The Challenges Hindering Australia from Trading with China

The Challenges Hindering Australia from Trading with China

One of the most important aspects of Australia’s foreign policy is its relations with Beijing. As of 2017, China was Australia’s largest trade partner by value (Goodman, 2017). The degree of its dependence on China is pretty outstanding. However, the effort to maintain good relations between these two countries has faced challenges for policymakers on both ends. Challenges facing Australia’s trade with China include their respective relationship with the United States, China‘s unfavorable regulatory policies against Australian businesses, and its commitment to local manufacturing companies.

Friction between the countries began in the 1990s, fueled by several actions by the Australian government, which Beijing interpreted as a provocation. In 1996, Australia’s strong support of the U.S. over the Taiwan crisis angered China. Prime Minister Howard condemned China’s intimidation of Taiwan’s first democratic elections, supporting the dispatch of American aircraft carriers to the region (Manicom & O’Neil, 2012). Beijing saw this as part of a policy shift by Australia, which worsened the relations between the two nations. China has continually warned Australia of trade sanctions for its support of Washington (Chai, 2020). Still, Australia continues to face unfavorable trade regulations from China for its alignment with Washington.

China has enacted unfavorable trade regulations on Australian exports. In 2018, China’s anti-dumping investigation against Australian barley exports concluded with 80.5 percent tariffs (Laurenceson, 2021). Many people took it as a retaliation against Australia’s call for an inquiry on COVID-19. Then, China banned several Australian abattoirs from selling its beef, causing a massive loss to the industry. Surprise checks on lobster exports were the next upset for Australian companies, with $2 million worth of live lobster stranded in Shanghai (Dalzell, Snape, & Landgrafft, 2020). Other Australian businesses such as timber, red meat, and cotton exports continue to face an unfavorable trade environment in China. This situation may worsen as China focuses on increasing its manufacturing capacity.

In the past decade, China’s regulations have incentivized local companies to take market share in the country’s consumer markets. In May 2015, the State Council of China announced the “Made-in-China 2025” plan that laid out economic goals for the period running from 2016 to 2025 (Li, 2018). One of the major plans is to guide China to become a world manufacturing plant and to create China’s brands. For example, the local players in fast-moving consumer goods were 66%, jumping to 72% as of 2016. For domestic automotive companies, their share was 31% in 2012, getting to 39% by 2016 (Ingilizian & Lannes, 2018). Australia’s businesses have already gotten a share of China’s trade unfavorable policies. But, it is yet unclear what counter policies would ensue.

The trade uncertainty has pressured the Australian government to find other markets to reduce economic dependence on China. It must consider the Chinese economic coercion from its crucial trade position over Australia. Some sectors have successfully found alternative markets but others, such as lobster and wine, continue to experience massive losses. This relationship is a warning to the neighboring countries relying on China’s market; it is high time they sought an alternative to avoid unprecedented economic sabotage.

The relations between Australia and China remain resilient to some extent, with the massive impact of unfavorable trade regulations. These regulations support China’s government objective; to make the country the number one manufacturer globally by 2025. China’s market power in Australia-China trade relations has limited Australia’s intention to create trade relations with the United States. If the Australian government does not find alternative markets for its companies soon, economic decline is inevitable.

References

Chai, T. S. (2020). How China attempts to drive a wedge in the U.S.-Australia alliance. Australian Journal of International Affairs, 74(5), 511-531. doi:10.1080/10357718.2020.1721432

Dalzell, S., Snape, J., & Landgrafft, T. D. (2020, November 2). Tonnes of Australian lobsters stuck in Chinese airports amid trade tensions. Retrieved from https://www.abc.net.au/news/2020-11-02/australian-lobster-exports-caught-in-china-trade-tensions/12837700

Goodman, D. S. (2017). Australia and the China threat: Managing ambiguity. The Pacific Review, 30(5), 769-782. doi:10.1080/09512748.2017.1339118

Ingilizian, Z., & Lannes, B. (2018). How local companies are winning over China’s consumers. World Economic Forum. https://www.weforum.org/agenda/2018/01/chinese-companies-winning-local-consumers/

Laurenceson, J. (2021). Australia’s export exposure to China: Assessing the costs of disruption. SSRN Electronic Journal. doi:10.2139/ssrn.3920027

Li, L. (2018). China’s manufacturing locus in 2025: With a comparison of “Made-in-China 2025” and “Industry 4.0.” Technological Forecasting and Social Change, 135, 66–74. https://doi.org/10.1016/j.techfore.2017.05.028

Manicom, J., & O’Neil, A. (2012). China’s rise and middle power democracies: Canada and Australia compared. International Relations of the Asia-Pacific, 12(2), 199-228. doi:10.1093/irap/lcs002