THE TTALK QUOTES


On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC  20006
No.40 of 2020
FRIDAY, JUNE 5, 2020

Click HERE for Wednesday's quote from President Trump on
the United States and the World Health Organization.
IN WESTERN AUSTRALIA, ROLLING WITH CHINA'S PUNCHES

"There's a general unhappiness that we've poked the bear."


Carly Veitch
May 30, 2020 (Publication date)
CONTEXT
Western Australia is huge. Occupying the western one-third of the Australian continent, it is not just the largest of Australia’s six states. It is the second largest country subdivision in the world. Outside of Perth in the southwest, Western Australia is sparsely populated, but when it comes to exports, the state is a powerhouse, accounting for close to half of the country’s export earnings – 46 percent in 2019. Those exports are mainly commodities: energy, minerals, agriculture. And in agriculture recently, Western Australia’s farmers – especially those that sell to China – have taken some major hits.

On May 25, China announced it would be imposing trade-killing 80.5 percent new tariffs on Australian barley. Technically, those are antidumping duties (73.6 percent) and anti-subsidy or countervailing duties (6.9 percent). 

The underlying Chinese investigations have been running for almost two years, however, and there is a sense that China may have reached these very adverse conclusions now, at least in part, as a response Prime Minister Scott Morrison ’s call last month for an inquiry into the origins of the COVID-19 crisis.

All of this brings us to Carly Veitch . She grows barley in the western part of Western Australia. Indeed, she was planting when she got the news of the new 80 percent tariff on Australian barley headed for China. Here is a bit more of what she said: 

“There’s a general unhappiness that we’ve poked the bear,” she says. “There’s a feeling that it started 18 months ago, and whether [the Covid inquiry] directly caused the tariff, well it wouldn’t help, but there is also concern it might relate to the China-US free trade agreement and the need to buy more [from the] US.”  

The quote is from a May 30 article in The Guardian by Gabrielle Chan .  You will find the link below. When you read it, you will see that Ms. Veitch immediately began to make adjustment in light of the new situation.   

Two weeks before China’s Ministry of Commerce announced the new duties on Australian barley, China advised U.S. growers of barley and blueberries that their products will henceforth be welcome in China. Understandably, the farmers in America’s Pacific Northwest are pleased by these new opportunities.
COMMENT
The ability to absorb bad news, make adjustments, and move on is admirable and something to be treasured. Today’s featured quote from Carly Veitch highlights just those qualities, which is why we were drawn to it. 

It is important to note, however, that the Phase I U.S.-China trade agreement she mentioned is not a free-trade agreement and does not purport to be. Its structural elements may have moved in that direction, but its commercial commitments are an exercise in managed trade. As the USTR fact sheet on the agreement explains:

The Expanding Trade chapter includes commitments from China to import various U.S. goods and services over the next two years in a total amount that exceeds China’s annual level of imports for those goods and services in 2017 by no less than $200 billion.

That $200 billion increase in U.S. exports to China is an across-the-board figure. China's commitment in agriculture is “to ensure” the purchase of an additional $32 billion in U.S. products over the next two years. New purchasing patterns are bound to arise from this, and China’s favorable nod toward U.S. barley is likely to be one of them.

For Australia, the new part is more painful because the old part was important. According to Tony Mahar , CEO of Australia’s National Farmers Federation,  “China is Australia’s largest barley market, almost 50% of our barley worth about $917 million [Austrian] is exported to China each year.”  That’s about $636 million U.S., and, at least for now, those sales are gone.

To call this managed trade is not to damn the agreement. Given all that led up to it, the deal was a welcome pause in the tensions that had been growing – and arguably are still growing – between the United States and China. That said, one downside of the deal was its potential for creating new tensions between the United States and t its allies, notably Australia, that are rival producers of products like barley. No one should be surprised that China saw an opportunity there and seized it.
SOURCES & LINKS
A Voice from Western Australia is a link to The Guardian’s article on China’s new tariffs on Australian barley with the quote from Carly Veitch. This was the source for today’s featured quote.

Western Australia is the Wikipedia entry for this Australian state.

Fact Sheet takes you to the USTR Fact Sheet on The Economic and Trade Agreement Between The United States of America and The People’s Republic of China. 

New Opportunities for U.S. Barley is a report from World Grain.Com on the opening of the Chinese market to U.S. barley producers.

China Takes Aim is a link to a Global Trade Review story of May 27 about China’s new tariffs on Australian barley. This includes the above quote from Tony Mahar of the Australian National Farmers Federation.
TO GET THE TTALK QUOTES IN YOUR INBOX
Or Other GBD Notices, click below.