Ongoing agricultural trade tension between China and Australia to have 'significant economic effects'

Tensions between the two countries are rising.
Tensions between the two countries are rising. Photo credit: Getty

Trade tensions between Australia and China have intensified, with the world's second largest economy halting some Australian timber imports and adding new restrictions on barley.

The latest moves come as Australia called for China to "play by the rules" after wine exporters reported hearing advice from their import partners in China that no products would be cleared through customs from Friday.

China's commerce ministry denied the "rumours", according to The Guardian, with Australia's Trade Minister Simon Birmingham urging Beijing to provide certainty and answers for the industry, but exporters remain on edge.

Last week China banned imported timber from Queensland after a bark beetle was found in a shipment, and a grain handler, Emerald Grain, was also suspended from exporting barley to China after weed seeds were found in a consignment, ABC News reported.

According to IBISWorld, which analyses global trade, Chinese importers have also flagged potential bans on Australian wheat, lobster, sugar, coal, copper ore and copper concentrate.

"These potential bans indicate China’s desire to use its position as a major market for Australian goods as leverage in negotiating the trade relationship between the two countries,"  Will Chapman, a senior industry analyst at IBISWorld, said on Friday.

"Despite escalating tariffs and bans, China still freely imports vast quantities of Australian iron ore and coal, suggesting that its moves have largely aimed to extract favourable conditions from Australia. Nevertheless, the restrictions pose significant challenges for Australian businesses caught in the crossfire."

In September China also suspended barley imports from Australia's largest grain exporter. That came after numerous other agricultural exporters had already felt the effect of bans or suspension of imports from China over the past six months. 

Chapman said the latest round of import bans and suspension were part of the Chinese government's strategy to use its economic might to extract political concessions from Australia.

"China's import bans are targeting lucrative commodities, which will have significant economic effects and will certainly escalate tensions between the Chinese and Australian governments," he said.

"While the trade relationship will continue, political imperatives in both countries to deliver economic growth in the wake of the COVID-19 pandemic and show geopolitical strength mean that both sides will want to claim victory in any potential resolution. What that might look like in practice remains to be seen."