Australia will temporarily suspend a World Trade Organization case against China over tariffs on barley while Beijing undertakes a review of the restrictions, in a potential breakthrough to the long-running dispute between the two nations.

The Australian dollar gained as Foreign Minister Penny Wong announced the agreement alongside Trade Minister Don Farrell at a press conference in Adelaide on Tuesday. The duo said their goal was to achieve a similar agreement for China’s tariffs on Australian wine in the future.

“We are hopeful that at the end of that review process, the impediments that currently exist will be suspended or removed and that we can get back to normal trade with China,” Farrell said.

China wanted “to rebuild trust and bring relations back to the right track,” Foreign Ministry spokesman Wang Wenbin said Tuesday at a regular press briefing in Beijing, “and in this process, through constructive consultation in a balanced manner, resolve our concerns on trade issues and benefit both peoples.”

The Australian dollar extended gains following the announcement and was trading at 66.65 US cents at 4:06 p.m. in Beijing, buoyed by the indication of improving relations with the world’s second-largest economy.

China imposed trade restrictions on Australian exports in 2020, including tariffs on barley and wine, following a call by then-Prime Minister Scott Morrison for an international investigation into the origins of Covid-19 in Wuhan. Morrison’s suggestion provoked a furious reaction in Beijing, which considered the topic highly politically sensitive.

In the intervening period, Australia’s exports to China continued to grow, mainly due to a renewed surge in iron ore prices.

China is Australia’s largest trading partner. However, Canberra is a close ally of Washington on security issues, which often led to tensions with Beijing during the past decade. 

Diplomatic relations steadily improved following the election of a center-left Labor government in Australia in May last year. Vice Foreign Minister Ma Zhaoxu is expected to visit Australia this week, the first Chinese official to travel to the country since 2017.

Beijing imposed tariffs of over 80% on Australian barley in May 2020, after accusing the country of dumping the grain on the Chinese market. At the time it was estimated the penalties could cost the Australian market as much as A$2.5 billion ($1.7 billion) over five years, according to the industry group Grain Growers.

In 2018-19, the barley trade with China was worth almost A$1 billion, the Australian government said.

“If the duties are not lifted at the end of the review period, Australia will resume the dispute in the WTO,” Wong and Farrell said in a statement.

--With assistance from Matthew Burgess, Lucille Liu, Ran Li and James Mayger.