CNBC with Tanvir Gill & Sam Vadas

Tanvir Gill, Host: Despite a deal where China will review its tariffs on Australian barley, Canberra officials are wanting Australian businesses to continue to diversify away from the China market, which is, of course, the biggest market for Australian barley as well as wine. But hopes are that similar restrictions on Australian wine could also be lifted. We have just the right person, actually, to answer all those questions, Don Farrell is the Minister for Trade and Tourism in Australia, and he joins us with more details on what policy is going to be looking like going down the road.

Thank you very much, Minister, for taking the time to be with us on this subject. Give us your own sense. You know, obviously barley has had some relief, but the $1.2billion trade on wine is what people are eyeing next. Can we expect relief on tariffs there because it’s been completely wiped out since 2020.

Minister for Trade, Don Farrell: Yes, thank you, I welcome an opportunity to talk with you and your listeners. Well, obviously barley is the first step in a long process of stabilising our relationship, our trading relationship, with China. Over the last few years there’s been something like $20 billion worth of trade that was previously done with China that has been stopped. Now, there’s been a variety of reasons as to why some of them have been stopped. Some of them relate to tariffs and some of them relate to regulatory rules.

We’ve started with barley to see whether or not we can resolve our outstanding issues, and we are hopeful that this provides us for a template to deal with all of the other outstanding issues.

We have a paradoxical relationship with China – on the one hand they’re far and away our largest trading partner. We did almost $300 billion worth of trade with China last year, and to put that into perspective, that’s more than all of the trade that we do with the United States, Japan, Korea, Singapore, the United Kingdom and Germany. So it’s a huge market for us.

Host: Indeed.

Minister for Trade: But we’ve had $20 billion worth of trade impediments. Those issues didn’t occur overnight, and they won’t be resolved overnight. We’ve also managed to get coal back into the Chinese market. That’s been happening over the last couple of months. We hope to resolve the barley issue in the next couple of months, and then we’ll be moving on one by one to all of those outstanding products.

Host: Minister, what template are you working with? Are you expecting China to completely relent on those tariffs, complete tariff relief or walk back or partial relief? I mean, what is it that you’re bringing to the table in terms of negotiations?

Minister for Trade: Ever since there was a change of government 11 months ago in Australia we’ve preferred the path of dialogue and discussion rather than disputation. We’ve had applications in the World Trade Organization that have been progressing, and we believe we were going to win those cases, but winning an early victory in the World Trade Organization doesn’t necessarily mean a quick resolution of the issue.

So as an act of goodwill what we indicated was that we would temporarily suspend our World Trade Organization dispute in respect of barley in return for an early re-examination on China’s part, of their tariffs in respect of barley. I’m hopeful that the goodwill that we have shown towards the Chinese Government will result in an early resolution to lift those tariffs, currently over 80 per cent. We want China to lift those tariffs so that we can resume normal trade with China.

Host: Would you want complete resolution on the matter, complete tariff relief, or even a partial one would be a good start?

Minister for Trade: No, we’re looking for a restoration of the arrangements that existed before the tariffs were imposed. We have a free trade agreement with China. We had zero tariffs on these products before they were imposed. We see a resolution of this issue resulting in the removal of all tariffs so that Chinese consumers can get the benefit of wonderful Australian produce, including barley, but more particularly we can get the benefit of increased sales to the Chinese market.

Host: Mr Farrell, you’ve been invited to China. I was wondering if you had any update on a timeline certainly for that trip. I mean, we’re a long way off from football diplomacy, I don’t suppose they’re going to call in Port Adelaide again to try to get relations back on track. So, I was just wondering, as I mentioned, a timeline, but also what you expect the nature of that visit to look like and how it might actually pave the way for a future Albanese trip.

Minister for Trade: You mentioned Port Adelaide’s visit - and of course, after the way in which the Adelaide Crows thrashed Carlton in the first of the Gather Round games last night, I’m sure that the Chinese market would just love to see the Adelaide Crows playing up there.

But, look, I think the Prime Minister may go to China later in the year. I’m sure that will be a possibility. I met my trade equivalent a few weeks ago via Zoom. It was a very warm and friendly meeting. The Chinese minister said to me that the freeze is over and we’re moving to a warm spring. All of the discussions between our two governments and our officials since that time have been indicative of that statement.

I have been invited to China, and I’ve accepted that invitation. We’re just working out when the best time for that to take place would be given the parliamentary sitting schedule over here. But I’d be confident that in the next few weeks we’ll be able to make an announcement as to when we’re travelling to China.

