Advertisement
Advertisement
China-Australia relations
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
China has targeted a number of Australian exports, including barley, beef, wine, lobsters and coal. Photo: Bloomberg News

Explainer | China-Australia relations: what’s happened over the past year, and what’s the outlook?

  • China has targeted Australian barley, beef, wine, lobsters and coal over the past year after Canberra called for an inquiry into the origins of the coronavirus pandemic
  • Despite ongoing tensions, Australia’s exports to China reached A$145.2 billion (US731.8 billion) in 2020, just 2.16 per cent less than the total in 2019
Relations between China and Australia have become fraught over the past year after Canberra pushed for an international probe into the origin of the coronavirus without diplomatic consultations beforehand, and Beijing eventually responded with a number of trade blocks on wine, barley, cotton, copper, coal, sugar and lobsters. We look at the issues in this series.

China and Australia, two of Asia-Pacific’s biggest trading partners, have been locked in political conflict for the past year resulting in a series of trade disruptions that have not yet been resolved.

On April 19 last year, Australian foreign minister Marise Payne appeared on national television calling for a global inquiry into the origins of the coronavirus pandemic, including China’s handling of the initial outbreak in the city of Wuhan, without prior diplomatic consultation with Beijing.

In the same week, Australian Prime Minister Scott Morrison suggested World Health Organization investigators in Wuhan be armed with the same powers as United Nations-backed weapons inspectors.

Since then, Beijing has targeted a number of Australian exports, including barley, beef, wine, lobsters and coal.

What trade actions has China taken against Australia so far?

Early in November last year, Beijing unofficially told Chinese traders to stop importing Australian coal, sugar, barley, lobsters, wine, copper and log timber in the biggest single trade “ban” so far. That followed informal bans on Australian cotton and coal in October. 

In May 2020, shortly after the conflict started, China imposed duties on Australian barley following an 18-month anti-dumping investigation. The duties imposed were at the highest end of possible penalties and rendered Australian barley uncompetitive in the Chinese market.

09:20

Trade ‘only one part of the battle‘ in China-Australia dispute, says legal expert Bryan Mercurio

Trade ‘only one part of the battle‘ in China-Australia dispute, says legal expert Bryan Mercurio

That same month, Beijing stopped five meat processors from exporting beef to China. By December, it had blocked six abattoirs.

The final blow to Australian exports came in March this year, when China formalised temporary anti-dumping duties on cheap Australian wine, which it claimed was damaging the domestic wine industry. The duties of between 116.2 per cent and 218.4 per cent were higher than the preliminary tariffs imposed in November, and left Australian wine unviable for Chinese consumers.

How has Australia responded?

In December last year, Australia lodged a complaint with the World Trade Organization (WTO) over China’s 80.5 per cent tariffs on its barley exports.

In its filing, Australia claimed China deviated from WTO rules 26 times during its anti-dumping investigation, including improperly using third-party country sales to justify the dumping.

Informal talks between the two trading partners in January did not resolve the issue and the Australian government said last month it would escalate the resolution process by asking the WTO to establish a dispute-settlement panel.

07:55

Australia ditched diplomacy for ‘adversarial approach’ to China and ‘a pat on the head’ from US

Australia ditched diplomacy for ‘adversarial approach’ to China and ‘a pat on the head’ from US

The Australian wine industry and government are also considering a complaint at the WTO over the duties on Australian wine, though this has not been finalised.

Since its accession to the WTO in 2001, China has launched four anti-dumping and anti-subsidy cases against Australia, of which two were the barley and wine cases. Australia has initiated 87 cases against Chinese exports.

Between 1995 and 2019, Australia was the sixth most prolific anti-dumping instigator among the 164 WTO members, after India, the United States, the European Union, Argentina and Brazil.

Are both countries suffering economically as a result of trade disruptions?

Not quite. Australia’s exports to China reached A$145.2 billion (US731.8 billion) in 2020. That was just 2.16 per cent less than 2019’s total of A$148.4 billion, which was the highest since 1988.

The bulk of those exports were iron ore, which has seen record prices that have helped bring Australian miners a windfall.

The strength in iron ore prices comes from strong demand in China for steel, a key material needed to support the country’s fast recovering infrastructure and construction sectors.

The surge in iron ore made up for losses in banned exports from Australia, as well as all other exports that slowed due to political risks.

Removing iron ore from the numbers, the Australian trade department said last month the value of trade with China for almost all other industries has fallen 40 per cent. For example, exports of coal and wine at the start of this year were near zero.

Analysts also say China could soon be under pressure to find sufficient coking coal – used for making steel – from other countries.

So has China experienced big shortages in coal so far?

China experienced its worst blackouts in more than a decade in late 2020, which coincided with a colder than usual winter, though Chinese authorities said they were not the result of a shortage in coal.
However, after unofficially banning Australian coal in October and again in November last year, China took steps to diversify supply. It began importing coal from Colombia and South Africa, underscoring its reluctance to buy from Australia amid the diplomatic spat.

Australia coal ban continues to weigh on supply, imports down 40 per cent

China produces a lot of its own thermal coal and is less reliant on Australian imports to fill any shortages. It does, however, rely on Australia’s coking coal, as it is high-grade and hard to replace in terms of quality.

Up to 60 vessels laden with Australian coal remain off the coast of China waiting to unload.

By February, crew on some of the boats had been at sea for about six months and were running out of supplies. China allowed several vessels to dock on humanitarian grounds, letting crew disembark, but not clear cargo.

What is the outlook, and can the trading relationship be restored?

Neither country has extended an olive branch. Australian politicians are pushing for trade diversification away from China. Last month, an Australian parliamentary inquiry called on the government to consider revoking the 99-year lease for Port of Darwin from a Chinese company citing a new foreign relations law.
Australia’s trade minister Dan Tehan earlier this month asked Australian businesses to “step up to the plate” in repairing ties with China, while Australian exporters have found new markets to take barley, wine and coal.

China continues to call for Australia to show mutual trust and respect, and stop working alongside the US to interfere in its domestic politics and destroy its reputation.

Want to know more?

In every episode of the Inside China podcast, we take a deep dive into a specific topic, mixing independent reporting and exclusive interviews to bring you unique insights into an emerging potential superpower. Now, we are featuring regular updates on the coronavirus pandemic from across the country.
Also each week, South China Morning Post journalist Finbarr Bermingham wraps up the latest economic data from China, delves deep into the ongoing US-China trade and tech war, and examines China’s changing economic relationship with Europe, Africa and the Indo-Pacific in the China Geopolitics podcast.
99