Canberra should abandon China trade
Australia’s trade arrangements with China are now under a cloud. The deteriorating China-Australia relationship has meant that Australia’s trade has gone through a year of ebb and flow.
Held up by resilient iron ore export and its surging prices, Australia has recorded export increase since last September, providing an ego boost to some Australian media outlets and politicians, claiming that Australia’s strong stance against Chinese aggression has had little negative impact on Australia’s trade position.
According to the Australian Bureau of Statistics (ABS), the nation’s export of goods in December 2020 rose 16 percent month-on-month, among which metalliferous ores increased by 22 percent and cereals surged by 216 percent.
The increase in metalliferous ores to China was driven by iron ore, up 25 percent to AU$9.87 billion, accounting for 79 percent of Australian iron ore exports last December, according to an ABS statement. Additionally, one third of the total wheat exported from Australia in the month was purchased by China.
Australia’s export rebound was driven by shipments of iron ore and grain products to China, which was the only major economy that achieved positive economic growth in 2020.
Taking an objective view with rational analysis, the fact is that Australia’s economy shrank 7 percent in the second quarter of 2020, the steepest decline since records began in 1959.
Australia rightly aligned itself with the Trump administration’s strong anti-China campaign. This was precipitated by actions by China: their criticisms of Australian policy, their move to slow down importing Australian goods. As a consequence, the deteriorating relationship has meant that China, Australia’s former largest trading partner, has now slumped in importing Australian barley, lobsters and wine.
There are further run on effects. The tourism industry in Australia will begin to seek visitors from elsewhere once borders open. Gone are the days of Chinese businessmen visiting Australia and throwing money around our casinos.
A major Australian salmon producer is planning to decrease export to China due to the trade tensions, however, whether exporters can find alternative markets as promising as China is proving to be difficult. As a major contributor to the global economic growth over an extended period, China will attempt to be the leading power driving the recovery of the post-pandemic global economy.
Given China’s industrial upgrading, the proportion of imported raw materials among China’s total imports is bound to decline.
China’s Belt and Road Initiative has advanced to the point where it can now ride on the many smaller economies in developing nations. China is fostering and deepening economic ties outside of the G20 economies. Some of China’s new followers are rich in resources and minerals and intending to boost their economic growth through enhancing ties with China. These new connections provide China with ample opportunity to diversify supply sources.
Globalisation has made countries interdependent, with trade and economic relations becoming increasingly intertwined. How nations can regain their sovereignty, self-reliance and national strength is important in the face of China’s unreasonable trade snares.
With the rise of anti-Chinese economies in Asia, Canberra must reassert its own position and overcome its decades long identity crisis. Australia’s government has seen itself as a bulwark of the Five Eyes Alliance, yet through successive steps since Gough Whitlam, has become economically a slave to the Asian market. According to a Belt and Road report, 39 percent of Australian goods were shipped to China in 2019-20, while 27 percent of all goods imported by Australia were from China.
It is critical that Canberra see both the opportunities for trade with India, but also ensure a robust and self-reliant economic view that will serve the home front first.
Although China has pulled various stunts in recent months, Australia should not seek to mend interaction with China, but rather ensure that the coal and ore sold so cheaply overseas should really be utalised at home and sold to friendly trading partners. Robust and diversified export markets tempered by an increasingly Australia first view will best serve to help struggling Australian families and businesses. Canberra should consider good-willed and genuine moves to build mutual trust with nations like India rather than hold out the false hope that China might come to its senses. A stronger Australia will benefit both Australia and its friends in the Indian and Pacific Oceans.