China launched a series of trade strikes to put pressure on Australia, but Canberra succeeded in counteracting such strikes by redirecting export flows.
When Australia proposed an independent international investigation into the origin of Covid-19, China angrily responded to a series of unprecedented trade sanctions that prevented the country from clearing many key exports. Australia.
According to Jeffrey Wilson, research director of the Perth American Asia Center, the sanctions are “causing pain” to the Australian economy, and China seems to want to send a warning message to other countries, weighing its relationship with Beijing more than damage. However, Beijing has failed in both of these goals.
Wilson believes that China’s trade retaliation measures have little impact on the Australian economy. Canberra’s ability to withstand pressure also proves Beijing’s warning that the “cost” may be lower than initially feared.
The competition between Australia and China is not a “nothing” mentality. Wilson pointed out that over the years, the economic ties between the two countries have become closer.
From 2009 to 2019, Australia’s exports to the world’s most populous country tripled, reaching approximately US$110 billion per year. Nearly half of the bilateral trade is Australia’s iron ore, which is an important source of raw materials to help the Chinese economy meet steel demand. It is as hot as the construction industry. In addition to coal, natural gas and agricultural products, another important source of income in Australia is the influx of Chinese students into the country’s universities.
For a long time, Canberra and Beijing tacitly agreed to shelve political differences for mutual benefit. Even when bilateral relations are strained, this principle has been adhered to, and the volume of trade has increased steadily year by year.
But after the Covid-19 outbreak, everything changed. In April 2020, the Australian government took the lead in calling for an independent investigation of the origin of Wuhan’s new coronavirus. China issued a statement to protest and preemptive strikes with trade strikes, which Beijing’s strategic planners consider to be the “core” of Prime Minister Morrison’s government.
China opened with the threat of its ambassador Thanh Canh Yee that it might boycott Australian goods in the country. A month later, Beijing imposed an 80.5% import tax on Australian barley, which shocked the country’s barley exporters. The sanctions list ranges from beef, wine, wheat, wool, lobster, sugar, copper, wood, grapes, cotton to coal and liquefied gas.
In November 2020, the Chinese Embassy in Canberra continued to publish a list of “14 points of dissatisfaction”, requesting Australia to adjust whether it hopes that bilateral relations will return to normal.
Wilson said Beijing’s trade crackdown on Canberra was unprecedented in scale. They have used this tool in many diplomatic disputes with Canada, Japan, Norway, the Philippines, and South Korea, but this is the first time that an economy has faced full outrage from China.
The tension between China and Australia has become a major “policy test” in contemporary international politics. Researchers have witnessed a sudden economic decoupling between China and a country whose exports depend on this market for 40%.
But China didn’t seem to get what it wanted in this test. After imposing the first sanctions on Australian barley, Foreign Minister Marise Payne immediately publicly accused China of “economic coercion.” The position of the Australian authorities remains firm that an independent investigation into the origin of Covid-19 is required.
Wilson believes that Australia has withstood such tremendous pressure because it does not allow itself to “get into trouble” in trade. When China set up trade barriers, Australia did not accept the damage, but quickly guided the flow of goods to the international market to find new destinations for its exports.
Coal is seen as the best proof of Australia’s success in resisting pressure in the trade war with China.
China banned the import of coal from Australia in mid-2020 and switched to suppliers in Russia and Indonesia. As a result, these two countries have reduced the amount of coal supplied to the international market.
Aware of this, Australia quickly filled the supply gap and redirected coal exports to new destinations such as India, Japan and South Korea. After Covid-19 pushed up coal prices, efforts to restore the global economy helped Australian companies earn more profits this year.
The same strategy has been successfully applied to many other economic sectors. Australia has redirected its barley exports to Saudi Arabia and Southeast Asia, its copper exports to Europe and Japan, and its cotton exports to many countries that have a demand for textile materials. Canberra chose to take a detour with beef and lobster, consolidate the goods into export companies that have not been suspended by Beijing, or send the goods through Hong Kong.
Australia still suffers losses, but far below what observers feared. According to the country’s Ministry of Finance, the sanctioned industries lost about US$4 billion in the Chinese market in the first year of the trade shock, but they made about US$3.3 billion thanks to the new market. Their losses accounted for nearly 0.25% of total exports.
Australia’s Finance Minister Josh Frydenberg said: “We have proven that our country’s economy is incredibly resilient.”
The research director of the Perth May Asia Center pointed out that the export redirection strategy does not always work. The export products that have successfully applied this strategy are mainly raw materials. At the same time, Australian furniture and wine produced mainly for Chinese consumers are still plagued by trade barriers. Commodities in global manufacturing and technology supply chains face more complex challenges.
“However, the Australian story offers an important lesson: the decoupling of bilateral trade does not mean that trade will inevitably be destroyed,” Wilson emphasized.
Since the economic losses are minimal, Prime Minister Morrison’s government can confidently push for tougher policies against China.
Ambassador Thanh Canh Nghiep’s “14 points of dissatisfaction” became “he hit his stick”. The Australian delegation attending the G7 Rome summit issued a statement to the entire meeting, accusing Beijing of conspiring to manipulate policy. In September, Australia formed the AUKUS alliance with the United Kingdom and the United States to help Canberra own nuclear submarines. Observers believe this move can counterbalance China’s military power in the region.
Wilson believes that the war between Canberra and Beijing shows that China can use the trade advantage of its huge economy as a tool to put pressure on and deter partners, but this is not always a fatal blow if the opponent adopts a reasonable defense. Measures strategy.
“China may be an important economic partner, but it is certainly not the only one. The international market can quickly adjust itself to a series of trade sanctions, greatly reducing the impact of trade sanctions. Their actions in practice,” Wilson said. “Adjustment The process is still painful, but the cost is less than we feared.”
Nakaren (follow Foreign policy)