“It has become clear to our industry that the National Development Reform Commission in China recently discouraged their country’s spinning mills from using Australian cotton,” Adam Kay, CEO of Cotton Australia, and Michael O’Rielley, chairman of the Australian Cotton Shippers Association, said in a statement.
China’s Ministry of Commerce has yet to officially respond.
Littleproud told CNBC’s Will Koulouris he would write to his Chinese counterpart to clarify the situation.
“I think it’s important that we get some clarification before we take the plunge. That’s why we’re working with industry and Beijing to make sure we get answers, ”he said.
Two years ago, China added about 800,000 tonnes of additional import quotas for cotton subject to sliding duty to meet demands from its textile industry, according to a report from the US Department of Agriculture.
Under Beijing’s commitments to the World Trade Organization, this means China is obliged to allocate 894,000 tonnes of cotton imports each year subject to a 1% import tariff, according to the 2018 US report. Any import exceeding this quota would incur a duty of 40% and is not commercially viable for exporters given market prices.
“What concerns us is that there are reports that Chinese officials are telling millers not to give Australian cotton a chance to participate in that initial quota,” Littleproud told CNBC, adding that the The industry was working to make sure there were other markets available.
“Thus, Indonesia, Vietnam and India all take a significant share of our cotton harvest,” he said, referring to a free trade agreement with Indonesia that had been ratified by months earlier.
Sharpen business relationships
Residential buildings and houses stand out as the Sydney Harbor Bridge and Sydney Opera House stand in the background in Sydney, Australia on Saturday, January 12, 2019.
Brendon Thorne | Bloomberg | Getty Images
According to the Australian government, China is Australia’s largest trading partner for goods and services and accounts for about 27.4% of Australia’s trade with the world. In 2019, trade between the two countries hit a record Australian $ 252 billion ($ 178.5 billion), up 17.3% year-on-year. Australia and China signed a free trade agreement which entered into force on December 20, 2015.
Littleproud has ruled out short-term subsidies for farmers, but said the Australian government is working to ensure they have the opportunity to spread their risk.
“We have told our exporters if they would be caught in wine, barley, we have made up to 14 free trade agreements around the world and give you the opportunity to spread that risk. It is a business decision for our exporters in all sectors. to make that decision, ”he said.
“So obviously they will assess the risks of trading with China, because this is obviously another simple trading principle, the greater the risk, the more you look for better rewards,” Littleproud added.