It has been widely reported in the media that Australia-China trade relations have deteriorated in recent months. Some aspects of this issue have been discussed in WTO committees and other bodies. At the May 3 meeting of the WTO’s Working Party on State-Trading Enterprises, for which the minutes were just circulated, Australia raised several issues related to the behavior and activities of Chinese state-trading enterprises (STEs) generally and the impact on Australian cotton and coal in particular.
Pursuant to GATT Article XVII:4(a) and paragraph 1 of the Uruguay Round Understanding on the Interpretation of GATT Article XVII, WTO Members are required to provide notifications to the Council for Trade in Goods of state trading enterprises and the products they import or export. A July 2018 notification from China on these issues, as well as the absence of more recent notifications, were at issue here. In April 2021, Australia raised a number of questions, including in relation to China's "overdue notifications" and possible import restrictions China imposed on Australian goods such as cotton and coal:
Has any Chinese authority, directly or indirectly, officially or unofficially, instructed any Chinese STEs, millers or other businesses, to stop or limit purchases of Australian cotton, or cotton from any other WTO Member?
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Has any Chinese authority, directly or indirectly, officially or unofficially, advised any Chinese STEs, millers or other businesses that their existing or future allocation of China's tariff-rate quota for cotton will depend on whether or not they import cotton from Australia?
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Noting concerns Australia has raised in other relevant WTO committees regarding the cessation of China's imports of Australian coal, has any Chinese authority, directly or indirectly, officially or unofficially, instructed any Chinese STEs, or other businesses, to stop or limit purchases of Australian coal, or coal from any other WTO member?
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China's last notification was submitted on 10 July 2018, and covers the notifying period 2015, 2016 and 2017. Can China please update the Working Party on when it plans to submit the overdue notifications for 2018 and 2019?
At the May 3 meeting of the Working Party, Australia pressed China on these issues, according to the meeting minutes:
Australia indicated that it was seeking further information from China regarding the activities of its STEs with respect to the importation of agricultural commodities, such as cotton, and coal. Concerning agricultural commodities, Australia wished to learn more about the requirements and conditions that enterprises other than STEs must meet in order to obtain trading rights; how tariff rate quotas (TRQs) are apportioned among STEs and non-STEs; whether China has a reallocation mechanism to avoid underfill of the portion of a TRQ allocated to STE; and whether China had reviewed the involvement of STEs in its TRQs. Australia also sought an explanation from China on the involvement of STEs in the importation of coal into China, noting that no STEs for coal had been notified, and wished to know whether formal or informal quota administration was being used to allocate imports to state-owned enterprises in China. For both cotton and coal, Australia sought clarification of whether any Chinese authority had, directly or indirectly, officially or unofficially, instructed any Chinese STEs or other businesses to stop or limit purchases from Australia or from any other WTO Member. Finally, Australia indicated that it had requested some additional statistical information, which was not included in China's notifications, and requested an update from China on its overdue notifications.
China responded that it "was currently reviewing the questions" and would submit new STE notifications soon. The minutes noted China’s reaction as follows:
China thanked Australia for its interest in China's previous notifications and for the further questions. China indicated that it was currently reviewing the questions, some of which had also been raised in the context of the Committee on Agriculture and the Council for on Trade in Goods, and would provide responses in due course. China reaffirmed that it was fully committed to fulfilling its WTO transparency and notification obligations, noting in this respect that it was finalizing its STE notification for the 2018-2020 period and would submit it for review shortly.
For the time being, these aspects of the China-Australia trade and diplomatic conflict are being pursued cautiously in WTO committees and working parties, and, aside from a few trade remedies cases, have avoided turning into a formal dispute. However, these issues have the potential of becoming a broader trade dispute between the two countries. It is worth noting that media reports have characterized the situation in much starker terms, with language such as: “Beijing imposed an informal ban around September [2020] that forced boatloads of Australian coal to languish at sea”; “Mills in China are being told to stop buying Australian cotton as speculation grows that a hefty tariff is about to be slapped on the trade.”
