Australia's allies are profiting from China trade bans – The Australian Financial Review

Credit: Original article can be found here

“The saving grace is that, in most instances, Australian exporters have been able to find alternative markets for the products that they’re no longer able to sell to China,” the head of Corinna Economic Advisory said.

For example, imports of Australian barley dropped from about $US264 million ($361 million) in the first half of 2020 to nil over the same period in 2021, according to data from China Customs.

Imports from Canada, however, increased from $US200 million to $US430 million, and $US55 million to $US322 million from France.

 

A reported directive from Beijing to shun Australian copper resulted in imports dropping from $US550 million in H1 2020, to nil in 2021. At the same time, imports from the US lifted from $US50 million to more than $US500 million, and Canadian imports lifted from $US178 million to $US320 million.

For coal exports, Indian and South Korea benefited from boosted supply from Australia as China’s imports dropped to nil in H1 2021. Over the same period, imports from the US lifted from $US65 million to $US500 million, Canadian imports lifted by $US150 million, and imports from Russia swelled from $US800 million to close to $US1.4 billion.

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Beijing’s approach toward domestic coal miners and its ban on Australian coal has caused chaos and dislocation in global coal markets, and prices have soared to record highs in recent months as China struggles to meet demand for its steel-making sector, despite a directive to limit output over H2 2021.

Canada, New Zealand and the US stepped in to fill the gap for crustaceans; the latter was helped by the US-China “phase one” trade agreement, which requires China to purchase an additional $US200 billion worth of US goods and services over calendar 2020 and 2021.

US beef exporters have also benefited from the agreement, and a reduction in imports from Australia due to both trade tensions and the rebuilding of herds due to seasonable factors. Imports of US beef to China lifted from $US43 million in H12020 to more than $$US280 million in 2021.

In July 2021, China imported about $US50 million worth of Australian beef, while it imported about $US110 million from the US.

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The US embassy in Canberra declined to comment on the windfall for its exporters, however, a former top US official with close ties to the Biden administration, Michele Flournoy, this month said the White House could not stop American exporters from taking advantage of Beijing’s bans.

“I’m not sure that the White House can control Napa Valley exports of wines to China, so there may be pockets of the business community that have stepped in to fill demand,” Ms Flournoy told an ANU leadership forum.

Writing in the Financial Review on Thursday, leading thinkers from the US Studies Centre said Australia should work with its allies to develop direct countermeasures such as a counter coercion fund jointly financed by like-minded governments could partially offset coercive losses.

“Such a fund is politically unrealistic now, but if Beijing’s use of coercion becomes even more frequent, these politics may change.”

Trade Minister Dan Tehan said while Beijing’s trade sanctions had reduced the overall value of exports being blocked by China, local businesses had pivoted well to other markets.

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Exports of goods impacted by China’s trade sanctions fell by around $5.4 billion over the year to the June quarter, but exports of the same goods to the rest of the world increased by $4.4 billion.

Despite the trade sanctions, record high iron ore prices in the first half of 2021 pushed the value of Australian goods exports to record highs, with China accounting for more than 40 per cent of the goods shipped.

A recent report released by the Australia-China Relations Institute at the University of Technology Sydney, found that the cost incurred by local exporters had been significantly mitigated by market forces.

“The key issue is not exposure but access to an effective mitigation mechanism,” the report said, noting barley and cotton exporters had weathered the transition relatively well, while wine and wood had suffered.

In December last year, the Australian government sought to resolve the dispute with China over the block on Australian barley at the WTO, and in June this year, it launched an action in the WTO over China’s tariffs on wine.

Two days after Australia’s move on wine, China launched an action in the WTO against Australia on anti-dumping and countervailing measures on wind towers, stainless-steel sinks, and railway wheels.