Host: We’ll be watching, and just back on Aussie farmers and, of course, this is very much a positive development, not just with the barley but also, of course, with lobsters and coal etc… for other exporting industries, but I’m curious, when these reviews take around three to four months, it still creates a lot of uncertainty. It very much highlights the fact that Aussie farmers, Aussie exporters, have had to diversify, and find other customers. So at what point, what preparations are they putting into place to welcome the Chinese market back when, of course, there’s so much distrust? And also, once we see a resumption of trade, how quickly do you think we could actually see that barley hitting China?

Minister for Trade: Well, you’ve correctly identified one of the key policies that the new government is adopting post Covid, and that, of course, is diversification. On Sunday I’m flying up to Vietnam and then later next week off to the Philippines. This is part of the Australian government’s overall diversification strategy.

This doesn’t mean we shouldn’t go back into China. We should go back into China. It’s a good market, they like our food and beverage and we should do our best to make sure we can meet that demand. The good thing at the moment, is that we’ve got a very large surplus of wheat and barley in Australia. We had a very good year weather wise last year, and all of our granaries are full of wheat and barley.

To answer your question directly, yes, we’re very confident that we can meet both the new demand that we’ve managed to find, particularly for barley, since we lost the Chinese market, but also that we’ve got plenty of grain that we can put back into that China market if those orders come through as a result of the thawing of the relationship.

Host: Mr Farrell, you seem quite hopeful of tariff relief from China on barley. What about wine?

Minister for Trade: Look, wine is the next cab off the rank as far as we’re concerned. We do have a World Trade Organization dispute going in respect of that. We have not suspended that application, but I would be hopeful that if the process that we’ve started with barley ends in the resolution of the barley dispute, then we can quickly move to resolve the wine dispute.

As you say, the wine industry has been very hard hit by the decision of China to increase their tariffs. Unlike barley, it hasn’t been as easy to find alternative markets. We’ve reached a new Free Trade Agreement with India and there’s many opportunities now to provide Australian wine into the Indian market. We’ve also reached a fresh Free Trade Agreement with the United Kingdom, and when it's approved by the United Kingdom government, will give us some extra opportunities into the United Kingdom.

We’re currently in deep discussions with the EU about getting into that market and, of course, that gives us additional opportunities as well.

Host: Mr Farrell, time is of the essence here, right, because this is farmers’ hard-earned money which is, you know, which is pretty much going away because exports are not picking up from China because of the tariffs. So they’re in a bit of a stuck between a rock and a hard place. I want to understand the timeline here. By when do you think a deal can be struck for barley and when does the negotiations for wine begin? Or what period of time are you looking to wrap this up?

Minister for Trade: The arrangement that we have in respect of barley is that as a result of us temporarily suspending our World Trade Organization dispute, the Chinese government will move immediately to review the tariffs that have previously been applied to barley. We’re looking for a resolution of that issue in the next three to four months. I’m personally hopeful that this process that the Chinese Government has now embarked upon will result in the lifting of those tariffs.

Once that happens then we’ll be moving on to the issue of wine. That’s the next cab off the rank. I actually live in a wine growing district of South Australia, the Clare Valley, so I’m very familiar with the issues that winemakers have faced over this last couple of years. I’m very keen personally, and the Albanese Government is very keen to quickly resolve the wine issue as well.

Host: Right. So, can we expect realistically before the end of this year for these two matters to be resolved?

Minister for Trade: I’m very hopeful that we’ll resolve it in that time frame, if not sooner.

Host: Alright, and there is an expectation, please correct me if I’m wrong here, that if China does not end up scrapping the barley tariffs, that Australia plans to resume that dispute that it has paused and withdrawn at the WTO. It plans to go back to that process and take up the fight again with the WTO. Is that –

Minister for Trade: Yeah, that’s correct.

Host: That’s correct, okay.

Minister for Trade: The agreement with China is that as an act of goodwill we will temporarily suspend our dispute, and they will commence their processes to review the tariffs. If at the end of that process it doesn’t result in the lifting of those tariffs, then we’ve made it very clear to the Chinese Government that we will resume our application in respect of the WTO.

I am hopeful that we won’t get to that position. I think the goodwill that both countries have expressed to one another is a very positive sign that we can stabilise our trading relationship with China. It’s a very important relationship from the point of view of both countries. The opportunity is there to stabilise it and to build on the goodwill that’s been established over the last couple of months.

Host: I wish you the very best with those negotiations because really at the heart of it it’s the farmers produce which is at stake. Minister Farrell thank you very much for joining us on this very important issue and giving us your thought process as well as your plans.

ENDS.