SINGAPORE – Australia wants a dialogue with China to resolve their trade dispute and clarify any misunderstandings with its largest trading partner, Australian Agriculture Minister David Littlepraw told CNBC on Friday.
Two Australian groups in the cotton industry said China had begun to discourage its spinning mills from using cotton imported from Down Under.
“It has become clear to our industry that China’s National Development Reform Commission has recently discouraged spinning mills in their country from using Australian cotton,”
The Chinese Ministry of Commerce has not yet responded officially.
Littlepraw told CNBC’s Will Kuluris that he would write to his Chinese counterpart to clarify the situation.
“I think it’s important to get clarification before we get into this. That’s why we’re working with industry and Beijing to make sure we get some answers,” he said.
Two years ago, China added about 800,000 tons of additional quotas for imports of cotton subject to a sliding duty to meet the needs of its textile industry, according to a report by the US Department of Agriculture.
According to Beijing’s commitments to the World Trade Organization, this means that China is obliged to distribute 894,000 tons of cotton imports annually, which is subject to a 1% customs tariff, says the US report from 2018. Any imports above this quota would imposed a duty of 40% and is not commercially viable for exporters given market prices.
“What worries us is that there have been reports that Chinese officials are telling millers not to allow Australian cotton to participate in this initial quota,” Littlepraud told CNBC, adding that the industry is working to ensure that there are alternative markets available.
“So Indonesia, Vietnam and India are taking significant parts of our cotton harvest,” he said, referring to a free trade agreement with Indonesia that was ratified months earlier.
Eastern trade relations
Residential buildings and houses stand like the Sydney Harbor Bridge and the Sydney Opera House in the background in Sydney, Australia, on Saturday, January 12, 2019.
Brendan Thorne Bloomberg | Getty Images
China is Australia’s largest trading partner for goods and services and accounts for about 27.4% of Australia’s trade with the world, according to the Australian government. In 2019, trade between the two countries reached a record 252 billion Australian dollars (178.5 billion dollars), an increase of 17.3% on an annual basis. Australia and China signed a free trade agreement, which entered into force on 20 December 2015.
Littleproud rejected short-term subsidies for farmers, but said the Australian government was working to ensure they had the opportunity to share their risk.
“We have told our exporters whether they will be caught in wine, barley, provided up to 14 free trade agreements around the world and given you the opportunity to spread this risk. It is a commercial decision for our exporters in every industry to make that decision, “he said.
“So obviously they’re going to make assessments about the risks of trading with China, because that’s obviously another simple business principle, the bigger the risk, the bigger the rewards you’re looking for,” Littleproud added.