The strikes have come thick and fast. First it was beef, then barley by August. Cotton and wine followed in October. The lobsters died on the airport tarmac earlier in November. China blocked Queensland timber last week, Victorian timber this week. For five months, 23 Indian sailors have been stuck on a ship loaded with 170,000 tonnes of Australian coal, unable to unload their cargo in Chinese ports.
Australian government ministers have attempted to get calls through to their Chinese counterparts to get some clarity on mysterious instructions issued to Chinese traders. None have been returned. Industry anxiety is rising. So is the political pressure. Beijing’s tactics are netting results. Labor is now calling for a new approach to China, so are the grounded rock lobster fisherman in Victoria and the grain growers in WA.
The conventional narrative is this turmoil has followed three important decisions by the Australian government.
First, the introduction of world-leading political foreign interference laws in 2018, second, the banning of Chinese telecommunications giant Huawei from the 5G network in the same year and finally, the public lobbying for an independent inquiry into the coronavirus in April.
Beijing would have you believe there is a simpler and more economic explanation for all of this. It is worth considering this perspective, if only to understand if the strikes are attempts at economic coercion or an exercise in squaring the ledger.
China’s foreign ministry spokesman Wang Wenbin made an extended reference to China’s chief gripe with Australian trade in a press conference last Friday. “So far Australia has launched as many as 106 anti-dumping and anti-subsidy investigations against Chinese products, while China only initiated four investigations against Australian goods,” he said.
“Between China and Australia, which country is breaching the principles of market economy and the bilateral free-trade agreement? And which country is reneging on its commitments, undermining cooperation and taking discriminatory measures? The facts are all too clear.”
Australia is one of the most prolific users of anti-dumping measures in the world. Australia’s own Productivity Commission says so. In 2016, it said “there are no convincing justifications for these measures, and they reduce the wellbeing of the Australian community”. It repeated the same argument again in 2019 to press home the point on why anti-dumping measures should be avoided.
Dumping involves foreign companies selling goods in Australia below the price in their home market, crowding them out and reducing the competitiveness of the local product. The Productivity Commission argues anti-dumping measures stymie innovation and economic growth because they protect inefficient products that can be bought at a lower price from elsewhere. The products that are dumped are then subject to countervailing duties, or tariffs, to make the local product more competitive.
In the case of China, Australia has taken particular issue with Chinese paper, aluminum and steel being dumped into the local market and undermining the competitiveness of Australian players. These three are worth paying particular attention to because of their importance to the local economy.
‘We’re living in a glasshouse, so we shouldn’t be throwing stones, we have massively exposed ourselves.’Geoff Raby, former ambassador to China
Between them they employ more than 140,000 Australians. More significantly, most are located in economically depressed manufacturing areas that are politically important. Steel comes out of the Illawarra, aluminum out of central Queensland and Tomago near the Hunter in NSW, and paper out of Morwell in the Victorian La Trobe valley.
All of them are vital, regional economic engine rooms. They can also drive shifts in political sentiment.
Opening them up to Chinese competition is a risk that might bring national economic dividends but cost workers in less competitive industries. Despite the pleas of the Productivity Commission, it is not a risk that Canberra has been willing to contemplate. Australia has risen to third in the anti-dumping ranks in the process. It has initiated 84 actions over the past half-a-decade, compared with 67 for the much larger European Union and six for Japan.
China uses a similar tactic to protect its coal industry. After years of not being able to produce enough coal to satisfy China’s insatiable demand for power, its local miners are now ramping up production. The Chinese Communist Party wants to protect these state-backed firms from Australian competition, so they implement quotas on cheaper Australian imports. The end result is ships filled with Australian coal floating in Bohai Bay with nowhere to unload their cargo.
Trade Minister Simon Birmingham does not believe the two are a valid comparison. “Australia’s anti-dumping system is entirely transparent and evidence based,” he said. “It is open to any party who questions the decisions that Australia makes, to follow the processes of the World Trade Organisation in challenging those decisions.”
China’s claims against Australian products are spurious and opaque. As trade expert Dr Jeffrey Wilson from the Perth USAsia Centre notes it is a form of “psychological warfare” designed to make Australian politicians question their diplomatic position on critical issues such as Hong Kong, the South China Sea and the Uighurs in Xinjiang.
But Australia’s former ambassador to China, Geoff Raby, believes Australia’s trigger happy decade of anti-dumping measures has done it few favours in the lead up to this year’s diplomatic crisis.
How much does he think some of the recent trade tensions are a politically convenient way of striking back at Australia’s own protectionism? “Oh, I’m absolutely sure that that’s the case,” he said.
Raby sits on the board of Chinese miner Yancoal and has been criticised for his mix of foreign policy advice with business links. He is also a former World Trade Organisation ambassador, which means on this topic he has an interesting perspective.
“As I used to say in the WTO, the reality is we’re all sinners in the church and somehow we get this public mind in
Australia that we are cleaner than anyone else.
“We use anti-dumping, always have, as a form of protection. There are some legitimate cases. But if you have that many cases, you’re using anti-dumping as trade harassment and that’s part of our trade policy kits.
He said former colleagues at the Department of Foreign Affairs would be shocked to hear him say this but “it’s the truth”.
“Why [China] has not taken more action sooner is an interesting point itself. But having that record ourselves, we’re living in a glasshouse, so we shouldn’t be throwing stones, we have massively exposed ourselves.”
This does not mean China’s diplomatically charged actions are reasonable, but as a risk management exercise, it might not hurt to take another look in our own backyard for measures that might expose more Australian exporters to unjustified retribution.
Source: Thanks smh.com