China increases Australian wool import quota but local media says it ‘does not signify a thaw in relations’

China has bolstered its Australian wool import quota by five per cent for 2022, but the Asian superpower’s local media says the move does “not signify a thaw in relations between the two countries”. The Chinese Ministry of Commerce made the announcement on Wednesday, with the quota set to increase from 38,288 tonnes in 2021 to 40,203 tonnes in 2022 in line with the China Australia Free Trade Agreement. Under the bilateral trade pact inked in 2015, China grants duty-free treatment to Australian wool up to the quota level. The agreement requires a 5 per cent increase on Australian wool imports until 2024, when it will peak at 44,324 tonnes. Comparatively, the quota for New Zealand (36,936) did not change. It is the second time China — the biggest buyer of Australian wool — has increased its import quota since diplomatic relationships between the two countries started to deteriorate in early 2020. The trade tensions were sparked by the Federal Government’s push for an independent investigation into the origins of the COVID-19 pandemic and intensified by China slapping an 80.5 per cent tariff on Australian barley exports in May. Beijing then implemented unofficial bans on a variety of Australian products including coal, log timber, lobsters and cotton, and has imposed anti-dumping duties on wine and barley. The South China Morning post on Wednesday reported the quota increase was “no real improvement” in trade ties, saying instead that China relied on the fibre “too much” to let it become the “victim of trade tension”. It buys 80 per cent of Australia’s greasy wool exports each year. The story quoted an anonymous agriculture analyst who said a real improvement in the trade relations between the two countries depended on products such as coal, beef and barley. “China can always choose other sellers over Australia for those products,” the analyst said. China, the world’s largest wool processing country, and Australia, the biggest wool exporter, are mutually dependent when it comes to trade of the fibre. China buys 80 per cent of Australia’s exports each year. Meanwhile, imports from Australia account for about 60 per cent of all wool imports to China, customs data shows. The 2022 Australian wool imports quota increase would not make a real impact on the market, according to the head of one of WA’s major wool exporting companies. PJ Morris managing director Peter Morris said the biggest impact on Australia’s $2.9 billion dollar industry would be increased consumer spending on wool products. Mr Morris said COVID-19 had been “absolutely horrendous for the wool industry”. “Logistics is a major problem, export ships are being delayed between four and six weeks and cash flow is tight,” he said. “Consumers may still be cautious to buy woollen goods and this combined with other COVID issues will be the determining factors on a recovering wool industry this year.” Australia’s wool exports are forecast to increase by 28 per cent to $3.4b in 2021/22 due to higher prices and higher production volume, according to the Australian Bureau of Agricultural and Resource Economics and Sciences’ December report.