Arrogant China shows its contempt for fair trading

The imposition of an 80 per cent tariff on our barley is a miserable result — for China. Importers, such as brewers, will pay the impost; they’ll pass it on to customers. For world-famous Tsingtao, it’s a dilemma: pay more, or opt for lower-quality homegrown or imported malting barley. Either way, Tsingtao just became a lot less competitive in the global beer market. Australian farmers are victims, too, punished for their export success. This is a lose-lose result, however arbitrary and vindictive. If not barley, it would be another crop. Beijing has been humiliated during the pandemic, its reputation tarnished. How do you shrink a nation of 1.4 billion? The Chinese Communist Party is taking care of that. “Look on my Works, ye Mighty, and despair!” Shelley wrote of the fallen Ozymandias, with his “sneer of cold command”.

Retribution aside, China’s case against us on barley is dishonest. Its claim that our growers are subsidised, citing Murray-Darling Basin support as evidence, is a crock. Almost 90 per cent of barley exported to China comes from Western Australia. For a nation slowly gobbling up our prime farmland, this is a poor understanding of terrain. With parts of Australia experiencing their worst drought conditions, many families on the land have had to rely on off-farm income or welfare payments to survive. We’ll certainly take our case to the World Trade Organisation. But action will take years. Growers will no doubt look for market gaps created by China’s ploy, with opportunities most likely in Vietnam, Thailand and other parts of Southeast Asia. Or they’ll switch to canola, pulses or wheat. This is unfair and malign, but likely to be a regular feature of the CCP playbook as it settles scores and intimidates its way through the wreckage, boundless and bare, of coronavirus.

Such behaviour invites us to reflect on the comprehensive strategic partnership we sealed with China in 2014, based on goodwill, trust and mutual benefit. That was a high point, to be sure, the diligent work of officials, political leaders and companies over a decade. Imperfect as it is — financial and professional services were carved out — the free-trade agreement opened the door for many. Exports to China boomed, led by iron ore, coal, natural gas, education and tourism. China accounts for 28 per cent of foreigners studying here. It’s the largest source of tourists; their spending is equal to the next four countries. All up, China buys 32.6 per cent of our exports, the same as total sales to our next five top markets — Japan, South Korea, the US, India and New Zealand. Investment platforms send customers an alert when a listed security exceeds 15 per cent of a portfolio. Canberra, we have a problem.

Diversifying our trade is prudent. But decoupling from China, as some would wish, is risky. Trade is mutually beneficial. Our big companies and producers want to be in China, with its voracious appetite for reliably supplied raw materials and aspirational products — from prestigious degrees and unique travel experiences, to safe baby formula and fine wines. As China gets richer, it will want more of these goods and services, which we produce at a winning nexus of price and quality. These competitive advantages pay for China’s exports to our shore. Long may this self-interest and free exchange prosper. Yet the disruptions to supply chains from COVID-19 will see nations, big and small, seeking self-sufficiency for all manner of products. That’s a pity, yet understandable. This retreat from globalisation will obviously hurt trade, growth, investment and productivity. It will impose a heavy constraint on China, the factory of the world.

China’s capricious tariff decision, too, will have ripple effects; it’s a reality check for us, and other nations, and a nudge to broaden our horizons. As Ben Packham reports on Wednesday, Scott Morrison will use a virtual summit with India’s Prime Minister, Narendra Modi, on June 4 to push ahead with plans to diversify our relationships. Canberra and New Delhi will cement new agreements to develop trusted supply chains in strategic sectors including medical goods, technology and minerals. A new defence partnership is in the works, while fresh research co-operation will help to deepen education ties, reducing the university sector’s reliance on Chinese students.

Our trade with India, a nation with almost as many people as China, is underdone; India takes 4.9 per cent of our exports, with a growing number of tourists and students coming here. Many settle in Australia, enriching our culture and lifting our skills base. India has a tiny share of our imports, less than one-tenth of the value of China’s sales. The only way is up. Mr Morrison, who cancelled a scheduled visit there due to the Black Summer bushfires, said India, with its shared values, is a “natural partner for Australia”. India will be essential to us in the post-pandemic world. Former Department of Foreign Affairs and Trade head Peter Varghese, author of a landmark 2018 report into the bilateral relationship, is right: we need to spread the trade risk, find new markets and constrain China’s ambitions to be the predominant global power. As Shelley observed of the ancient King of Kings, China’s “frown, and wrinkled lip” have been exposed.