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No quick fix from Biden for Australia’s China trade woes

Consider coal, the latest Australian export that China has cut off. In the global thermal coal trade, Indonesia is the superpower and accounted for 41 per cent of seaborne exports in 2019. Even if miners in the United States, Canada, the United Kingdom and New Zealand refuse to supply Chinese power generators, the only response it would draw from Beijing is chuckles. In the case of coking coal, lost Australian sales to China are already being snapped up by Canadian suppliers.

Export of coal is the latest that China has cut for the Australians. Indonesia is the power block in the global thermal coal trade, and accounted for 41 percent of seaborne exports in the year 2019. Should the US, UK and New Zealand decline to supply Chinese power generators, all that will  happen is, receiving giggles from Beijing. In the case of coking coal, sales that the Australians have lost to China are being bought up by the Canadians suppliers.

One prominent Australian strategist suggested that when a country faced Chinese boycotts, ‘collaborating nations would agree to purchase the goods or provide compensation’. Good luck to any president or prime minister wishing to explain to privately-owned companies why they must buy goods they don’t want.

It reported that the US is becoming   increasing sensitivity towards Chinas growing power with tariffs struck on US350 billion worth of Chinese imports independent to the World Trade Organizations rules is just one example. Another concern is the expanding of the number of Chinese Companies  that are targeted by the US Department of Commerce’s ‘entity list – including  individuals strongminded enough to undertake “activities contrary to US national security and / or foreign policy interests’ – which is now more than 300.

The obvious danger for Australia is getting bogged down with the United States in the economic equivalent of the forever wars against its largest trading partner, this time spilling treasure rather than blood.

Canberra should concentrate on managing China’s economic strong arm tactics and how best to work together with strategic partners is a fragment of that. This would be the most favorable way in which to enhance the flexibility of supply chains for essential o strategically important goods and services and also cost-effective.

But when it comes to China’s targeting of Australia’s exports, the most productive approaches will lie closer to home. Given that Australia’s good dropped by only 2 percent in 2020, Australia need not panic. It proved that China was reluctant unable to wean itself off the big produce like iron ore. 

Next, Australia can strive to address the source of the risk. Michael Wesley delivered a blunt assessment that ‘the place to start in re-conceptualizing our relationship with China is by admitting our strategy so far has failed’. It is know that many countries in the region are squaring their economic interests with China and their security and considered interests with the US. Australia is now facing extraordinary stages of Chinese trade hostility and this might trigger a reconsideration as to whether the preset approach is the most suited on. Rather than pointing fingers and holding Canberra responsible for Beijing’s bad conduct, it should be about safe guarding Australia’s interest by not amplifying on an inferior strategy for addressing the challenge

Australia can also work to mitigate the risk that remains. Trade diversification is a worthy objective. Tapping other markets has already proven feasible for producers in some industries like barleybeef and coal. But the difficulty of this strategy at an aggregate level is revealed by new data showing that China’s share of total Australian goods exports increased to a record high of 40 per cent amid the trade attacks.

Australia can look at mitigating the remaining risk. Trade diversification is worthwhile and selecting markets such as barley, beef and coal have proven to be very feasible for producers. The obstacle with this strategy is that records taken at an aggregate level indicate that China’s share of total Australian goods exported increased to a record high of 40 percent amidst all the trade attacks.

The diversification test for Australia is to expand their range of products that can be exported competitively to international markets. A novel agenda is needed because culling the Austrade network in China and working it up in in Indonesia or India is not quite the answer.

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