SNAPSHOT: China targets Australian farming as Pacific tensions grow
Sino-Australia relations have been strained since the government of former prime minister Malcolm Turnbull in June 2017 accused China of attempting to influence Australian politics. Foreign interference legislation was passed by the Australian Senate on 28 June 2018.
Australia offers little domestic protection to its farming sector and maintains low tariffs on agricultural imports. Its government aggressively pursues free trade agreements and considers this open-market approach the impetus behind its successful agricultural industry.
China's actions can be seen as a pushback against Australia's aid and defence activities in the Pacific. Canberra views its activities as countering growing Chinese influence.
The probe can be seen as a strategic undertaking to place pressure on the government of new prime minister Scott Morrison in its regional dealings. China recently targeted soybeans in its ongoing trade war with the U.S.
Firms with interests in Australia and China should monitor developments as the risk of further punitive action by China against Australia's private sector is likely.
One-year outlook (2018-2019)
Highly Likely: Australian barley is highly likely to face additional regulatory scrutiny at Chinese ports, and exporters should prepare for the possibility of consignments being refused entry. China may potentially employ non-tariff measures (NTMs) policy measures other than ordinary tariffs. While this is against WTO rules, it will be difficult for the Australian government to hold China to account in the one-year outlook.
Likely: There is strong potential that China will react to Australia's future strategic policy undertakings by targeting other Australian agricultural commodities. Over 20 per cent of Australia's agriculture is exported to China; this includes 75 per cent of its wool, while China is Australia's biggest export market for wine. Potential action could include the use of NTMs to prevent trade, or port inspections to slow trade, as experienced by the Australian wine sector in May 2018.