On the first anniversary of the China-Australia trade dispute, Australian economic experts say Australia won “the first round of the battle very well” between the two countries. Economists at Australian think tanks also say that if the Chinese Communist Party hopes to achieve the goal of forcing Australia to change its national policy, hitting the Australian economy hard and warning other countries, then the Chinese Communist Party has lost.
Last May, the Chinese Communist Party announced high tariffs of more than 80 percent on Australian barley, and it did so at a time when most Australian barley farms had already been planted. In the year since then, the Communist Party has imposed a succession of restrictions on a range of Australian exports, including wine, lobster and coal.
Stephen Bartholomeusz, co-founder of the Business Spectator website and one of Australia’s most senior business journalists, said in a May 17 opinion piece in the Sydney Morning Herald, “If this is a trade war, then Australia won the first round of the encounter won very nicely.”
Over the course of a year, the price of iron ore, Australia’s most profitable export industry, has risen from about $60 per tonne to a record-breaking level of more than $200. While the Chinese Communist Party sanctions a number of Australian exports in an attempt to hit the Australian economy hard, it has had to buy large amounts of high-priced Australian iron ore and natural gas to blood the Australian economy.
Bartolomez writes that the price of iron ore has exceeded $200 a ton and the price of liquefied natural gas has returned to the level of two years ago, and the soaring prices of these two resources have far offset the losses caused by the CCP’s retaliatory measures, which have not failed to suppress the prices of these two resources, but their measures have had little effect against the backdrop of a huge increase in steel production.
Last month, the Ministry of Finance decided to adjust import tariffs on raw materials for the steel industry, using zero tariffs to encourage imports of pig iron, crude steel and other products, while reducing domestic steel production and encouraging local iron ore production; last week, three major regulators in Tangshan, China’s steel industry capital, claimed to crack down on “market price manipulation.
Bartolomez said the Communist regulators’ measures have only slightly reduced the price of iron ore, from $230 per ton to $210 per ton. By comparison, the price of iron ore was nearly $160 per ton earlier this year, compared with about $60 a year ago.
Communist China is also looking for new sources in Brazil to try to reduce the Chinese market’s dependence on Australian iron ore, but the recovery of Brazilian iron ore production remains a struggle. “This means that China can do little to reduce its imports of Australian iron ore while trying not to damage its steel industry and economy.”
And the low-cost advantage of several major Australian mining companies over Brazilian iron ore is clear.
For Australian products subject to Chinese Communist sanctions, Bartolomez writes, “In coal, Australian producers have responded to China’s coal ban by shifting their export markets to other countries, particularly India. While producers may not get the same prices as before, China is forced to buy lower quality coal at a higher price, while Chinese competitors can buy Australian high quality coal at a lower price and benefit considerably from it.”
Australia is also a major LNG exporter. Demand for LNG in the Asia-Pacific region is strong enough that even if China reduces its LNG imports from Australia, Australia can easily find other export markets, as is the case with coal.
“While China (Communist Party of China) has inflicted losses on some (Australian) export industries through tariffs and other sanctions, it has not yet been able to hurt Australia’s two really important commodity exporters,” Bartolomes wrote.
Roland Rajah, chief economist at the Lowy Institute, an Australian think tank, told the ABC that industries suffering under the Communist Party’s retaliatory measures were waking up from the Chinese dream and moving on to trade with other countries to make up for the losses.
Since October last year, only 33,000 tons of Australian barley has been exported to the Chinese market, according to the Australian Bureau of Statistics. During the same period, Saudi Arabia imported 1.5 million tons of Australian barley, making it Australia’s largest export market. Grain growers in Western Australia expect this year’s barley sowings to be near record highs.
Raja said the Communist ban cost the Australian coal industry A$10 billion, but most of it was compensated in other markets.
Looking at the year-long Australia-China trade conflict, Raja said the Communist Party’s economic coercion of Australia had been a “failure”.
“If China’s (CCP) goal is to change Australia’s policies, to cause economic damage or to send a warning to other countries not to go against Beijing, then I would say that China has basically failed on all three counts,” Raja told the Australian Broadcasting Corporation.
The Australian prime minister has repeatedly said publicly that while the Australian government wants to maintain a positive relationship with China, it will never sacrifice Australian values to do so.
There has been no change to Australia’s policy of banning Huawei’s participation in the construction of 5G networks, and the federal government has introduced the Foreign Relations Act, repealed the Belt and Road agreement signed by the Victorian government with the Chinese Communist Party without permission, and continued to increase defense spending in the federal budget.
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