Acknowledging the appeal may take years to be resolved, Birmingham told reporters Australia would also request formal consultations with China regarding dumping and other duties on Australian barley amid an increasingly bitter trade and diplomatic row between the two countries.

As relations soured this year after Canberra proposed an independent investigation into the origins of the coronavirus pandemic, first reported in central China last year, Beijing in May imposed five years of anti-dumping and anti-subsidy duties totalling 80.5 per cent on Australian barley — effectively stopping a billion-dollar trade in its tracks.

Australia denies the allegations it subsidizes local barley production and Birmingham said it will seek formal intervention from the WTO.

“Australia has an incredibly strong case to mount in relation to defending the integrity and proprietary of our grain growers and barley producers,” Birmingham said.

The Chinese government embassy in Australian didn’t immediately respond to email requesting comment.

The WTO appeal threatens to further stoke bilateral tensions that have already seen China impose tariffs on a range of Australian commodities, with diplomatic communication limited.

But Australia’s conservative government is under growing pressure from grain growers now forced to seek alternative markets — which often don’t pay as much as China — for their products for the next five years while Beijing’s tariffs are enforced.

About 70 per cent of Australian exports of the grain typically go to China, Australian data show.

The effective block on sales to China also comes as Australian barley production is expected to hit nearly 12 million tonnes this crop year, after rain revived some of the biggest growing regions following years of drought.

— Colin Packham is a Reuters correspondent in Sydney.

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The rejection comes after Australia sought a formal review over duties totalling 80.5 per cent that China imposed this year, citing as grounds subsidies and dumping, activities that Australia has denied.

“We were informed last week that the application was unsuccessful,” said one Australian government source, who sought anonymity as he is not authorized to speak to the media. “We are extremely disappointed, but not surprised.”

Both China’s commerce ministry and Australia’s department of foreign affairs and trade did not immediately respond to requests for comment.

Australia had asked the Chinese ministry in August for a formal review of its processes, following the imposition of the duties on barley. About 70 per cent of Australian exports of the grain typically go to China, Australian data show.

China concluded that Australia’s Murray Darling Plan, a scheme to spruce up an ecologically vital river system, provided a subsidy for growers, although Australia denies it subsidizes barley production.

Its rejection will force Australian farmers to sell barley to the domestic livestock industry at prices less than sales to China would have earned.

Australian barley production is expected to top 10 million tonnes after rain revived some of the biggest growing regions following years of drought.

China’s decision also comes at a time of fraught ties that have spilled into trade focused on food products and iron ore.

The latest irritant was Australia’s push for an international inquiry into the source of the coronavirus that emerged in China’s central city of Wuhan late last year and spread worldwide.

Earlier this year, China suspended beef imports, launched a dumping investigation into Australian wine and told its millers to stop buying Australian cotton.

Barley is typically used in breads and soups and dried to create malt for beer production, as well as being used for animal feed.

— Colin Packham is a Reuters correspondent in Sydney.

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China late on Tuesday said it would ban barley imports from Australia’s largest grain exporter, just weeks after it slapped a more than 80 per cent tariff on shipments from Australia.

The ruling has seen Chinese processors shun other Australian sellers amid fears that Beijing could ban other grain handlers.

As a result, Australian farmers will now target a domestic market, where demand is unusually high after a recent three-year drought wilted large areas of pasture.

“The financial hit will be enormous but we can look at domestic livestock market which doesn’t have much feed at hand after the drought,” Andrew Weidemann, a grain grower in Victoria told Reuters.

“The big issue is next year. If the season continues, there will be pasture and so farmers like myself will have to switch to other crops.”

China had until recently bought as much as 70 per cent of Australia’s barley exports. But with that market closed, Australian farmers will receive about A$50 (C$47.82) a tonne less than what China would typically pay.

The disruption of Australia’s barley market comes amid souring bilateral relations.

Already inflamed by Australia’s allegations that China was meddling in its domestic affairs, relations worsened when Prime Minister Scott Morrison called for an independent inquiry into the origins of COVID-19.

China just weeks later slapped on the tariff, while last month, China said it would investigate whether Australian wine was being dumped into its largest buyer, a review that has since been expanded to include possible subsidies.

Australia denies both allegations.

— Colin Packham is a Reuters correspondent in Sydney.

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China’s ministry of commerce said it had confirmed dumping by Australia and significant damage on its domestic industry as a result, following an inquiry which began in 2018.

The tariffs on barley, which will remain in place for five years, are the latest agricultural commodity to be affected by a deteriorating relationship between Canberra and Beijing.

