Topics: Australia to initiate WTO action for tariffs imposed on Australian barley by China
Simon Birmingham: Late yesterday out of courtesy Australian officials in Canberra, Beijing and at the World Trade Organization in Geneva advised their Chinese counterparts of Australia’s intention to request formal consultations with China in relation to the application of anti-dumping and countervailing duties against the Australian barley industry. We will make those formal requests through the WTO tonight. We’ve applied, at every step of this journey, all of the appropriate processes, procedures and courtesies to the manner in which Australia and Australian industries have engaged with the Chinese Government and their Chinese counterparts. This is the logical and appropriate next step for Australia to take. We have been a long-standing defender of the international rules-based system, of the importance of multilateral cooperation and engagement.
And in doing so, it’s appropriate that, when we argue for there to be international rules and an independent international umpire to resolve disputes, that when we find ourselves in the case of having such disputes, we call in the umpire and we ask the independent umpire to adjudicate and ultimately to help to settle those disputes. This is not the first time, even in my stint as Australia’s Trade Minister, that we’ve taken such action. Australia has a current dispute with India in relation to the sugar industry. We have had a dispute with Canada in relation to the wine industry, which importantly, we have ultimately resolved without having to use all of the WTO processes. So in initiating this dispute with China in relation to the barley industry, we again extend the important offer of dialogue and discussion as an off-ramp in relation to this dispute. We’ve done it with Canada in relation to wine, we can do it with China in relation to barley, if both parties are willing to come to the table and sit down and work through the relevant issues in that regard.
WTO dispute resolution processes are not perfect. They take longer than would be ideal, but ultimately, it is the right avenue for Australia to take at this point in time. We, along with many other countries, use these processes in the right and orderly way, and Australian industry should see this as being about Australia defending the values, operation and interests of Australian producers, but doing so in a calm, methodical and careful matter. We’ve taken this step following extensive consultation with Australian industry, and I thank them for their engagement throughout recent months, and indeed in relation to the grains industry and the barley industry in particular, for their cooperation over the preceding couple of years since China first initiated investigations into this sector, and as we have sought to work with them in their defence at every step of the way. We are highly confident that based on the evidence, data, and analysis we have put together already, Australia has an incredibly strong case to mount in relation to defending the integrity and proprietary of our grain growers and barley producers. We have full confidence that they are not unduly subsidised, that they do not dump that product into global markets, and that they have operated with nothing but commercial imperatives in relation to the way they have engaged in the China market, providing their Chinese customers, over a sustained period of time, with a high quality, value for money, market-oriented opposition in relation to Australian barley. And those are exactly the factors underpinned by evidence that we will take through the WTO processes in relation to defending the integrity of our farmers and grain growers and making sure that their rights are upheld through the global trading system.
Question: Minister, overnight, the Chinese Foreign Ministry pointed two specific deals they had issue with. One was the CK takeover bid for Australian gas pipelines, and the other was the Lion menu dairy deal. Neither of those deals were recommended to be blocked by the Foreign Investment Review Board on national security provisions, has Australia left itself vulnerable by blocking business deals for Chinese takeovers without further backing?
Simon Birmingham: Well Australia’s foreign investment laws have always operated on the basis that the Treasurer of the day makes the final decision in relation to whether or not an investment is in Australia’s national interest. And this is an important safeguard to ensure that ultimately, not only do we have that national interest test, but public confidence of foreign investment into Australia is maintained. And so those processes, underpinned by further analysis, but ultimately a judgement for the Treasurer of the day, need to consider all aspects around Australia’s national interest, take that advice from FIRB, overlay it with other advice and analysis, and ultimately come to a judgement call. Australia remains very much one of the world’s most open economies when it comes to welcoming foreign investment. The vast majority of applications that received foreign investment are approved, and over the last 12 months, the vast majority of applications have been approved, including the vast majority of applications from Chinese applicants through the FIRB process too.
Question: Minister, how long will the WTO process take? And what’s the worst thing that could happen to China if found in Australia’s favour?
