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Trade and talks return, but Australia-China ties need clarity to ensure thaw in relations lasts

South China Morning Post (Hong Kong)
Syed Munir Khasru
February 15, 2023


After a trade break of more than two years, Australian coal ships have arrived at Chinese ports, indicating hope for goods such as barley, lobster, wine and others on which the Chinese government had imposed hefty sanctions.

Last week’s virtual talks between Commerce Minister Wang Wentao and Australian Trade Minister Don Farrell, the first meeting between the country’s trade ministers since 2019, discussed resuming bilateral and commercial exchanges and improving relations. Ties have been strained in recent years over political, trade and security issues.

Relations deteriorated amid a string of events starting with Australia banning Huawei from its 5G networks. They soured further as Australia’s foreign minister called for an inquiry into China’s response to the Covid-19 outbreak in April 2020, marking the lowest point in bilateral relations.

Australia also faced the brunt of China’s “wolf warrior” diplomacy, wherein diplomatic and ministry officials respond to any criticism or opposition to China with arguments and accusations on social media.

It resulted in a slew of aggressive comments towards Australia. Hu Xijin, then the editor of the Global Times, described Australia on Weibo as “a bit like chewing gum stuck on the sole of China’s shoes”.

Later, China imposed an 80.5 per cent tariff on Australian barley, barred imports from Australia such as beef and enacted anti-dumping and anti-subsidy reviews on Australian wines. Coal ships were left stranded off the Chinese coast amid China-imposed restrictions. Although China constitutes more than 30 per cent of Australia’s exports, Australia said it would not bend under economic pressure.

China also warned its international students about studying in Australia. In July 2020, Australia cautioned its citizens against travelling to China, citing the chance of arbitrary detention. A year later, Australia joined the United States, Britain and other countries in accusing China of engaging in malicious cyber activities, a charge Chinese representatives denied.

Sino-Australian bilateral trade has shown significant growth from its beginnings in the 1970s, and the two economies enjoy a “complementary relationship” with a two-way merchandise trade. Australia-China trade has increased annually from US$2.51 billion in 1995 to US$57.2 billion in 2020. Iron ore, petroleum gas and coal are among the major exports from Australia to China, whereas computers and broadcasting equipment are China’s major exports to Australia.

China is Australia’s largest goods export market including agricultural goods, as well as for service exports including education and recreational travel. China is also Australia’s largest source of overseas students, apart from being its largest import source for clothing, communications equipment and so on.

The overall impact of China’s regime of sanctions and restrictions on Australia has remained low as it has found alternative markets for products such as beef, coal and copper ore. Yet, other products such as lobster and timber have suffered compared to their 2019 levels. Disregarding disruptions stemming from the pandemic, Australian exports have overall increased because of high commodity prices.

Australia joining the Quad security grouping has predictably drawn China’s derision. The grouping, which comprises Australia, Japan, India and the US, is seen by some as an alliance against China’s growing military might and economic clout in the region, some of whose members have ongoing disputes with China. Recently, Quad members also formed a cybersecurity partnership to counter the risk of Chinese cyber warfare in the region.

On the other hand, the China-led Regional Comprehensive Economic Partnership (RCEP) is expected to reduce trade barriers and boost economic collaboration in the region. However, RCEP cannot aid in resolving trade wars as it does not possess a strong dispute mechanism to resolve tariff impositions or promote new trade. In that respect, RCEP might not have a significant impact on improving Sino-Australian trade.

Sino-Australian relations have begun to see improvement under the leadership of new Australian Prime Minister Anthony Albanese, as opposed to the previous government of Scott Morrison. Australia’s intent to improve relations is evident in the talks Foreign Affairs Minister Penny Wong held in December 2022, when she discussed trade blockages faced by Australian exports along with the issue of Australian citizens detained in China.

There is hope for an annual strategic dialogue to get reinstated. However, talks and dialogue might not be sufficient given that bilateral relations and trade have suffered despite the presence of a comprehensive strategic partnership and a free-trade agreement.

Australia and China must be forthcoming in communicating their expectations as their earlier deals disintegrated with political disagreement. With a political chasm leading to a mismatch in trade requirements, both countries need to be more prudent in devising a strategy that is mutually beneficial. With regional disputes and rivalries growing increasingly tense, future Sino-Australian rapprochement must be based on maintaining stable economic relations despite geopolitics driving a wedge between them.

With the US building strategic alliances around Southeast Asia and the Ukraine war affecting global economy, the challenge is to have a long-term vision that envisages optimum use of market access, demarcation from political alliances and minimises conflicts of interest.

Then foreign minister Wang Yi said during his meeting with Wong last December that China was ready to start again on the journey to improve bilateral relations and move forward in a sustainable manner. However, as his Australian counterpart aptly noted during a visit with her country’s ambassador to China, “The ice thaws, but slowly.”

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