The Chinese and Australian Flag

Australian Exporters Could be ‘Back On The Radar’ In China as Tensions Ease

Over the past couple of years Australia and China’s relationship has been strained with China announcing tariffs and sanctions on barley, beef, lamb, wine, cotton, lobsters, coal and timber. In 2020, The Chinese Ambassador suggested that Australia’s push for independent investigation into the origins of COVID-19 was what led to Chinese consumers turning away from Australian beef, wine and other Australian products. Now Australian lobster farmers and winemakers are attracting renewed interest from Chinese importers and distributors, the first sign of a potential withdrawal of $20 billion in trade sanctions that have crippled industries and dominated three years of economic disputes with Beijing.

Tariffs Imposed by China in 2020

Tariffs imposed by China included 80% on barley which were said to apply for five years, which brought the trade that was worth more than $1 billion (in 2017), to a halt. In the same week that China flagged its plans to tariff barley, four major Australian beef exporters were blacklisted by China over claims of mislabelling. Australia sold $3 billion of red meat to China in 2019. Australian wine sales were hit with interim tariffs of up to 200% for dumping and a six per cent tariff for countervailing duties leaving Australian winemakers to scramble to find new markets for $1.26 billion of wine. The cotton industry was facing tariffs as high as 40% with Australia typically selling around $800 million of cotton to China each year.

Tonnes of live Australian lobsters were left to die on the tarmac as China’s customs delayed quarantine inspections in November 2020. Days later, word spread that importers in China had been warned by officials to stop buying Australian lobster ahead of an unofficial ban from November 6. An export market worth $771 million in 2017-18.

Coal had also been identified in the list of commodities that Chinese importers had been warned to avoid from November 6. By early December, fourth quarter exports had fallen by 82% and Australia’s largest coal port, Newcastle, had completely stopped sending coal to China altogether. China’s state media confirmed that Beijing had blocked Australian coal imports, jeopardising $14.5 billion of trade.

In 2019, nearly half of Australia’s timber exports went to China, a market worth $1.9 billion. In 2020, China refused to accept timber from four Australian states. The detection of bark beetle in a shipment of Queensland timber led China to block that trade in early November 2020 also.

What About Now, 3 Years Later and a Government Change, Will Trade Resume with Australia?

On the eve of Foreign Minister Penny Wong’s first visit to the Chinese capital, Australia China Business Council president David Olsson said Australia should also consider withdrawing its World Trade Organisation case against China at the same time as Beijing withdraws its anti-dumping case against Australia as a sign of goodwill.

“We all have to make decisions that are not necessarily decisions that we’re entirely comfortable with, but which are important decisions to help us get to a better place,” said Olsson.

“If our government decided that there was merit in agreeing to some sort of tactical compromise on this, to resolve thorny diplomatic problems with China, I think people would generally accept that.”

Wong is the first foreign minister to travel to China since Marise Payne in 2018 after years of diplomatic estrangement over human rights, national security, trade strikes and COVID-19.

“Many of the hard issues in the relationship will take time to resolve in our interests,” she said. “Speculation about outcomes obviously has implications for leverage, and I am certainly not interested in giving any country leverage other than Australia.”

Speaking from Hong Kong, Olsson said until the federal election in May, Chinese businesses did not feel they had permission to engage as deeply with their Australian counterparts as they would have liked.

“The change in government became a trigger for them to try and engage again. So, we’ve had really quite strong engagement, over the last six months in particular,” he said.

“At the business level, members are reporting that the number of calls and email communications they’re getting from Chinese companies has ramped up considerably. It’s as if Australia is back on the radar.”

China is a huge market for Australian exporters and Chinese importers across agriculture, resources, and services sectors and opens up potential windfalls worth billions of dollars when trade resumes.

The first indication of trade relief will come from business because the Chinese government has never officially acknowledged the existence of the sanctions. Instead, China has argued that importers were making their own investment decisions not to purchase Australian products. In October 2020, coal traders were given verbal instructions to stop importing Australian coal, but little public documentary evidence exists beyond crates of wine piling up at Chinese ports or lobsters spoiling on airport tarmacs, incidents that Chinese authorities blamed on labelling or pest control issues that will form part of its argument in any World Trade Organisation defence.

“That’s a positive development that we’re seeing,” he said.

“It’s not yet translating into real economic activity. One hopes that if something happens tomorrow, that might then provide the impetus for further change and for things to start flowing again.”

Opposition foreign affairs spokesman and former trade minister Simon Birmingham warned against stopping the appeal to the WTO until China’s tariffs are removed.

“Although it would be preferable for China to remove these unfair tariffs without waiting for the conclusion of the WTO processes, we certainly shouldn’t give up the leverage of securing principled rulings from the independent umpire,” he said.

The Australian government has maintained that China’s complaint to the WTO over steel anti-dumping measures is without merit and that its trade sanctions on Australia were a form of economic coercion due to its positions on human rights and national security.

Olsson said Australia needed to reconsider some of its foreign investment positions, particularly as China accelerates its plans for renewable energy.