Simon Birmingham: So the WTO processes, as I acknowledged in my remarks, take longer than we would wish to be the case in an ideal world. It could take years. It could take years. This is about achieving, as much as anything, a systemic outcome as well as a specific outcome. We want a specific outcome that recognises Australia’s grain growers and barley industry, operate in nothing other than entirely commercial ways and with the utmost of integrity. But we also want a systemic outcome that identifies the fact that the decisions that have been reached by Chinese authorities, on that basis, are not underpinned by facts and evidence and ultimately leads, we hope, to change in relation to their practices. The WTO processes enable and allow for third parties, for other countries to become third parties to the processes as well. So we will welcome the participation of other nations through these processes, which will mean that this is not just a matter assessed in relation to the Australia barley industry but hopefully can give rise to greater confidence in terms of the Chinese application of these processes to all nations into the future.
Question: Is it your expectation that other countries might join this and it might become a broader push?
Simon Birmingham: It’s quite common place for other countries to become third parties to proceedings in the WTO. Australia has done so on many occasions. China has done so on many occasions, and I would anticipate that others do so on this occasion.
Question: Minister, the WTO has been- the Appellate court is now down to one judge thanks to Donald Trump, so it’s usually got seven down to one. So, you say it’s going to take possibly years. Could it take decades given it has been stripped of all its resources and is practically useless at the moment?
Simon Birmingham: Andrew, you make an interesting point in that question, but it does actually also highlight an important point in relation to both Australia’s and China’s stated commitments to the World Trade Organization’s processes. So, there are essentially three distinct phases that this will go through, assuming there isn’t an off-ramp in which negotiators settle the issue. The first phase is the consultation phase, which is a relatively limited process running over a couple of months where the parties are essentially forced to engage in a consultation, in a mediation if you like to see if it can be resolved without having to go to the next stages. Assuming that does not lead to an outcome, the second stage is the primary phase of considering the case, where a panel is formed in the WTO to consider the arguments and to ultimately form a judgement. Then there is an appeal right, which is what you are speaking of in terms of the Appellate Body of the WTO, which is currently in a state of dysfunction.
However, a number of countries, around 20, worked together over the last year or so to agree upon an alternate approach whilst that Appellate Body is in that state of dysfunction. Notably, Australia and China both agreed to be parties to that alternate approach. So, we do have a functional appeal avenue available if we ultimately get to that stage, and we do so as a result of the fact that both Australia and China have demonstrated a commitment to co-operate with the EU, with Canada, and with others, with the WTO in
addressing this vacuum that exists in relation to its Appellate Body, and I hope that that mutual demonstration that Australia and China have both shown to the utilisation of the WTO’s processes, is also underpinned and reflected in the way in which this case is conducted. And ultimately, I again appeal for the fact that just as we have done so with Canada and the wine industry, and just as many others have done so in initiating WTO processes, there is always the ability to pause them and resolve these through dialogue instead.
Question: Minister, it’s been confirmed that Five Eyes officials are discussing potential joint retaliatory sanctions against China in response to what it has been doing to Australia, or possibly refusing to sell certain products to China that China refuses to purchase from Australia like coal. Where do you think that level of response fits in with something more formal like the World Trade Organization; would be that a move that you support from our allies given that by your own admission we are potentially entering into a year’s long process whereas this could actually bring China back to the table much faster?
Simon Birmingham: I’ll make two points there. The first is that Australia respects the proper processes and we are engaging through the proper processes and taking this dispute to the next stage of the World Trade Organization – is just that. It is the utilisation of the proper processes that we have all signed up to in terms of settling trade disputes. The second point I would make is that when it comes to the sales of Australian goods, and obviously the disruption that occurs when excessive tariffs are placed as part of an anti-dumping decision, as has been the case in relation to Australia’s barley exports and our wine exports to China, of course we have to go and look for alternate markets to support those industries. Our network of trade agreements allows us to do that, our relationships with other countries allow us to do that, and we will of course do everything we can and are doing everything we can within our powers through our Austrade, diplomatic and other networks, to use those relationships, to help our producers find and access successfully those alternate markets.