The Chinese ministry said duties of 73.6 per cent would be levied on all companies, including four named exporters, The Iluka Trust, Kalgan Nominees Pty. Ltd., JW+JI Mcdonald and Sons and Haycroft Enterprises, as well as an anti-subsidy duty of 6.9 per cent.

Australia is the biggest barley supplier to China, exporting about A$1.5 billion-$2 billion (C$1.36 billion-$1.81 billion) worth a year, which is more than half its exports.

Barley is used both for brewing and animal feed.

“There aren’t many alternative markets. It could be sold to Saudi Arabia, but it will be heavily discounted to what Australian farmers could have received by selling to China,” an Australian government source told Reuters.

By contrast, China — the world’s top barley importer — will simply shift purchasing to other key producers, including France, Canada, Argentina and some smaller European exporters.

“It’s very replaceable,” said Andries De Groen, managing director at Germany headquartered barley trader Evergrain.

Australia’s Minister for Trade Simon Birmingham said the Chinese decision was deeply disappointing.

“We reject the basis of this decision and will be assessing the details of the findings while we consider the next steps,” Birmingham said in an emailed statement.

“We reserve the right to appeal this matter further.”

Australia’s relationship with Beijing soured in 2018 when it banned Huawei from its nascent 5G broadband network, while tensions were escalated by concerns within Canberra over China’s attempts to secure greater influence in the Pacific.

“The issue is part of broader juggle that Australia makes between its political place in the west and economic place in the east,” Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia, said of the barley tariff.

China has been angered in recent weeks by Australia’s call for an independent inquiry into the origins of coronavirus.

Last month, Beijing’s ambassador to Australia said Chinese consumers could boycott Australian beef, wine, tourism and universities in response to Canberra’s demand.

Days later, Beijing suspended imports from four of Australia’s largest meat processors, worth about 20 per cent of Canberra’s beef exports to China.

— Reporting for Reuters by Min Zhang and Dominique Patton in Beijing and Colin Packham in Sydney.

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The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) pegged production of the country’s largest rural export at 21.2 million tonnes, down from its previous estimate in March of 23.9 million tonnes.

That would be 14 per cent below the 10-year average of 24.7 tonnes, and mean a third straight year of lower-than-average production — crippling growers and exporting companies, and providing a hurdle to an economy that is already threatening to stall.

The bureau said growing regions have received enough rain to establish crops, but many areas have very little moisture left in the soil, making them reliant of rains in September and October to avoid further crop downgrades.

“Crop prospects in regions with low to very low levels of soil moisture will likely deteriorate,” it said.

Australia exports the bulk of its wheat crop but with increased domestic demand from the country’s livestock sector due to the drought, exports from the world’s fourth-largest supplier are expected to fall.

As a result, traditional buyers of Australian wheat such as Indonesian and Japanese millers will be forced to look to alternative markets such as Russia at a time when prices are rallying.

Supported by Australia’s outlook, global benchmark wheat prices have risen about 15 per cent since May.

Dwindling wheat exports will also damage Australia’s stuttering economy.

Wheat is the country’s most lucrative rural export from an agricultural sector worth about A$50 billion.

Australia’s central bank last week cut interest rates to an historic low, in a bid to support employment growth and lift inflation.

With some farmers across Australia’s east coast unable to sow because of the dry weather, the bureau said production from New South Wales, Queensland and Victoria, will total 8.6 million tonnes.

However, national output will be cushioned by output from Western Australia, the country’s largest grain growing region, which will total 8.2 million tonnes, it said.

Lower production may force some millers into rare imports.

Australia in May approved the first import shipment of wheat into the country in more than decade.

— Colin Packham is a Reuters commodities correspondent in Sydney.

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Australia’s Department of Agriculture and Water Resources said late on Tuesday that it has approved an import permit of Canadian wheat.

“The shipment is expected to arrive in Australia in the next six to eight weeks,” it said in a statement on its website.

Australia last imported wheat in 2007 when an El Nino weather event led to a severe drought and cut production to around half of the typical annual output.

Although the last El Nino was in 2016, Australia has suffered a prolonged drought along its east coast in recent years, which has led to two straight years of lower output.

The drought also threatens production this year.

Farmers are now sowing crops, but with little rains, many have been forced to delay planting or choose to sow into dry soils — exposing them to crop failures.

Australia’s official commodity forecaster in March said production would rally nearly 40 per cent this year but with little rains, private forecasters are beginning to trim their estimates.

Australia’s traditional customers have already turned to the Black Sea region to secure supplies.

Indonesia, the world’s second-largest importer which relied on Australia for much of its wheat supplies, has bought record volumes from Russia and Ukraine.

