-Pacific Partnership, which our Government pushed through. And Indonesia, now of course…

David Speers: Sure. But the figures do show that China is accounting for more of our two-way trade than it was some years ago. It’s accounting for more of our exports than it was some years ago.

Simon Birmingham: And China’s economy has continued to grow in that time, which indeed, has seen it drive greater demand for goods and services from right around the region, not just from Australia, but from many other countries. Ultimately, David…

David Speers: Okay, but do you think businesses and farmers need to look beyond China now?

Simon Birmingham: This is an important point. Government doesn’t determine who businesses sell their goods or services to. Australian businesses make those commercial decisions. Now they need to balance the risk and reward of whom they trade with. Ultimately, that is a commercial decision for each individual business as they engage in that. I would, of course, encourage businesses, where they can see equal reward or similar reward, by spreading their risk across numerous markets, to do so. And that would be wise business practice. But, in terms of that balance…

David Speers: Is China too risky, do you think, for them?

Simon Birmingham: I would expect that many Australian businesses, off the back of some unpredictable regulatory interventions, such as those we’ve seen in the last couple of weeks, would start to consider whether the risk profile has changed, and may, therefore, look at other markets.

David Speers: Trade Minister Simon Birmingham, thank you.

Simon Birmingham: Thank you, David.