Question: But this is retaliatory action, other large nations are considering joining in on our behalf. They’re stepping up to the plate to help Australia, what is your take on that possibility?
Simon Birmingham: It’s for other nations to speak for themselves, I speak for Australia, and Australia is using the proper processes of the WTO and exploring wherever we can the opportunities and alternate markets, using our network of trade agreements and all of our other relationships to give our producers the best possible chance of accessing those markets.
Question: Could this be the first of several cases? Are you looking at bringing similar actions on wine, coal, cotton, seafood, beef, anything else?
Simon Birmingham: It is possible that there could be further actions, and certainly I would reserve all of Australia’s rights in that regard. We have a series of different actions that China has taken during the course of the year and each of them come with slightly different criteria for how you might respond in the WTO. Barley and wine are obviously both using similar criteria in relation to anti-dumping measures, and China’s rulings and decisions on those are transparent, although we think they are erroneous, but they are transparent and we’ve got the ability to be able to respond to those. In relation to other matters, some of the trade sanctions are clearer such as the use of phytosanitary or regulatory labelling and other standards. And if we don’t see appropriate steps taken to be able to resolve those issues in accordance with the agreements and undertakings that we share, well, again, we could consider further action including the potential use of the WTO.
Others seem to be the application of pressure or market distorting factors within the Chinese system where businesses within China, often state-owned enterprises, are being discouraged from purchasing Australian goods. Now, that of course is a harder point to prove than where there are extensive judgements or rulings that have been made by Chinese officials behind it. And in those areas we will monitor closely all of the trends that unfold in relation to purchasing decisions, watch that closely and see whether that leads us down certain avenues for appeal.
Question: This is an escalating trade dispute, can you what it’s ultimately costing Australia in terms of a dollar figure or hit to our GDP?
Simon Birmingham: Look, the costs obviously depend very much upon just where China chooses to take this, and in saying that I emphasise that Australia has not changed our positions in relation to our support for the growth and economic development of China, to our support for a positive relationship between Australia and China, and to our commitment to it being an open trading nation. China has undertaken a number of steps this year. They come at some relatively small, thus far macroeconomic cost, but clearly at some direct cost to some of the industry sectors, and with the pressure of shifting volume into other markets and whether or not that impacts upon the price points in those markets. So, we are continuing to monitor that very closely with each of those individual businesses. It really is in support of the industries, the businesses and the jobs in those sectors that our priority lies, and that is why we will work as hard as we can to help them find those alternate markets and contracts wherever possible.
Question: Do you have a ballpark figure so far?
Simon Birmingham: The costs obviously affect trade volumes that are in the billions of dollars but there will be alternate markets for many of those items and opportunities there which we have to continue to work through to make sure that we get the best possible substitute markets at the best possible prices for those goods and services.
Question: Considering this WTO process could take years or decades, how will this actually help producers or Australian businesses actually caught up in this issue at the moment? Is this about drawing a line in the sand for future? Or do you hope that actually lodging these sort of cases might hopefully get China to reconsider their actions right now in the here and now?
Simon Birmingham: As I said before, we would hope this dispute will ultimately resolve the issue in case in relation to Australia’s barley industry. And in the meantime, of course Australian barley producers will assess whether they plant barley in future years or whether they plant other grains and crops. And we will be working with them in terms of the opportunities for them to pursue avenues to sell into other markets. But we also hope it provides a systematic check in relation to the way in which this decision and case is being handled by China and can provide greater certainty in the long run for other sectors, and ultimately perhaps other countries as well in relation to how such issues are considered and handled.
Question: Minister, you’re in your final days in the Trade portfolio, which I’m sure you’re probably relieved at. Can you just sort of reflect on how things have got so badly with China, and in particular I guess the hypocrisy of them when you hear Xi Jinping give speeches talking about free trade and keeping international commerce going, and yet here he is carrying on like a bully boy tactics, beating up on the small kid in the playground, which is what it looks like very much. Do you think the message is that China is just an unreliable business partner?
