A tipping point looms on the Australia-China reset

After months of meetings, visits and tours, it is now time for China to start untangling itself from the mess it created.

If not, Australia will have to escalate the dispute over more than $20 billion in trade bans on Australian exports.

Trade Minister Don Farrell, touring Beijing on Friday, has yet to secure any concessions from China.Credit: DFAT

The Albanese government has hardly put a foot wrong in its diplomatic reset with China, but it could get much more difficult from now.

It was a no-brainer for Trade Minister Don Farrell to travel to Beijing in a bid to get his counterpart, Wang Wentao, to commit to removing the trade sanctions.

Despite the “warm, constructive and candid” talks and Farrell being granted a surprise tour of Beijing’s Forbidden City, Farrell did not secure any concessions.

While there has been some movement on the unofficial ban on Australian coal over the past year, the more devastating trade bans – such as the tariffs on wine and barley – are all still in place.

A tipping point is fast approaching.

Wang has agreed to visit Australia soon, while Chinese Foreign Minister Qin Gang is also said to be planning a trip for July.

If China doesn’t remove the wine or barley tariffs before or during those visits, things are going to get very awkward for the Australian government.

Canberra does not want a visit to occur without at least one of those disputes being settled.

China has imposed trade bans on Australian exports including barley, wine, beef and seafood.Credit: Bloomberg

The difficulty for Beijing is how it manages to remove the trade bans while saving face. It wants to untangle the barley and wine tariffs without admitting that it was all done for coercive purposes in response to Australia’s call for an independent inquiry into COVID-19.

No doubt it is also testing Australia’s resolve on the way through.

But there is an off-ramp coming.

Beijing has about two months to complete its review of the barley tariffs; otherwise Australia has committed to resuming the dispute through the World Trade Organisation.

In the immediate term, Australian officials are working hard to achieve a breakthrough on some other unofficial bans, such as those on seafood and beef.

It should be easier to secure a concession in these areas because Beijing doesn’t have to save face. China never announced these exports were banned, so all it has to do is start letting them in again.

The other challenge for Australia is how it will respond to any demands China makes in return for lifting the trade bans. Farrell has already pushed back on Chinese calls for Australia to relax its foreign investment rules, but he left the door open for Beijing’s accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Any blatant quid pro quo would demonstrate to Beijing that its economic coercion worked, and set a problematic precedent.

Perhaps more importantly, there is still the matter of two imprisoned Australian citizens, journalist Cheng Lei and writer Yang Hengjun, which Farrell raised with his counterpart on Friday.

The thaw in relations with Beijing has led to renewed hope that a breakthrough can be reached on the two cases, but there is no sign of an imminent release.

If there is no movement on any of these issues, Australia will have to go back to the drawing board.

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