Beware Biden’s US-China dealings, warns trade expert

Australia needs to make sure it is not dealt out of trade with China, one of the nation’s top trade experts has warned.

Helen Sawczak. Picture: Aaron Francis/The Australian

Australia will need to keep a watching brief on the policies of the Biden administration to make sure it is not dealt out of trade with China, one of the nation’s top trade experts has warned.

“There is no indication, apart from his political appointments, on which way he will go with China,” said Helen Sawczak, former CEO of the Australia-China Business Council, referring to US president-elect Joe Biden.

“He has campaigned in a very hawkish manner during the election but he has also campaigned in support of multilateral bodies such as the World Trade Organisation and World Health Organisation, which bodes well for more conciliatory policies towards China.

“Australia needs to watch closely what happens on US-China relations.

“Every trade deal the US does with China could help American farmers and mean there is less that China buys from us.

“Any US trade deal with China will have a flow-on effect on ­Australia.”

Ms Sawczak, who is now a senior adviser with investment bank Moelis and a trade consultant, said while the US was one of Australia’s closest strategic allies, when it came to its trade interests it would put America first.

“We should not presume that just because we have a strong strategic relationship with the US that it is going to translate into economic matters,” she said.

“Australia needs to put Australia first.”

Her comments came as figures released this week showed China’s economy, the world’s second largest, finished the year on a high note. Gross domestic product rose 6.5 per cent in the fourth quarter from a year earlier, according to data released by the National Bureau of Statistics on Monday, marking China’s best quarter of year-over-year growth in two years.

China would continue to be one of the world’s strongest economies and many countries would continue to want to trade with it in the wake of the COVID-19 pandemic, she said.

Damaging trade ties

Ms Sawczak, who was speaking to The Australian ahead of a speech to Hong Kong-based trade and tech consultancy Lynk later this week, said observers in Asia were “aghast” at how Australia’s relationship with China had gone from the signing of a “gold standard” free trade agreement that came into effect in 2015, to the current low point in the political relationship that was now damaging trade ties.

“People who also trade with China are looking aghast at how we have gone from what was the gold standard in terms of trade deals, which was the envy of the world, to the absolute pariah we are now,” Ms Sawczak said.

She said Australia’s decision to very publicly ban China’s Huawei and ZTE from supplying its 5G network and a string of rejections for Chinese companies bidding for Australian companies, plus its strong call for an inquiry into the origins of the COVID-19 pandemic, had helped to push political relations with China to new lows.

Ms Sawczak said there were more than 100 countries which, like Australia, had China as their major trading partner, many of which also had differences of opinion on many issues.

But she said Australia was one of the few that had seen such as sharp deterioration in its political relationship with the Asian giant over the past five years.

Ms Sawczak said Australia had not “grappled with the idea that economic and political power has shifted to Asia”.

She said this meant the rise of countries such as China, which were very different to Western economies and democracies.

At the same time, China was also “flexing its muscles and becoming more assertive”.

Trade tensions

She said this would mean the world would continue to see trade tensions in the near to medium term.

“Trade tensions will become the norm,” she said.

Ms Sawczak added that it said a lot about the strength of the economic relationship between Australia and China that it had continued to remain strong despite the increasing political tensions of recent years.

Reports from China’s customs agency this week showed Australian exports to China last year set a near record of $148bn, despite the COVID-19 pandemic. This was just down from the record $154bn in 2019 and came despite the imposition of tariffs on Australian barley and wine and trade issues over exports of Australian beef, timber and coal.

The political tensions between Australia and China would result in other countries in Asia such as Vietnam having closer economic ties with China, while Australian trade ties fell.

China’s Ministry of Foreign ­Affairs confirmed this week that Vietnam had just overtaken Australia as China’s sixth-largest trading partner, according to the latest data from its customs authorities.

“Australia’s business with China is still doing OK, but largely on the back of strong trade in iron ore and LNG,” Ms Sawczak said.

“But countries like Vietnam are going to be overtaking us.

“They have a lot of disagreements with China but they have the nouse to have a positive political relationship with China.”

“It is a new world order.

“Countries in Asia are overtaking us and if we are not at the table, we will be dealt out.”

Ms Sawczak said there was continued strong goodwill between Australian and China ­business, in people-to-people ­relationships and in cultural ties.

“If there is going to be a defrosting of the Australian relationship with China it will be through business-to-business and cultural ties,” she said.

Ms Sawczak said despite calls for Australia to diversify its ­trading relationship away from China, it was not easy to find new exports markets in other countries of the size and price that Aus­tralian exporters were getting in China.

“Business cannot replicate anywhere the volume and the amount of the spending which it does with China,” she said.

Ms Sawczak said one of the long-term issues for world trade was the potential for a technological decoupling of the US and China.

She said if the world divided into two technological groups — US and European-based and China-based technological systems to be adopted by companies in Asia and the third world — it would cause duplications and add to costs in the future.