Senator Birmingham said taking the Chinese Communist Party to the WTO in Geneva was the logical next step. The $600 million barley dispute is the first to be formally referred to the WTO this year, but the Morrison government has left the door open to investigations into wine, beef, coal and half-a dozen other sectors targeted by Beijing.

“We are highly confident that based on the evidence, data and analysis, Australia has an incredibly strong case to mount in relation to defending the integrity, and proprietary of our grain growers and barley producers,” Senator Birmingham said.

China imposed extra tariffs on Australian barley in May.

China imposed extra tariffs on Australian barley in May.Credit:Bloomberg

The grain, which is used to make beer and animal feed, was one of the first Australian exports hit after the Morrison government called for a coronavirus inquiry in April. The 80.5 per cent tariff was applied by Chinese customs authorities in May over allegations that Australian producers had dumped the product in the Chinese market at a discount rate. The Australian government and local industry have strongly denied the allegations.

Saudi Arabia has moved quickly to plug some of the gap, snapping up more than $19 million worth of barley in October alone after negotiations with Australian producers and the government.

It is only the third time that Australia has taken on another country at the WTO in the past two decades. The case will be closely watched by other governments grappling with China’s increasingly assertive diplomacy. The ability for the WTO to function will also be scrutinised after being blocked from using many of its powers by a protectionist Trump administration.

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GrainGrowers chairman Brett Hosking said the industry supported the Australian government’s decision to refer the barley case and warned the tariffs would cost Australian producers an estimated $2.5 billion over the next five years.

“The Australian grains industry has been fully cooperative and provided all necessary information through the options available to date, yet this has done little to change the outcome of the tariffs,” he said in a statement.

Scott Burchill, a senior international relations lecturer at Deakin University, said since 2016 the US has blocked the reappointment of WTO Appellate Body members and rejected more than a dozen proposals to fill the remaining vacancies.

“The terms of two Appellate Body members expired on 10 December 2019, leaving only one member remaining. Since three members are needed for an appeal, the process is at an impasse,” he said.

Senator Birmingham acknowledged the case could take years to resolve but maintained it would be able to proceed up until the appeals stage, where an alternative mechanism has been established among some WTO members.

The formal escalation now threatens to stretch Australia’s fight with its largest trading partner beyond 2021.

China’s Foreign Affairs spokesman Wang Wenbin on Tuesday night claimed for the first time that two specific decisions by Treasurer Josh Frydenberg that blocked $14 billion in Chinese investment in Australia were breaches of the free-trade deal signed between the two countries in 2015.

China's Foreign Ministry spokesman Wang Wenbin.

China’s Foreign Ministry spokesman Wang Wenbin.Credit:AP

Mr Wang said the decision to block APA Group’s $13 billion gas pipeline cash takeover bid from Hong Kong-based CK Infrastructure Holdings in 2018 and a $600 million deal for Lion Dairy & Drinks from China’s Mengniu Dairy in August were breaches of Australia’s obligations.

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“In fact, it is the Australian side that has been politicising economic, investment and technological issues, and discriminating against Chinese companies,” Mr Wang said. “It has gone so far down the wrong path.”

The CK deal would have created a mega-energy infrastructure provider through a $20 billion network of power plants and gas, while the Mengniu purchase would have seen it take over Lion’s milk, iced coffee, yoghurt and soy milk portfolio.

The Foreign Investment Review Board [FIRB] and the Australian Competition and Consumer Commission did not recommend blocking either deal. But Mr Frydenberg prevented both sales from going ahead because he argued they were not in the national interest.

China’s opaque and highly regulated business conditions make it difficult for foreigners to invest in China, with restrictions on purchases and land acquisitions. The Treasurer was contacted for comment.

Senator Birmingham said Australia had no intention of changing its position on human rights, Huawei, the coronavirus inquiry, national security or foreign investment decisions.

“Ultimately what is going to be required here from Australia, is a period of calm, consistency and patience, and for China, we hope, to be willing to come to the table,” he said.

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