Rising tension between Australia and China could play into the hands of New Zealand sheep meat exporters.

Australian Prime Minister Scott Morrison irked China after he led calls for an inquiry into the origins of the coronavirus pandemic.

Chinese state media accused Morrison of using the call to cosy up to the United States and to deflect attention from his handling of bushfires.

The rising diplomatic tensions have had an impact on trade between the two countries.

An 80% tariff effectively stopped Australia’s wheat exports to China overnight in June.

In September China announced an inquiry into what it alleged was dumping of subsidised Australian wine in its domestic market.

The meat industry has not escaped unscathed either.

In August five beef processing plants were suspended after Chinese customs authorities claimed to have found a banned chemical in beef originating from the plants.

Plants processing sheep meat haven’t been targeted so far but Silver Fern Farms group sales manager Peter Robinson said it was becoming a factor for Chinese buyers to weigh up when dealing with Australian meat imports.

“Importers are very nervous about Australian plants being delisted… not so much tariffs.

“I think the Chinese authorities tend more to do it with a delisting.

“But there is nervousness that their product may be caught at borders or maybe subject to more testing.”

Whether it was the buyer or seller left carrying the can if the Chinese government decided to target Australian sheep meat is not a straightforward matter, according to Canterbury-based meat trader Sam Clark-Hall of Lattitude Commodities.

Most of the sheep meat trade with China is conducted on a CIF basis where the exporter would bear the liability of repatriating containers or moving them to another destination if the plant where the meat originated from were to be delisted.

“However it would be typical they would be holding some sort of deposit or leverage over the importer so could choose to deduct some of the cost out of this.”

In the case of a tariff being imposed once the meat was on the water it would be the importer’s problem.

“However if they refused to pick up the container and left it on the wharf it would be the exporter’s problem so I would expect some sort of renegotiation of price in this situation with the exporter helping their customer out with some price relief.

“That said the threat of a political dispute does create uncertainty and importers and exporters will be proceeding with caution and probably not selling too far forward.”

SFF’s Robinson said while the threat of retaliation hung over Australian sheep meat NZ exporters hadn’t yet seen any benefit in increased sales.

He said with an election looming the risk was higher than normal that a NZ politician could make comments inflammatory to China which could result in retaliation against exporters.

“We also have to be mindful that could be us at the drop of a hat too.”