Australia embraces US, pays price with China as trade war hits bottom line

Australia embraces US, pays price with China as trade war hits bottom line

Australia is stuck between lobster and anvil.

Its biggest trading partner is China, which is expected to become the world’s largest economy. That should be good news, but there is a catch: Canberra also longs for the security and legitimacy it derives from its alliance with the United States and the West.

As Beijing and Washington mutually target their economic and military ambitions in a cycle of escalating tensions, some in Australia fear their country will pay the price of being caught between the two geopolitical enemies.

Experts say these competing strategic interests and Canberra’s recent strategic shift to the West are partly to blame for its year-long trade war with Beijing – and falling lobster prices.

Until recently, China accounted for about 96% of Australia’s southern lobster exports, a trade worth more than half a billion US dollars per year to the nation of the Antipodes.

But late last year, Beijing brutally imposed a ban on lobster imports after Chinese officials claimed shellfish samples contained heavy metals.

“We’re a pawn in the whole cycle of things,” said Andrew Ferguson, managing director of Ferguson Australia Group, a seafood company based in Adelaide, South Australia.

The loss of the market was devastating for his business.

“Covid has not been helpful,” he said recently by phone. “China has certainly chosen the right time to do it because it is hurting us with all its might.”

The lobster ban was quickly condemned by Australians as a new move in a long-running trade dispute between the two countries that affected other major agricultural exports such as barley, wine and beef.

Australia’s cancellation of two infrastructure deals with China in April prompted Beijing to accuse its leaders of a “cold war mentality” and threaten a possible response.WILLIAM WEST / AFP via Getty Images

The strained relations have escalated to the point that Beijing has essentially suspended all but the most common contacts between the two sides and accused Canberra of having a “cold war state of mind.” Chinese state media and foreign ministry regularly attack Australia for adopting anti-China policies at the behest of the United States

On Saturday, the Australian government said it was filing a formal complaint with the World Trade Organization over China’s imposition of anti-dumping duties on Australian wine exports.

“We are faced with a conundrum of the kind that we have not seen for generations,” said John Blaxland, professor of international security and intelligence studies at Australian National University.

He said Australia will not downplay its alliance with the United States and is ready to tolerate economic pain at its expense, “out of fear of political oblivion”.

“Historically, Australian leaders, prime ministers have sought to balance security ties with the United States, with trade interests with China,” he said by phone from Canberra. “But lately this has become more and more problematic.”

“There has been consensus that we will double our ties with the United States and push back threats and coercion from China.”

Australian Prime Minister Scott Morrison has just spent a week in Europe on a major charm offensive, bringing together allies to help ensure peace and stability in the Indo-Pacific region – and seeking diplomatic support for the ongoing trade struggle between Canberra and Beijing.

Attending the Group of Seven meeting as a guest, he met President Joe Biden on the sidelines and signed a major new free trade agreement with his British hosts.

The trade deal is expected to boost exports of traditional British products such as Scotch whiskey, while boosting imports of lamb and wine from Australia.
Henry Nicholls / Reuters

After separate meetings with Morrison in London and Paris, British Prime Minister Boris Johnson and French President Emmanuel Macron said their respective countries were “neck and neck” with Australia.

Johnson was quick to add, however, that “no one wants to slip into a new cold war with China.”

The G-7 also issued a statement berating Beijing for cracking down on its Uyghur minority and other human rights violations, as well as “non-market policies and practices” that are undermining the global economy.

China, currently the world’s second-largest economy, is not in the bloc and has grown angry at the criticism.

Chinese Foreign Ministry spokesman Zhao Lijian called the G-7 statement a deliberate slander and interference.

Relations between China and Australia have been on a downward trajectory since Canberra banned foreign political donations in 2017, then worsened when Australia banned Chinese tech giant Huawei Technologies from its 5G network in 2018. But relations really fell last year after Morrison called for an international investigation into the origins of Covid-19.

Beijing has also been angered by criticism of its actions in the South China Sea, Xinjiang, Hong Kong and Taiwan.

People wearing face masks line up to buy fresh Australian beef at a supermarket in July 2020 in China’s Hainan province, ahead of the beef bans being implemented. Yang Xu / Chinese Press Service via Getty Images file

But one of the main points of contention has been the changing domestic priorities and foreign policies of both sides vis-à-vis the United States.

Indeed, from Beijing’s perspective, Australia’s foreign policy has already shifted “quite drastically” to the United States, according to Jane Golley, director of the Australian Center on World China at the University. Australian National.

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“They have always maintained a strong alliance, but they have expressed themselves much more on this alliance and moved away from Beijing in the last two, three or four years,” she said.

Economists argue that Canberra’s willingness to align with Washington’s Chinese policy has had a direct impact on Australia’s trade relationship with China.

“Beijing has no problem with Australia being a US security ally. What he has a problem with is when Australia uses this alliance to attack China, ”said James Laurenceson, director of the Australia-China Relations Institute at Sydney University of Technology.

Secretary of State Antony Blinken said last month that the United States would not leave Australia alone in the face of coercion from China and that such behavior towards allies would hamper improved relations between Washington and Beijing. .Noel Celis / AFP via Getty Images file

“We are desperate to signal to the United States that we want them to hang around,” he said. “So we’re getting into a whole bunch of different issues, whether it’s banning Huawei, or whether it’s, you know, calling China’s actions in the South China Sea, or calling to a Covid investigation. “

But tangling with China on political issues is risky business and comes at an economic cost.

China accounts for nearly 40% of Australia’s total exports, according to the Australian Bureau of Statistics.

In the past 13 months, China has reduced imports of Australian beef and imposed tariffs totaling 80 percent on barley and more than 200 percent on wine imports.

The costs to Australia’s bottom line are real: Exports to China fell about US $ 2.3 billion in 2020, according to the bureau.

The only saving grace has been China’s dependence on Australian iron ore, but that might only last for a while.

Blaxland said China is making Australia an example, warning other countries of the consequences of speaking out.

“I think this is the new normal,” he said.