The Australia China Trade War

Published by Ecosodes team on

It has been known for quite some time now that Australia yearns to be the eminent leader of the Indo-pacific, and this has been the precise motto for the conservative right-wing leader of Australia- Scott Morrison. Since the beginning of his term in 2018, we have seen the protectionist policies of Mr. Morrison’s government, officially termed as the foreign policy of strategic patience and consistency, particularly regarding China, Australia’s biggest trading partner.

After benefitting from China’s boom for decades, Australian conservatives are now railing against China. Relations between Australia and China, its largest trading partner, have been souring since 2017 when the Australian national security agency warned of growing Chinese interference in Canberra’s domestic affairs. Escalated tensions have been a result of pursuance of Morrison’s Doctrine of “managing China on Australia’s terms” by promoting a non-confrontational approach while providing clarity and consistency on what constitutes Australia’s essential national interests.

These tensions escalated after Australia became the first country to ban China’s Huawei from its 5G network before soaring to new heights earlier this year after Canberra led the call for an independent investigation into the origins of the COVID-19 pandemic that first emerged in Wuhan. Fuelling the already sparked anti-China wave, the coronavirus pandemic justified the protectionist and conservative moves of the right-wing Coalition in Australia.

Beijing’s increased scrutiny of Australian imports appears to be retaliation for Canberra leading a global effort calling for a probe into the origins of the COVID-19 pandemic that started in the mainland. In June, China cited labeling and compliance issues for imposing 80% tariffs on Australian barley shipments and blocked beef imports from four Australian processing plants.

This was followed by Chinese officials launching anti-dumping investigations into Australian wine in August. The Australian Government announced on 19 June 2020 that there had been a spate of cyber-attacks on Australian businesses and government agencies from a “sophisticated state-based actor”, without naming China directly. However, the sources from the Australian Government stated there was a high degree of confidence that China was behind the cyber-attacks. The Chinese Government also issued a travel warning to Chinese-Australian diaspora and Chinese international students from studying in Australia in June, claiming an increase in racial discrimination and violence against Chinese people.

The Sino-Australian relations are thoroughly bilateral, with both China and Australia being highly dependent on the other. China accounted for a third, or about $120 billion, of Australia’s exports in 2019. Iron ore, coal, and gas — the country’s biggest exports — made about 60% of those sales. Universities and tourism hot spots in Australia also count on the Chinese for a big chunk of their business. China is not only Australia’s largest trading partner but also one of the biggest investors in Australia in 2019. On the other end, China is the largest overseas market for Australian winemakers; it imports $850 million worth of Australian wine a year.

However, the Morrison Government’s recent policy initiatives have been focused on defense spending, not economic or diplomatic diversification. The Defence Strategic Update has an Indo-Pacific focus on area denial and emphasizes cooperation with key Indo-Pacific partners. However, it does little to address the real conundrum at the heart of Australia’s relations with China – its trade dependency. In order to reduce trade dependency through diversification, it requires investment in diplomatic capacities, as well as bringing people and businesses on board.

The foreign policy of Australia is currently shaped by contending forces – a divided bureaucracy and party, increasing pressure from both China and the U.S., an opportunistic Prime Minister, and the absence of convincing policy ideas to deal with the central challenge of trade dependence on China. As a consequence of that, the Morrison government is struggling to manage the increasingly difficult China relationship without an overarching strategy.

The countries have been in a state of disagreement due to political tensions for years now. Australia is enormously dependent on China for trade, investment, and others, but it’s remained a vocal critic of Beijing. At a time when China remains engaged in a trade war with the U.S., Beijing has escalated its feud with Australia amid the coronavirus pandemic, putting trade between the two powers—totaling $235 billion annually—at risk.

Written by- Ishika Goel


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