Beijing ducks and weaves on trade tension allegations
China has blamed its bans on our coal and other products on Australia ‘violating’ trade and investment rules.
Chinese officials have accused Australia of putting at risk a trading relationship “cherished by both sides and upheld for mutual benefits” by violating trade and investment rules, in an aggressive response to Australian queries at a World Trade Organisation forum.
The comments, in which Beijing dismissed equally terse questioning from the Department of Foreign Affairs and Trade, are written responses tabled at the international trade body in late December.
They are replies to dozens of queries from Australian officials, who asked for an explanation of a Chinese “delay in renewing import licences for Australian exporters of various agricultural goods (eg hay, lobsters and table grapes), despite Australian traders having submitted renewal requests to China in accordance with China’s requirements well ahead of time”. Australian officials, through the WTO, also requested Beijing “explain why imports from Australia across a range of sectors are, unlike exporters of like products from other (WTO members), experiencing sudden lengthy inspection and processing delays, without providing any prior notification or justification”.
Despite ending the coal trade between China and Australia – as well as that in key agricultural sectors – Chinese officials waved the questions away, suggesting the effective bans were little more than the need for quarantine and testing of Australian products.
Trade Minister Dan Tehan told The Australian he was not convinced, and said he had encouraged China to “to adhere to all rules, and not just claim to do so”.
“While Australia welcomed China’s stated commitment to transparency, the answers Australia received from China to our questions unfortunately do not alleviate our concerns with China’s trade practices,” he said.
In the last two years Beijing has effectively banned the import of Australian coal, forcing a global restructuring of trade routes, and put crippling tariffs on other major Australian exports, such as wine and barley.
Treasury estimates suggest that Australian exporters affected by China’s trade restrictions lost about $5.4bn in exports to China in the 12 months to the end of June 2021 – but found $4.4bn of new markets elsewhere.
And, despite the $1bn loss in trade last financial year, the Chinese bans have arguably had a greater impact on its domestic economy than that of Australia.
Metallurgical coal bans mean that Chinese steel mills have spent the last year paying far more for the steelmaking ingredient than competitors in Japan and Korea, and the energy crunch in the northern hemisphere has forced Chinese authorities to put a cap on domestic thermal coal prices amid widespread power shortages – at the same time putting a rocket under the earnings of Australian coal exporters.
Only Australian timber and wine – particularly products made specifically for the Chinese market – have struggled to find alternative export destinations.
In the questions Australian trade officials quoted comments by Chinese bureaucrats attributing trade bans to political tensions, such as some by Foreign Ministry spokesman Zhao Lijan in July in answer to a media question about bans on Australian agricultural products.
“We will not allow any country to reap benefits from doing business with China while groundlessly accusing and smearing China and undermining China’s core interests based on ideology,” Mr Zhao said.
“When a certain country acts as a cat’s paw for others, it is the people that pay for misguided government policies.
“From what you mention in your questions, we can see how such a practice has served the country concerned.”
But the bans on products such as coal, hay, wine and lobsters are little more than a reflection of the need to conduct “risk testing and analysis”, according to Chinese officials, who denied any intent to target Australian exporters.
“In recent years, the Chinese Customs has conducted risk testing and analysis on the safety and quality of imported coal, and found that there are many cases concerning unqualified imported coal,” Chinese officials said.
“As for lobsters: Chinese Customs carries out inspection and quarantine on lobsters imported from Australia at import ports in accordance with the law, and release them after passing the inspection.”
China’s response to the questions also pointed to the significant increase in imports of Australian wine between 2015 and 2019 – Australian exports rose from 57 million litres to 121 million litres – and accused state and federal governments of providing a “large number” of subsidies to winemakers.
Four days after the meeting, the WTO’s Dispute Settlement Body established a panel to examine China’s duties on Australian wine, after Beijing blocked an earlier attempt in September.
The minutes of the meeting reflect the tense relations between Beijing and Canberra, with Australian officials asking pointed questions – in language bordering on the undiplomatic – of their Chinese counterparts.
“Since the second half of 2020 there have been consistent media reports that Chinese authorities ‘unofficially’ directed state trading enterprises to cease or limit purchases and imports of Australian coal, cotton and other products,” the minutes say.
“What controls does China have in place to ensure no such ‘unofficial’ directions are given, and what steps has it taken to investigate these allegations?”
In response, Chinese trade officials waved the allegations away.
“It is normal for Chinese importers to make decisions on whether and where to purchase based on market conditions and their own needs, with various factors being taken into consideration. This is of common business practice and conforms to laws of the market.”
But even given the rejection of specific allegations, Beijing’s anger can ultimately be dated back to the federal government’s 2018 decision to ban Chinese telco Huawei from providing equipment for the rollout of Australia’s 5G network, the documents say.
“Without any concrete evidence, Australia has banned Chinese companies from participating in the construction of Australia’s 5G network on the grounds of ‘national security’,” Beijing’s response said.
“Since 2018, more than a dozen Chinese investment projects in Australia have been rejected by the Australian side on the grounds of national security.
“Australia has initiated 106 anti-dumping and anti-subsidy investigations against Chinese products, which is 26 times the number of investigations initiated by China in Australia. This not only interferes with the sound development momentum of China-Australia pragmatic co-operation, undermines Australia‘s own image and credibility, but also runs counter to the fundamental interests of the two peoples.”
The latest monthly report from Australia’s anti-dumping commission shows Chinese manufacturers are the subject of measures in 17 categories of goods – including ammonium nitrate, grinding balls, precision pipe and tube steel, wind towers, railways and stainless steel sinks.
Mr Tehan said he rejected any suggestion that Australia had politicised international trade.
“The Australian government will vigorously defend the interests of Australian exporters and does not accept any suggestion of politicisation or discrimination,” he said.
“We remain ready to resolve this matter directly through discussions with China. Australia is a strong supporter of the rules-based trading system, where exporters and importers make commercial decisions based on market signals.”