China has ordered cotton mills to stop buying Australian supplies, an Australian government source and two China-based cotton traders briefed on the matter said yesterday, the latest sign of worsening trade ties.
Relations soured after Canberra accused China of meddling in domestic affairs, and worsened when Australian Prime Minister Scott Morrison sought an independent inquiry over the origins of COVID-19 that emerged last year in the Chinese city of Wuhan.
China is the biggest buyer of Australian cotton, considered the highest quality of all import origins, and the trade was worth about A$900 million (US$637 million) during the 2018-2019 crop year.
The suspension of cotton purchases comes just days after Canberra scrambled to confirm reports of another suspension ordered by China, of coal buys from Australia.
“The millers essentially get a quota they can import, and essentially they’re being told they might not get their quota next year if they buy our cotton,” said an Australian government source, who was briefed by Australian officials in China.
If Chinese millers continue to buy from Australia, they could be hit with a tariff of 40 percent, said the source, who sought anonymity as he was not authorized to speak on the matter.
In an e-mail, Australian Minister for Trade, Tourism and Investment Simon Birmingham said the government was “aware of changes in exports conditions” for cotton, and warned China against steps to choke trade.
“Impeding the ability of producers to compete on a level-playing field could constitute a potential breach of China’s international undertakings, which would be taken very seriously by Australia,” he said.
The Chinese embassy in Australia did not immediately respond to requests for comment.
Two China-based cotton traders said many mills had received verbal instructions early this week or the last. The move will hit supply of top cotton grades.
“It’s very supportive to the price of high-grade cotton,” one trader said, adding that this year’s domestic crop included a smaller proportion of high-grade fiber.
China imported about 400,000 tonnes of Australian cotton last year, customs data showed.
Some Chinese firms might still use Australian cotton in their mills in Vietnam, said the second China in May imposed anti-dumping and anti-subsidy duties totalling 80.5 percent on Australian barley, effectively stopping a billion-dollar trade in its tracks.
On Tuesday, it also began an anti-dumping investigation into Australian wine imports.
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