The PRC’s use of border blocks on food and beverage imports: quantifying Australia’s position

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Thomas Pantle, Project and Research Officer, Australia-China Relations Institute, University of Technology Sydney

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Key takeaways

• Blocking imports at the border for alleged Sanitary and Phytosanitary (SPS) reasons and Technical Barriers to Trade (TBT) are potentially attractive tools for economic coercion because they are notoriously difficult to litigate. Food and beverage products are particularly vulnerable.
• The end of 2019 marked a point of inflection in the Australia-China trading relationship. While the political relationship had been on a downward trend since the latter half of 2016, the trading relationship had theretofore remained relatively unscathed. Throughout 2020, trade disruptions took various forms including anti-dumping and anti-subsidy tariffs, verbal warnings, unofficial media reports and border blockages.
• In 2019, the People's Republic of China's (PRC's) Food and Beverage (F&B) imports from Australia were worth AUD$8.2 billion. A quantitative analysis of SPS and TBT measures by the PRC does not indicate an overall ramping up against, or a singling out, of Australia in recent years as the bilateral political relationship has deteriorated.
• In 2019 Australian products, weighing 2,251 tonnes, were rejected 71 times at PRC ports. In 2020 Australian products, weighing 926 tonnes, were rejected 70 times. Countries including Russia, Vietnam, India and Thailand experienced worse interruptions by frequency and weight.

1. Introduction

The political relationship between Australia and the People’s Republic of China (PRC) has been on a downward trajectory since the second half of 2016. But the spill over to trade was minimal through to the end of 2019. This changed in 2020. As trade disruptions proliferated as the year unfolded, it became increasingly difficult for Beijing to plausibly claim there was not a coercive element to their actions.[1]

The forms these disruptions took varied. On May 18 2020 Australian barley exports were hit with anti-dumping and anti-subsidy tariffs. On October 9 2020 reports emerged of PRC state-owned utilities and steel mills being given verbal notice to stop importing Australian coal. A third category involved blocking Australian goods at the border using non-tariff barriers, notably Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT). For example, on May 12 2020 a PRC Foreign Ministry spokesperson confirmed that four Australian abattoirs had had their certification to supply the Chinese market suspended due to ‘repeated violations of inspection and quarantine requirements’. Another example was on September 1 2020 when the General Administration of Customs People’s Republic of China (GACC) revoked the registration qualification of Australian grain cooperative CBH Grain, Australia’s largest grain exporter, for barley exports due to alleged multiple detections of quarantine pests. [2][3][4]

Stopping goods at the border for alleged SPS and TBT violations may be done for legitimate reasons such as to protect human, animal or plant life or health within the importing country. However, they are also attractive for coercive or other purposes, such as to protect domestic producers from international competition, because they are notoriously difficult to litigate against using international trade rules. Australian National University academics Darren Lim and Victor Ferguson have contended that the PRC’s moves last year appeared to ‘follow a familiar playbook, in which the Chinese government relies on technical regulatory measures to restrict exports, while denying any retaliation is taking place‘. [5]

The purpose of this brief is to perform a quantitative analysis of the PRC’s use of alleged SPS and TBT violations against Australian food and beverage (F&B) exports. F&B products are amongst the traded goods most regularly affected by SPS and TBT measures. One of the surest surest signs of coercive action would be a ramping up of alleged violations by Australian producers as the political relationship between Canberra and Beijing experienced a sharp, negative step-change in 2020. Accordingly, this brief compares the PRC's SPS and TBT actions against Australian F&B exports in 2020 with those in 2019. Further, the extent of these measures against Australian producers are also compared with those levelled at producers from other countries for added context.

A key finding is that despite the attention given to the PRC's SPS and TBT measures against Australian F&B exports in headlines and commentary, in fact there is little to suggest that such actions increased in 2020 or that Australian producers have been singled out. This brief adds to previous research by the Australia-China Relations Institute at the University of Technology Sydney (UTS:ACRI) that aims to inform an accurate assessment of coercive risks consequent to Australia’s trade exposure to the PRC. [6]

2. Food and beverage exports

According to UN Comtrade data, in each year from 2017-2019 Australia was the PRC's 4th largest food import source by value. In 2019, it was only topped by Brazil, the US and New Zealand (Table 1).

In 2019, Australian F&B consignments were stopped at the PRC border on 71 occasions (Table 2). Compared with other countries, Australia ranked 5th as goods from Japan, Taiwan, Vietnam and the US were blocked on a more regular basis. In 2020, the frequency with which Australian goods were stopped did not increase with 70 episodes recorded. And compared with other countries Australia's ranking fell to 9th.

