Australian boycott of Chinese goods would leave us exposed and have little impact on them
We like to think of ourselves as important and significant in the world but entering into a trade war with China would leave us completely exposed.
Have you ever been at the pub and seen a little guy get into a fight, and get punched hard? It’s not pretty. If a little guy gets into a chirping match with a big angry bloke, he better have a good back-up plan. Or some good mates nearby.
This is Australia’s situation with China.
Australians love Australia, and so we should. But when it comes to international politics, it is important to remember we’re not one of the big fish in the pond. We do not get to throw our weight around.
Pauline Hanson has told Australia we should just boycott China. Stop buying their stuff. Ms Hanson, as we all know, is not the sharpest mind this country has to offer. She’s like the voice in the little guy’s head telling him to just punch the steroid-fuelled aggro bloke.
A simple strategy: Just smash him! It makes us feel powerful to tell ourselves we can be aggressive and win. But it is a good way to get flattened.
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Instead we need to be smart. Boycotting China would be like a flea landing on an elephant. Australia cannot move the needle on China’s wellbeing. But it could definitely squash ours.
America is one of the big fish. It can provoke a trade war with China. Because it buys around 19 per cent of Chinese exports, it has muscle. (It also has the world’s most powerful military and controls the most capable nuclear arsenal in history.)
Australia is not America. We only buy 1.9 per cent of their exports. We have a modest military and the number of nuclear weapons we control is a nice round zero. We can’t do to China what US President Donald Trump has done. Not without backlash.
If we stopped buying Chinese goods, it would cost China around 0.9 per cent of their GDP. No big deal. But if they stopped buying ours, it would cost us around 16 per cent of our GDP. A big deal.
A big trade war would blow up in Australia’s face. Western Australia would be hit hardest because iron ore exports to China are a huge part of the state’s economy. Queensland would miss coal exports. NSW would miss tourism. And Victoria would lose out big on education.
It would damage the whole country and put Australians out of work at a time when we need all the economic oomph we can muster.
Giving up on Chinese imports would hardly be a picnic either. Where does Pauline Hanson think things are made these days? From socks to semiconductors, the shops would look empty without Chinese-made goods.
When you’re the little guy in a fight you need to be smart not just angry. Strategic not just aggressive. And as the charts below show, we’re the little guy. China outstrips us in population, GDP and military spending. Not by a little. By a lot.
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This information shouldn’t make us worried. It is not meant to make us despair. What it should do is make us choose our strategy properly. Because while Australia alone may lack muscle, it does not lack mates.
We’re a country that is democratic, free, and law-abiding. Australia is part of a large and extremely powerful bloc of countries who respect freedom and the rule of law. It includes the European Union, plus countries like the UK, Japan, NZ, Canada and, not least, the United States of America.
A lot of movies have come out recently where the superheroes gang up together. The Avengers and similar. There is a lesson for us there. Acting alone is over. We need to use global organisations. Apply pressure through the WTO, the G20 and the UN. Getting into a one-on-one fight with China is not a battle Australia can win.
Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.
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