COMMENT – Tension between China and Australia over commodities trade being seen as former flexing its muscle

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Photo courtesy: Hanjin Shipping

Australia’s ties with top trade partner China soured in 2018 when it became the first country to publicly ban China’s Huawei from its 5G network, and worsened after Canberra called for an enquiry into the origins of the coronavirus.

Tit-for-tat diplomatic reprisals have since followed, including raids on the homes of Chinese journalists in Australia, evacuation of some Australian journalists from China and a raft of trade measures imposed by China on Australian exports.

China is by far Australia’s top overall export market, worth $104 billion in 2019, according to the International Monetary Fund (IMF), so a lasting severing of trade ties could damage the Australian economy. Australian shipments of beef, barley and coal worth billions of dollars have been the most impacted by recent measures, and China has been able to find alternative supplies easily. Iron ore – Australia’s top export and a critical ingredient for China’s massive steel sector – has been spared so far from any crossfire, as has Australian LNG.

It all began in February 2019 when China’s northern port of Dalian banned imports of Australian coal and capped overall coal imports from all sources till the end of 2019 at 12 million tonnes. Then in May 2020, China hit Australian barley with anti-dumping and anti-subsidy duties totalling 80.5 per cent with retrospective effect from May 2019, with the duties expected to last five years. It also put a stop to beef imports from four of Australia’s largest meat processors.

Then in August 2020, China, the top export market for Australian wine, launched anti-dumping and anti-subsidy probes on some Australian wines. By the end of the month and beginning of September 2020, China suspended barley imports from Australia’s largest grain exporter, CBH Grain after pests were found, and ordered stricter inspections of Australian wheat and barley.

Australia is the biggest barley supplier to China, exporting about A$1.5 billion to A$2 billion worth a year, which is more than half its exports.

In October, Australia started investigating reports that China has verbally instructed buyers to avoid Australian coal supplies. Australian coal arrivals to China are expected to slow in the near future and the share of China’s coal imports from Australia fell to 26 per cent in October. The same month, China also asked the country’s cotton mills to stop buying Australian supplies or face the risk of a tariff of 40 per cent. China is the biggest buyer of Australian cotton. Its cotton trade with Australia amounted to about A$900 million ($637 million) during the 2018/19 crop year. China also slashed imports of Australian copper concentrate by more than half in October.

Then finally last month, in November, Australia said it was “extremely disappointed” after China imposed temporary anti-dumping measures on Australian wine imports from Nov. 28. China found coal imports from down under failed to meet environmental standards amid stalled Australian shipments.

In retaliation, Australia’s Woodside Petroleum shelved talks to sell stakes in a gas field and liquefied natural gas (LNG) project to Chinese firms because of the diplomatic row. China then rejected Australia’s appeal to scrap anti-dumping and anti-subsidy duties totalling 80.5 per cent on its barley exports. Beijing banned barley shipments from Australia-based grain exporter Emerald Grain, owned by Japan’s Sumitomo Corp. Australia stopped rock lobster shipments to its top market China, after Beijing imposed new live seafood inspections that include checks for traces of minerals and metals.

China also banned Australian timber after pests were found in timber from Victoria state. Earlier, China’s Foreign Ministry said customs repeatedly found biohazards in Australian timber after media reports that Beijing had halted timber imports from Australia’s northeastern Queensland state.

China’s Foreign Ministry however, denied any retaliatory measures. The ministry said reduced imports of Australian products like wine, coal and sugar were the result of buyers’ own decisions, after media reports stated that Beijing had warned importers to stop buying a range of Australian goods.

China is also expected to block imports of sugar, red wine, lobster, barley, coal and copper ore and concentrates from Australia, according to the media reports. Economic and political observers across the world are calling it China’s flexing of muscles in the global community. That China’s economy has been the best performing economy in the world,  post Covid-19 pandemic, it is making a statement to the world to toe its line, many observers feel.

Shekhar Ghosh is a communications consultant and and former journalist, who has edited and written for publications such as like Business India, Business Standard, Business Today and Outlook.

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