To be clear, this is not proof positive that the TBT measures taken against, for example, Australian beef in May 2020 did not involve a coercive purpose. But what the data in Table 2 do demonstrate is that there was no overall ramping up of SPS and TBT measures against Australian F&B exports in 2020. In fact, compared with Australia’s importance as an F&B import source, PRC customs authorities stopped Australian goods less regularly than other supplier nations.

If the volume of consignments blocked is used rather than the frequency of consignments, a similar pattern emerges. In 2020, Australian goods weighing 926 tonnes were prevented from crossing the border (Table 3).

This afforded Australia a ranking of 8th amongst supplier countries.  Both in terms of volume and ranking these figures were down from 2,251 tonnes and 3rd in 2019. The considerably higher figure in 2019 is largely attributable to three consignments of oats from CBH Grain Pty Ltd. These consignments, which make up 94.5 percent of the total weight, were determined to be carrying harmful organisms and pests.

Box 1. A beef case study

Australian beef exports to the PRC have previously been the subject of alleged SPS and TBT violations. For example, on July 25 2017, then-trade minister, Steve Ciobo received notice from the PRC's quarantine agency that the certification to supply the PRC market would be suspended for six Australian meat processing plants, allegedly due to labelling and non-compliance issues. The certification to supply the PRC market for these abattoirs was reinstated in October that year. [7]

When suspensions were placed on four abattoirs on May 11 2020, what quickly followed were claims that coercion was at play. On 12 May 2020, a report in The Australian Financial Review cited ‘private concerns inside the government linking the sanctions to the Prime Minister’s calls for an international investigation in the COVID-19 virus’. A report in the Sydney Morning Herald on the same day similarly observed that the suspension was ‘fuelling concern of a campaign by Beijing against Australian producers in response to Prime Minister Scott Morrison’s push for an independent coronavirus inquiry’. Jeffrey Wilson of the Perth USAsia Centre, in comments to The Australian, said ‘[t]his is unquestionably political retribution…This is not about technical issues and arguments over trade policy. This is about diplomatic signalling and making a point‘.[8][9][10]

According to data obtained from the PRC's Food Import and Export Safety Authority, in 2019 Australian beef products were blocked from entry 24 times (Table 4). In 2020 the number of Australian beef consignments affected by border stoppages increased by 3 to 27. In 2019 Australia was the PRC's 3rd largest beef import source by value and weight. The 27 consignments blocked last year saw Australia ranked 1st in terms of the frequency with which blocks were applied. This compared with 12 consignments stopped from Brazil and Russia in second place. This might seem to imply that Australia was being singled out. Yet qualifying this interpretation is that in volume terms, Australia ranked 7th with just 11 tonnes stopped. This is compared with Brazil in 1st place with 82 tonnes.[11]

Of the Australian beef exports stopped in 2019, 67kg was chilled and the rest frozen. In 2020, 1,179kg was chilled and the rest frozen.

An assessment of potential coercion is further complicated by idiosyncratic factors such as COVID-19. For example, in 2020 the PRC suspended eight Brazilian meat processing plants ‘over concerns about novel coronavirus outbreaks in food-processing facilities’, whilst eleven Argentinian plants were suspended for the same reason. This is distinct from the labelling and health certificate infractions directed at four Australian suppliers in May and allegations of a banned antibiotic present in the shipments from another abattoir in August. In July 2020, two Australian meatworks voluntarily stopped sales to the PRC after COVID-19 was detected in abattoir staff. [12][13][14]

These have yet to be relisted by PRC authorities. In the case of Brazilian and Argentine exporters, media reports indicate that suspensions usually only last a week. However, the two main reasons given to block the Australian product – ‘goods certificate inconsistent’ and ‘bad labelling' - are also not unusual in the case of other suppliers (Figure 1).[15]

When suspensions were placed on Kilcoy Pastrol, JBS Australia and Northern Co-Operative last May, Senator Birmingham said the suspensions were due to ‘highly technical issues’ that date back more than a year. PRC customs data show that beef consignments from these meat processing plants were rejected 18 times in 2019 due to ‘goods certificates inconsistent’ and ‘bad labelling’. According to the Australian Meat Industry Council, ‘[W]e have dealt with issues of this nature before…this is a trade and market access issue.’[16]

3. Conclusion

Whilst customs data on rejected F&B consignments do not highlight an overall singling out of Australian products, the case of non-F&B exports may differ. For example, on October 9 2020, reports emerged that PRC authorities had notified steel mills to stop importing Australian thermal and coking coal. What followed was confirmation of ships containing Australian coal being refused entry at PRC ports. According to data obtained from GACC, from December 2019 – Feburary 2020, Australia exported 22 million tonnes of coal to China, accounting for 31 percent of China’s total coal imports. From December 2020 – February 2021, Australia coal accounted for 0 percent, whilst China’s total coal imports grew by 13 percent. [17][18][19]

Tables 1,2,3,4 and Figure 1