EXPLAINER

How much does Australia need China's market?

There'll be less of this on the dining tables of the Chinese rich. Picture: Shutterstock
There'll be less of this on the dining tables of the Chinese rich. Picture: Shutterstock

Wine is the latest in a string of Australian products whose route to China has been blocked or made much more difficult.

China has put barriers up against imports of beef, coal, barley, copper, seafood, sugar, timber and now wine. It's hinted that Chinese students might be dissuaded from returning to Australian universities.

Sometimes the hurdle is a tariff - in effect, a tax on Australian imports - in retaliation for Australia allegedly "dumping" Australian goods on the Chinese market at unfairly low prices (something Australia denies vehemently).

Sometimes it's glitches in customs clearance - but if you have $2 million worth of fresh Australian lobster on the tarmac at Shanghai airport, it's a costly glitch (perhaps a costly deliberate glitch).

How much does it hurt?

China has imposed tariffs of between 100 and 200 per cent on imports of Australian wine, taxing them on entry and doubling or trebling the previous price. In effect, it closes off the market.

Australia's biggest wine producer, Treasury Wine Estates, which owns premium brands including Penfolds, had been marketing its high-end wines vigorously to the new Chinese rich.

Its chief executive, Tim Ford, says: "We are extremely disappointed to find our business, our partners' businesses and the Australian wine industry in this position."

He says that "there is no doubt this will have a significant impact on many across the industry, costing jobs and hurting regional communities."

Producers deny that they have been selling at below the cost of production. There will be an inquiry, but the result will come too late to help.

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"The Australian government categorically rejects any allegation that our wine producers are dumping product into China," Agriculture Minister David Littleproud said.

The fear is that Chinese wine drinkers will develop a taste for other countries' wines when Australia has been doing well in the market which matters most.

When China put an unofficial ban on Australian coal imports, the price of coking call sunk from $138.50 a tonne to $101.25.

The price of prawns has collapsed (which is good immediate news for Australians this Christmas but bad longer-term news for the economy).

But it's not just tariffs 

Sometimes, the barrier is a bit of bureaucracy - but bureaucracy with a disruptive purpose, in the view of Australian exporters .

Apart from the lobster, there have been hold-ups with Australian timber, where officials said they were looking for bark beetle.

China's customs agency said it would block timber from Queensland after officials claimed to find the beetle in a load of wood. Victorian timber exports then found themselves blocked.

Barley growers have also suffered - and last year, half the barley grown in Australia went to China.

Imports of the grain were blocked when Chinese officials claimed to have found weed seeds in a load.

Australia's largest grain exporter, CBH, was blacklisted.

"The CBH has been advised by the Australian government that CBH Grain has been suspended from exporting barley to China," a CBH spokesperson said.

Australian producers will look for alternative markets - but these alternatives are not there for the taking. If they were there with easy access, they would already have been entered.

Does China have a point?

The beauty of the bureaucratic hitches is that they don't appear to break World Trade Organisation rules. Who is to say that beetles, weeds or metal weren't found in consignments of wood, barley or lobster?

But producers are adamant their products have the highest standards. On top of that, no other country has found similar fault with the same products.

Professor Jane Golley, director of the ANU's Australian Centre on China in the World, is now more sceptical of China's actions.

"Until a few weeks ago there were plausible denials, but the big shift this week is the number of targeted goods," she says.

"It is no longer that they are doing it for other reasons than to punish us."

What's behind it?

Australia has displeased China on a number of fronts.

In 2017, the government voiced concern about the Chinese government in Beijing trying to intervene in Australian politics.

In 2018, Australia was the first country to ban the Chinese technology giant Huawei from its 5G network.

This year, Australia echoed the United States in calling for an inquiry into the origins of the coronavirus, which was first detected in the Chinese city of Wuhan.

At the same time, Mr Trump was using racist phraseology, calling COVID-19 "kung flu". Australia seemed to align with Mr Trump.

"They have repeatedly made wrong statements and actions on issues concerning China's core interests," a Chinese government spokesman said, suggesting Australia undertake "deep reflection".

Who holds the strong cards?

To be blunt, China does. It accounts for about one-third of Australia's trade, while Australia accounts for less than 4 per cent of China's commerce.

The Australia-China beef trade was worth $2.6 billion in 2019, according to the Perth USAsia Centre.

The Australia-China coal trade was worth $13.8 billion in the same year.

Australia exported $12.1 billion of education services, and $16.3 billion of travel services, to China in 2018-19.

Where now?

It may be that China and Australia can find a way of stepping back. After all, New Zealand criticises China, but it doesn't do so in a way which Beijing finds so provocative.

But the real danger now is that China sees Australia as the great example it can set for other countries, saying, in effect: "See. This is what you face if you step out of line. We can hurt your economy."

The tariffs and delays won't devastate the Australian economy - but they are warning shots. In effect, China is already saying: "Step out of line much more and we'll tighten the screws a lot more."

This story How much does Australia need China's market? first appeared on The Canberra Times.

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