Australia Feeling the Force of China’s Escalating Trade War

China imposed new tariffs on Australian imports on Friday, the latest move in an escalating trade war that has rallied several of Australia’s allies in support for the country. The Washington Post’s Gerry Shih reported on the significance of the latest tariffs on wine, an industry that is heavily reliant on exports to China for viability:

Beijing on Friday announced new tariffs of up to 200 percent on Australian wine, which the country’s trade minister said could make business “unviable” for a $3 billion industry that sends 40 percent of its exports to China. The move adds wine to a growing list of Australian exports that have been targeted by Chinese authorities this year. Other products that have faced trade barriers include coal, timber, seafood and barley, totaling about $20 billion.

[…] Australian Trade Minister Simon Birmingham said Friday that the series of Chinese moves, taken together, appear not to be driven by legitimate regulatory concerns and “give rise to the perception that these actions are being undertaken … in response to some other factors.”

“Doing so is completely incompatible with the commitments that China has given through the China-Australia free trade agreement and through the World Trade Organization,” Birmingham said in his toughest comments to date, while stopping short of threatening a formal complaint with international trade authorities. “It’s incompatible with a rules-based trading system,” he added. [Source]

Relations between China and Australia have been strained for months amid disputes over a wide range of issues, beginning with Canberra’s calls in April for an independent investigation into the origins of COVID-19. China has resisted any investigation into the source of the virus in China, and is ramping up claims that the virus originated abroad. Since March, Beijing’s volume of political scores with Australia has grown, culminating in the “leak” of an official list of “14 disputes” to Australian media last week. Among other points of contention, Beijing has taken issue with the Morrison government’s outspokenness about human rights issues in China, its blocking of several foreign investment proposals, and “antagonistic” Australian media coverage of China. A swathe of tariffs and import bans issued by the Chinese government have hobbled key Australian exporters, from lobster farmers to wheat producers.

This week, media reports have shown how those sectors are feeling the force of the new measures. Bloomberg’s Aaron Clark, Kevin Varley, and Annie Lee reported that more than $500 million worth of Australian coal is stranded off the coast of Chinese waters:

More than $500 million worth of Australian coal is on ships anchored off Chinese ports, as a diplomatic spat between the two countries cuts into trade, idles a portion of the world’s dry bulk carriers and threatens to spiral into a humanitarian crisis.

More than 50 vessels have been waiting a month or longer to offload coal from Australia, according to separate analyses of shipping data conducted by Bloomberg and data intelligence firm Kpler. There are about 5.7 million tons of coal on the anchored ships, which are mostly Capesize and Panamax-sized vessels, according to Kpler, and an estimated 1,000 seafarers. [Source]

The level of aggression that Beijing has been willing to deploy against Australia has alarmed Canberra’s allies, prompting some to speak out in support. Tom Tugendhat, chairman of Britain’s Foreign Affairs Committee, called the 14 demands an “extremely aggressive act” and called on “free countries of the world to [take] this extremely seriously.” The Australian Financial Review’s Jacob Greber reported that the situation in Australia has been “regularly invoked” among policymakers in the U.S., signaling the level of alarm that has spread among Western nations. On Thursday, the Financial Times’ editorial board called for coordination among democratic allies to counter pressure from Beijing:

The rapid deterioration in the relationship between Beijing and Canberra is much more than a bilateral affair. It demonstrates how a more assertive China is now seeking to intimidate nations that are a long way from its shores, by resorting to a bullying style of “wolf warrior” diplomacy. The treatment of Australia sets a worrying precedent since China is making demands that would impinge upon the country’s domestic system — affecting basic liberties such as freedom of speech.

Democratic countries should watch this conflict closely and be prepared to support each other in pushing back against Chinese pressure. Without such co-ordination, Beijing will be encouraged in its efforts to divide and rule, inflicting real political and economic damage on democratic countries that defy its will. [Source]

Up for review at the end of this year is a bilateral trade agreement that may provide an important litmus test for how far Beijing and Canberra will allow relations to deteriorate. Experts have suggested that the two governments are unlikely to be willing to tear up the China-Australia Free Trade Agreement (ChAfta) over the current dispute. Despite their ongoing disagreements, the two earlier signed the Regional Comprehensive Economic Partnership (RCEP), a landmark trade agreement including fifteen countries.

For the Diplomat, Katie Howe wrote about the bigger picture of the bilateral relationship, highlighting its deep historical roots and breadth of economic ties that render the bilateral relationship more complicated than it seems:

In 1972, Australia became the second Western nation after Sweden to establish diplomatic relations with the People’s Republic of China. To date, Australia remains the only Western country to have elected a Mandarin-speaking head of government, former diplomat Kevin Rudd. In 2020, the head of the Department of Foreign Affairs and Trade (DFAT), former ambassador to China Frances Adamson, is also a Mandarin speaker.

[…] Australia ranks in China’s top 10 sources of principal imports. While iron ore, natural gas, coal, and gold make up the bulk of these (A$98 billion in 2018-19), service industries such as education and tourism (valued at A$16 billion in 2018-19) have become an important part of the trade relationship. Given that success in these industries requires a more sophisticated, bilingual understanding of the market, this area of growth has been led by the Chinese Australian business community. The greatest disruption experienced by these sectors has been travel restrictions and quarantine protocols caused by the COVID-19 pandemic

[…] Many of these initiatives have remained untouched by the fluctuations of diplomatic relations and over the past 18 months many projects have been newly established or advanced. Payne says that despite diplomatic tensions, Australia’s national brand remains strong in the mainland. “Our reputation – for providing safe, reliable, high quality products – hasn’t changed at the consumer level,” he said. “Products in health, food, beverage and fresh produce will continue to be in demand.” [Source]


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