21 May 2020
Why Australia must not bow to China but seek wider trade options
In 2018, Australian beef and wine exports were left at the docks, unable to enter China. In 2019, Australian coal exports were held up at Chinese ports. Recently, following Prime Minister Scott Morrison’s call for an independent international inquiry into COVID-19 outbreak’s origin, China suspended beef imports from four Australian abattoirs, and slapped a crippling 80 per cent tariff on Australian barley.
Australia is far from the only country to suffer Beijing’s economic coercion tactics, and it is time to look for ways to work with other like-minded countries to put a stop to it.
Although Australian officials deny it, industrial representatives, journalists, and economists have interpreted the events as Beijing’s attempts to punish Australia for its perceived political missteps. In some quarters of Australian business, the misconception exists that the punishment is deserved when Australia continues to upset China, but the reality we face is an emerging superpower growing more demanding by the day, and redefining what counts as upsetting.
Domestically, the Chinese Communist Party rules with an unyielding iron fist, throwing dissenters – journalists, activists, ethnic minorities – in jail on trumped-up charges. Now the regime is attempting to replicate the formula on the international stage, pushing back aggressively on claims it detests, and threatening those who make them.
Australia is far from the only country dealing with this problem. In 2019 alone, fights over Huawei and 5G saw Beijing ban or delay Canada’s meat, soybean, and pea imports and threaten German auto companies and a potential free trade agreement with Denmark, and possible retaliatory sanctions against India. Any country could see its lucrative trade relationships with China put at risk.
Australia has rightly taken China to the World Trade Organisation over the barley dispute, but is that enough? Its leadership in calling for an inquiry into COVID-19’s origins has been backed by a coalition of 116 countries. Now like-minded nations should form an alliance and demand from China more clarity, objectivity and fairness in its trade relationships. This would blunt the edge of Beijing’s coercive diplomacy, and make clear that it too has much to lose if it continues to weaponise its trade relationships.
Since China announced the barley tariffs, industry groups have called for an end to criticisms of Beijing’s policies and a “reset” of the sino-Australian relationship. However, as Xi Jinping’s China sinks deeper into the abyss of authoritarianism, a unilateral reset won’t fix the underlying problem. If COVID-19 has taught us anything, it’s that we need to diversify our interests and export targets, and look to our real friends.
Taiwan has set an excellent example of turning the economic coercion crisis into a diversification success. In 2016, Taiwan’s tourism, one of its main industries, suffered deep losses following the inauguration of President Tsai Ing-wen, who advocates a strong Taiwan identity. Instead of making political concessions, the island took the opportunity to diversify and reform. Three years later – despite China's 2018 ban on mainlanders’ individual tourist visas to Taiwan – the number of foreign visitors to Taiwan hit the record high of 11.84 million last year.
For Australia, the road of diversification will be bumpier for some industries than others. It can hardly find a market that replaces iron and coal exports at the drop of a hat. But the point is to begin thinking long-term, and recognise that sectors overly dependent on China are a strategic vulnerability.
As anyone who has dealt with bullies would know, their power over the bullied is almost always exaggerated.