Simon Birmingham: Well, if these are my final days in the Trade portfolio, I’m not about to throw diplomacy out the door, much to your disappointment, in the last few days. We’ve seen, as I have reflected through the course of the year, that the risk profile of trading and doing business with China has grown throughout the course of this year. That the fact that China has accumulated a series of decisions that look like sanctions against Australia obviously changes that risk proposition for Australian businesses and industries as they choose to consider doing business with China.
And it also has a knock-on effect in relation to others around the world. Australia is not the first country to see China apply different trade sanctions against them that appear to lack justification if you just look at the trade elements of the relationship. And so that heightened risk profile is one that all businesses around the world potentially face, which means it’s a bad outcome for China and the Chinese economy, as well as for economies like ours around the world. That ultimately, China faces the prospect that businesses making commercial decisions around the world will decide that there’s a higher risk and potentially not worth the rewards that are there. And they will take their trade or investment avenues elsewhere.
But China is also still the second-largest economy in the world, the biggest goods market in our region, a market with a burgeoning middle class. And unsurprisingly, given that scale, is the number one trading partner for us and for most other countries within our region. The vast majority of other countries within our region. So, we are right to stand by our values, which includes the principles of supporting China’s economic prosperity, which has achieved the miracle of our lifetime in lifting hundreds of millions of people out of poverty and improving living standards for many as a result of that. We’re right to stand by that as an objective worthy of continued pursuit and worthy of Australia continuing to seek to engage and support through a partnership approach. But none of that comes with the selling out of our values. None of that comes with Australia compromising in relation to a national security objectives.
Ultimately, what is going to be required here is from Australia, a period of calm, consistency, and patience. And for China, we hope, to be willing to come to the table, recognising that Australia is going to be consistent in all of our values, but that includes our willingness to engage with them. And we will sit down at any time to reengage at the highest levels to try to work through these issues and to make sure that people and our businesses who have for a considerable period of time built a strong relationship are able to get back onto that strong footing.
Question: Is the Government making representations to the incoming Biden Administration to quickly accelerate the appointment of those WTO power judges so that institutions such as the WTO can get up and running better than they have been under the Trump Administration?
Simon Birmingham: We’ve got many issues across a range of levels to talk to the Biden Administration about as they take office. We’ll have discussions in due course about the WTO Appellate Body. But right now, we’re at the very early stages of a potential dispute with China now moving into those formal consultations, and then the appointment of a panel as I outlined before. The prospect of an appeal is still quite some distance off. And as I stress that we do, as a result of China other countries, cooperate in the WTO, have an alternate mechanism already available to us and agreed between us as to how such an appeal will be resolved.
Question: Minister, you say that Australia is consistent with its values, that it respects the rules and it’s transparent. But let me take you back to Eric’s question with regards to Mengniu Dairy attempted takeover of Lion. Now, it had passed FIRB. FIRB had said: no problem. The ACCC said there was no problem. Treasury said there was no problem, and yet for some undeclared reason, Josh Frydenberg blocked it. So, aren’t the Chinese right in being rather cross at our hypocrisy?
Simon Birmingham: No, I don’t think that’s an appropriate way to present it, Andrew. In the end, as I said before, the vast majority of FIRB applications, of foreign investment applications, including the vast majority of China’s applications continue to be successful through our processes.
Question: But they’ve singled this one out last night.
Simon Birmingham: I understand there may be a singling out in relation to one that was one of a few that was unsuccessful, versus the many that are successful. China is an important part of our foreign investment landscape; by no means the largest. Our largest foreign investor is the United States, our second largest is the United Kingdom, our third largest is Japan. The European Union being essentially our fourth largest collectively without the UK as part of that mix. So, we do see that China I think comes in at about number six. But in all of those cases, the vast majority of applications are accepted. And Australia continues to emphasise that we are open and welcoming to foreign investment where it passes the national interest test. And we’ve demonstrated that by saying yes in the vast majority of cases.