Is China really winning the trade war against Australia?
Ever since Australia called for an international investigation into the origins of Covid19, it has been at the receiving end of China’s unabashed wrath. China has tried to politically, economically and diplomatically coerce Australia into dropping its agenda that calls China out for it's mishandling of Covid19, it’s treatment of Uighur Muslims and the Hong Kong National Security Law.
What started as a mere increase in tariffs on Australian barley, escalated tremendously when a spokesperson for the Chinese government, Zhou Lijan, tweeted a doctored photo of an Australian soldier holding a knife to an Afghan child’s throat. But this comes further down the lane in the list of moves China has played. With its trade strikes barley, wine, lobster, its restrictions on beef exports and now coal, China has not held back from arm twisting Australia into giving into the characteristic ‘Chinese globalisation’ and concept of ‘free trade’. And all for good reason… China accounts for roughly 40% of Australian exports — a figure which stands at roughly the same place as the sum of the next three largest trading partners — Japan, USA, and S.Korea. China also accounts for a large chunk of Australia’s international students, which earn it a sum of roughly $10 billion each year. It also accounts for 1 in 13 jobs in Australia, which has led to increased anxiety and instability among Australian business figures and government alike.
According to journalist Shekhar Gupta, “If the Chinese want to strangle Australia, they can reduce their trade with Australia which would take away six percentage points from Australia’s GDP and 14.5 per cent of their spending surpluses. In contrast, what will happen to China will be small — they will lose 0.5 per cent of their GDP, and maybe 2.5 per cent of their citizens’ average spending surplus.”
In short, if China has its way, it would have a servile relationship with Australia — which in no way would be anything short of neo-colonialism. And yet another evidence of this is the 14 point dossier, which essentially lays down the list of policies China wants Australia to abandon if it wants to smoothen the economic relationship they share. The list includes stopping funding for “anti-China” research, raids on Chinese journalists and academic visa cancellations, “spreading a crusade” in multilateral forums on China’s affairs in Taiwan, Hong Kong, and Xinjiang, banning Huawei from the 5G network, and blocking 10 foreign investment deals across infrastructure, agriculture and animal husbandry sectors.
But despite this gambit, it seems that China has not been particularly successful in its attempts at steamrolling Australia. In fact, it is quite clear that China severely miscalculated the global response, betting on their reluctance to turn Beijing into an enemy. In reality, its attempts at cornering yet another country with its ‘wolf-warrior’ diplomacy have brought the global multipolarity into unison with important multilateral platforms like Five Eyes and Quad increasing cooperation to counter the large hegemonic power. And this has picked up further momentum with President-elect Joe Biden promising to rebuild relationships with allies that were damaged by Trump’s ‘America first’ policy.
As for the geo-economics of the Australia-China trade war, it is clear that a long-term solution for Australia is the diversification of trade partners and investors. In the short-term, though, Australia has already taken the best recourse by standing its ground and reaching out for politico-diplomatic support. Australian exports account for a mere 4% of China’s trade and yet, China’s post covid economic momentum is suffering under the weight of its political aspirations. Worsening power shortages due to the ban on Australian coal is shutting down factories and imposing restrictions on the consumption of electricity. Earlier this year, there were reports of a food crisis in China in the wake of its trade war with the USA and Australia. All this and Australia still has an arrow left in its quiver. Australian iron ore exports to China account for $90 billion per year, which is about 8–9 times the amount of coal ($13.7 bn in 2019), a soft spot which can clearly hurt China.
It stands to reason that while the world may be dependent on China for cheap manufacturing, China too is dependent on it. And while most may not be able to stand up to it alone, China should be cautious pushing these countries closer.