Matt Canavan calls for retaliatory levy on iron ore to China

Former resources minister Matt Canavan says the government must force Beijing to ‘pay a price’ for trade bans on Australian products.

‘Iron ore is the one product that China has not slapped tariffs or restrictions on in its increasing trade war with Australia because it cannot easily replace our supply’: Senator Matt Canavan. Picture: Adam Yip

Former resources minister Matt Canavan says the government must force Beijing to “pay a price” for its trade bans on Australian products by imposing a levy on iron ore exports to China.

Writing in The Australian today, Senator Canavan says a 1 per cent levy would raise more than $800 million a year, which could be used to support sectors hit by Chinese trade bans.

“Iron ore is the one product that China has not slapped tariffs or restrictions on in its increasing trade war with Australia because it cannot easily replace our supply,” he writes. “China’s trade action has already caused massive economic harm to our beef, barley, seafood and wine industries … To avoid further harm we need to make the Chinese Communist Party pay a price because that will be the only thing that will stop further trade restrictions.”

He says the proposed levy should be raised every time China takes further action against Australian producers.

“We could signal that the levy would be removed if China ended its unjustified trade restrictions,” Senator Canavan writes.

His proposal comes days after Trade Minister Simon Birmingham accused Beijing of undermining the “letter and spirit” of the China-Australia free-trade agreement and its obligations under World Trade Organisation rules, through its targeted sanctions against Australian exports.

Australia exports almost 900 million tonnes of iron ore to China a year — about 60 per cent of its annual needs — reaping about $85bn in 2019-20.

“Some will argue that an iron ore export levy would cause China to look elsewhere for its iron ore needs and kill our iron ore golden goose,” Senator Canavan writes. “But China is doing that anyway with its development of the massive iron ore deposits in Guinea, and its faltering attempts to support the growth of the Brazilian iron ore industry.”

Senator Canavan has the backing of independent Senator Rex Patrick.

“Australia needs as many tools as possible in its toolbox as China seeks to exploit our trade dependency for their own geopolitical purposes,” Senator Patrick says.

Senator Canavan believes Australia should counter the risk of China developing other iron ore suppliers by working with other countries to better spread the production of steel across the globe.

“We should work with like-minded countries to increase the production of steel in non-Chinese countries so that the world does not just unduly rely on Chinese steel,” he writes.