The Black Sea region, Europe and North America are expected to post a rise in production for the 2019-20 crop, to be harvested around the middle of this year, likely depressing prices.

— Colin Packham is a Reuters commodities correspondent in Sydney.

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The bill threatens to expose fractures within the ruling coalition government, which last week introduced tougher oversight of the shipments but stopped short of banning them altogether.

The new government policy came as footage emerged showing 2,400 sheep dying from heat stress on a vessel bound for the Middle East last year.

Backbench lawmaker Sussan Ley said the new rules did not go far enough.

“A 60-kg sheep will be allocated space equivalent to just under two A4 pieces of paper,” Ley told parliament in one of the world’s largest exporters of livestock.

While the bulk of Australia’s meat exports are processed, markets such as the Middle East and Indonesia prefer to buy live animals.

Australia’s chief commodity forecaster in March said it expected 1.9 million live sheep to be sold this year, worth A$250 million.

“For Australian farmers, animal welfare is our highest concern. We need to fix the industry, not ban it,” said Fiona Simson, president of the National Farmers Federation.

The proposed legislation puts Prime Minister Malcolm Turnbull in a political bind.

Emboldened by opinion polls that show nearly three quarters of voters support an end to the trade, two members of Turnbull’s Liberal Party have said they support Ley’s bill, joining forces with the opposition Labor Party.

The rural-based Nationals, the junior member of the coalition government, opposes a ban, insisting it could inflict widespread damage on Australia’s agricultural sector.

“This strikes at the heart of the coalition arrangement,” said Nick Economou, senior lecturer in Australian politics at Monash University in Melbourne.

“The prime minister cannot let this go forward, he cannot afford to upset the National Party.”

The political alliance that has existed since 1923 was strained this year after an extramarital affair by then Deputy Prime Minister Barnaby Joyce triggered a war of words between Australia’s most senior lawmakers.

Turnbull’s government will likely seek to delay the passage of the bill, analysts said, through its control of parliamentary business.

The Labor Party could force a vote on Ley’s bill if it secures the support of two independent lawmakers, a vote that could potentially be too close to call

–– Reporting for Reuters by Colin Packham.

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More than 20 provisions have been suspended or changed in the final text ahead of the deal’s official signing in March, including rules around intellectual property originally included at the behest of Washington.

The original 12-member deal was thrown into limbo early last year when U.S. President Donald Trump withdrew from the agreement to prioritize protecting U.S. jobs.

The 11 remaining nations, led by Japan, finalized a revised trade pact in January, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). It is expected to be signed in Chile on March 8.

The deal will reduce tariffs in economies that together amount to more than 13 per cent of the global GDP — a total of US$10 trillion. With the U.S., it would have represented 40 per cent.

“The big changes with TPP 11 are the suspension of a whole lot of the provisions of the agreement. They have suspended many of the controversial ones, particularly around pharmaceuticals,” said Kimberlee Weatherall, professor of law at the University of Sydney.

Many of these changes had been inserted into the original TPP 12 at the demand of U.S. negotiators, such as rules ramping up intellectual property protection of pharmaceuticals, which some governments and activists worried would raise the costs of medicine.

The success of the deal has been touted by officials in Japan and other member countries as an antidote to counter growing U.S. protectionism, and with the hope that Washington would eventually sign back up.

“CPTPP has become more important because of the growing threats to the effective operation of the World Trade Organization rules,” New Zealand Trade Minister David Parker said on Wednesday.

Last month, Trump told the World Economic Forum in Switzerland that it was possible Washington might return to the pact if it got a better deal.

However, Parker said on Wednesday that the prospect of the U.S. joining in the next couple of years was “very unlikely” and that even if Washington expressed a willingness to join CPTPP, there was no guarantee that the members would lift all the suspensions.

Parker said the deal would likely come into force at the end of 2018 or the first half of 2019.

Governments were quick to tout the economic benefits of the agreement.

“The TPP-11 will help create new Australian jobs across all sectors — agriculture, manufacturing, mining, services — as it creates new opportunities in a free trade area that spans the Americas and Asia,” said Steven Ciobo, Australia’s minister for trade in an emailed statement.

New Zealand’s government expected the CPTPP to boost the island nation’s economy by between NZ$1.2 billion (C$1.11 billion) and NZ$4 billion a year, with beef and kiwifruit exporters among the top beneficiaries of the deal.

Brian Innes, president of the Canadian Agri-Food Trade Alliance, representing export commodity groups, said CAFTA is “especially pleased that the market access provisions in the original agreement remain intact.”

