Australia’s cotton industry is bracing for what could be a devastating blow as it becomes the latest casualty in the escalating trade tensions with China.

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.

Government sources have told the ABC the cotton industry could face tariffs as high as 40 per cent, a sanction that could make the trade with China unviable.

Trade Minister Simon Birmingham has confirmed he’s aware of concerns China might be set to impose changes on the trade and is seeking more information from Australia’s largest trading partner.

“China should rule out any use of discriminatory actions against Australian cotton producers,” he said.

“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.”

The Australian industry has become increasingly nervous about the $800 million market, which typically accounts for 65 per cent of the cotton grown nationwide.

In a statement on Friday, Cotton Australia and the Cotton Shippers Association said the industry was “trying to understand apparent changes to export conditions”.

“It has become clear to our industry that the National Development Reform Commission in China has recently been discouraging their country’s spinning mills from using Australian cotton,” the statement said.

“Our industry is working with the Australian Government, including the Trade and Agriculture Ministers’ offices, to investigate the situation and fully understand what is going on.”

Littleproud talks up other options

On Thursday, Agriculture Minister David Littleproud said the government had not received any official word of changes to the cotton trade with China.

“We’ve had no formal notification from Chinese officials, we’re working closely with the cotton industry to make sure we work through any announcement they may make,” he said.

“They haven’t given us any notification of that.”

Speaking in Orange, NSW, Mr Littleproud spruiked Australia’s trade credentials, including new free trade agreements and emerging markets.

“We have already been diversifying away from China if any changes to our quota arrangements take place,” he said.

“That’s looking to countries like Indonesia, India, Vietnam.

“We’ll continue to work with industry to make sure there are opportunities to send boats left and right if we have issue with one particular market.”

Cotton Australia and the Cotton Shippers Association said the industry relationship with China was long valued and respected.

“To now learn of these changes for Australian cotton exports to China is disappointing, particularly after we have enjoyed such a mutually beneficial relationship with the country over many years,” they said.

“Despite these changes to our industry’s export conditions, we know Australian cotton will find a home in the international market.”

Earlier in 2020, China introduced hefty tariffs on Australian barley and suspended beef imports from several Australian abattoirs.

It has also launched an investigation into allegations of dumping by the Australian wine industry.

-ABC