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TRADE WAR: Australia braces for new China trade strikes

(Source: Getty, AAP)
(Source: Getty, AAP)

From tomorrow, the number of Australian exports blocked by China is set to climb as trade tensions between the two countries continue to escalate.

Australian sugar, lobster, copper, copper concentrates and some timber will be banned from China from Friday after Chinese traders were reportedly instructed by Community Party officials to halt imports.

Bans or heavy tariffs are already in place for beef, coal, red wine, and barley.

Wheat is also expected to join the target list, according to reports by the South China Morning Post.

The incoming bans come after Australian rock lobsters were stranded on a Chinese airport tarmac last week amid custom clearance delays.

China is Australia’s largest trading partner by far, and last year imported $149 billion worth of goods from Australia.

The sweeping bans represent the latest breakdown in Australia-China relations, which Geoff Raby, former Australian ambassador to China, described as at the lowest point since 1972.

The alleged meetings between Chinese traders and officials were denied by a spokesperson for the Chinese Ministry of Commerce.

“We did not hold such a meeting, neither did we issue the notice, nor do we know about such rumours,” the spokesperson said.

Canberra’s relationship with Beijing has deteriorated since Australia called for the launch of the World Health Organisation’s (WHO) inquiry into the origins of the coronavirus, which first emerged in Wuhan.

Trade Minister Simon Birmingham on Wednesday called for “greater clarity” from China around the incoming bans, but has in the past sought to downplay speculation that the trade attacks are retribution.

“There are lots of different rumours and stories at present and it is hard to quite define and discern which things are true, which things are inflated,” Birmingham told 2GB.

Sydney-based think tank the Lowy Institute senior fellow Richard McGregor said China seemed “determined to punish Australia and make it an example to other countries”.

“They want to show there’s a cost for political disagreements.”

What does this mean for Australia – and could it get worse?

Commonwealth Bank agriculture commodities specialist Tobin Gorey said the “precise nature of the ban” was “unknown for now”, as only a specific set of Australian goods were being impacted.

“The ban might take on a more specific nature in the next week or so, narrowing the amount of Australia’s wheat that China will not allow to be imported. If not though, then this ban is possibly a worrying evolution in China’s trade policy towards Australia,” he said in a note.

“The narrow, specific bans are a major problem for specific businesses in Australia already. A move to broad, general bans considerably increases the impact.”

While China is attacking “high profile” Australian products such as lobsters and beef, prominent economist and Asia business relations expert Tim Harcourt said the Asian superpower remains one of Australia’s largest trading partners.

“They want to target things that won't really hurt them a lot, but make a point,” he told Yahoo Finance.

But the significant imports – iron ore and natural gas, products that “really matter to China” – haven’t been touched, Harcourt noted. According to Bloomberg, iron ore has not been included among the list of China’s bans.

“You can knock off a few lobsters here and there. But major gas is tied up for ten years – you don’t want to put that in jeopardy,” he said. “That will bring China’s industrial engine to a halt which they don't want to do.”

Australia isn’t the only country subject to China’s trade attacks; its other trading partners such as South Korea, France, Ecuador, and Japan have received similar treatment, Harcourt added.

“They really don't want to be seen as responsible for the pandemic. The best form of defence is attack.”

It’s unlikely China will move to significantly intensify the bans, as China itself stands to lose, he said.

“Ultimately this will really hurt them. If they broke down trade with Australia, it would really hurt their recovery, the middle class, and put them under a lot of political pressure.

“We do need China as a trading partner, but they need us – probably more.”

China’s ‘attack as a form of defence’ mode of operating is in line with its authoritarian regime, according to the economist. “It’s all about making threats, pushing people around and undermining them.”

On 1 September, thinktank the Australian Strategic Policy Institute issued a paper that tracked 152 instances of China’s “coercive diplomacy” that targeted 27 countries as well as the European Union.

Australia was identified as among some of the countries most targeted by China, the paper said.

“The CCP’s coercive tactics can include economic measures (such as trade sanctions, investment restrictions, tourism bans and popular boycotts) and non-economic measures (such as arbitrary detention, restrictions on official travel and state-issued threats),” the Institute said.

China’s attacks hit harder the more a country is economically dependent on it, the paper added.

“The economic, business and security risks of that dependency are likely to increase if the CCP can continue to successfully use this form of coercion.”

–with wires

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