Gaining preferential access to Japan is “especially important,” he said in a release Wednesday, “since it is the third-largest market for Canadian agriculture and agri-food products, accounting for $4 billion in exports in 2016.”

Taking part in the CPTPP will give Canada a competitive advantage over the U.S. in several markets, CAFTA said, and will also level the playing field for Canadian exports to other CPTPP countries, such as Australia, which already have trade pacts with Japan.

The pact’s 11 member countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

— Reporting for Reuters by Charlotte Greenfield in Wellington and Colin Packham in Sydney. Includes files from AGCanada.com Network staff.

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Li, the first sitting Chinese premier to visit Australia in 11 years, was welcomed to parliament in Canberra by Prime Minister Malcolm Turnbull amid extra security in the capital in the wake of an attack outside Britain’s parliament by a suspected Islamist-inspired attacker.

Australia is seeking to take advantage of China’s decision earlier this week to suspend meat imports from Brazil, the world’s biggest exporter of beef and poultry, due to a scandal over sales of rotten and salmonella-tainted meats.

Australia, however, may have little scope to increase meat exports as its cattle herd is languishing near a two-decade low. Graziers culled cattle in record numbers following a drought induced by an unusually strong El Nino weather system between 2014 and 2016.

Beef is among Australian agriculture exports to China that were worth more than A$8 billon (C$8.15 billion) last year. They have been propelled by the wide-ranging China-Australia Free Trade Agreement signed in 2015, cementing China’s position as Australia’s largest trading partner.

“China must feed their nation but has seven per cent of arable land. Australia is seizing the opportunity to provide the high-quality, safe food,” Turnbull said in a speech in Canberra.

During his visit, Li will meet Australian business leaders at trade forums and attend an Australian Rules Football League match in Sydney before heading to New Zealand for two days.

Trade agreements

Turnbull said he will also seek to progress a possible regional trade agreement as Australia seeks to minimize the impact of President Donald Trump pulling the U.S. out of the Trans-Pacific Partnership in January, effectively killing the accord in its current form.

While Trump has advocated an “America First” approach, China has signalled its desire to play a bigger international role, particularly in promoting free trade, a stance reinforced by Li.

“We believe that to resolve trade imbalances we need to continue to expand trade. That is the solution. We cannot close our doors,” Li said in Canberra.

China’s Foreign Ministry later cited Li as telling Turnbull that China will continue to open up and work with Australia to send “positive signals” about promoting trade liberalisation and protecting the current global trading system.

Li is expected to encourage Australia to sign up for China’s New Silk Road initiative but an agreement is unlikely during his visit, Reuters reported earlier this week.

The plan, officially called the One Belt, One Road, or OBOR, initiative, is a signature foreign and economic policy of Chinese President Xi Jinping, envisioning massive infrastructure spending to link China to Asia and beyond.

Regional security will also be discussed as Australia, which has supported U.S.-led freedom of navigation activities in the region, seeks to reduce tensions in the South China Sea.

China claims almost the entire South China Sea, through which about $5 trillion worth of trade passes each year. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims to parts of the sea.

— Colin Packham is a Reuters commodities correspondent based in Sydney, Asutralia. Additional reporting for Reuters by Ben Blanchard in Beijing.

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Rinehart and her minority partner, Chinese developer Shanghai CRED, will now complete the purchase of S. Kidman, which runs cattle and pastoral activities on tracts of land the size of South Korea.

The property sale has been a lightning rod for concerns about the sale of Australian agriculture and other key assets to foreign investors, with the government blocking earlier bids to Chinese-led groups.

“It has been two years since the shareholders resolved to sell and 18 months since the process began so it is nice get the regulatory approval,” Greg Campbell, CEO and managing director of S. Kidman, told Reuters.

Domestic ownership of agriculture is seen as crucial for Australia to cash in on global food demand and to keep tax revenues onshore.

“Kidman will remain majority Australian owned under this proposal, and remain an Australian incorporated company headquartered in South Australia,” Treasurer Scott Morrison said in a statement on Friday.

Rinehart is Australia’s richest woman with a net worth of $11.7 billion, according to Forbes, based on an iron ore empire in Australia’s mineral-rich Pilbara, where she grew up.

Campbell said the deal was expected to be completed by Dec. 25, but final Chinese regulatory approval is still outstanding.

The cattle station Anna Creek will not be sold to the Rinehart-led consortium because of its close proximately to a government-owned weapons-testing range, and will instead be sold to private Australian cattle farmers.

— Colin Packham is a commodities correspondent for Reuters based in Sydney, Australia.

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