Australia’s trade ties with China show there’s no need to throw the baby out with the bath water
- Chinese sanctions on Australian goods remain in place, and the new government in Canberra is sticking to the same policy position as its predecessor – yet bilateral trade remains strong
- Despite the China threat being hyped up politically, Australian businesses are leaning into engagement rather than decoupling
For those wanting to instil a view that economic exposure to China is dangerous, the Australian experience has become Exhibit A.
With this as background, an international audience might be surprised by developments over the past week.
It began with the Australia China Business Council (ACBC) and the Australian Chamber of Commerce in China issuing a joint press release on September 13 to “reaffirm their commitment” to engagement with China, adding they were developing a programme of “high level and industry focused delegations from each country to the other as soon as travel can safely resume”.
The next day, after the new Chinese ambassador, Xiao Qian, had delivered an address at the ACBC’s Canberra Networking Day, the organisation’s president, David Olsson, remarked, “we are in a good place”.
The Australian business community, he said, had an “important role” to play in putting the Australia-China relationship “back on the right track”.
At a welcome dinner the evening before, Australia’s assistant minister for foreign affairs, Tim Watts, hadn’t minced words when describing Beijing’s sanctions as “unfair” and “unjustifiable”.
This year, imports are on track to achieve another new record, while exports are likely to finish at their second-highest level ever.
Though recent years have seen a low ebb, a new book by University of Sydney historian James Curran argues that volatility rather than stability has been the norm between Canberra and Beijing since diplomatic ties were established in 1972. Yet despite this, an analysis published last month in China Economic Journal shows that with only a few exceptions the impact of this volatility on the value of Australia’s exports to China has been insignificant.
Consider the trans-Tasman dairy manufacturer, A2 Milk. While wishing to diversify sales of infant formula by increasing its exposure to the US, that’s impossible as long as American authorities continue to stall on approving their application to supply the market. Meanwhile, Chinese authorities have just renewed A2 Milk’s registration to supply the same product to their market.
While Canberra pursues the case through the World Trade Organization, Treasury Wine Estates has maintained its connections to the lucrative China market by sourcing more of its offerings from California and boosting its investments in the domestic wine-growing region of Ningxia.
Australia’s experience does indeed serve to remind other countries that Beijing is willing to weaponise trade in pursuit of political and strategic objectives. But it also shows that there’s no need to throw the baby out with the bath water: leaning into engagement rather than driving a “decoupling” is generally the best response.
James Laurenceson is director and professor at the Australia-China Relations Institute, University of Technology, Sydney