Australian rock lobster, an innocent casualty of the trade war between China and Australia, is quietly returning to the Chinese table through the back door or through the gray trade of re-exports.
Australian lobster was once one of the highest luxury items on the Chinese table. As the world’s largest customer, China used to import more than 90 percent of Australia’s lobster each year. But as Australia responded to the U.S. call to exclude Huawei from 5G network construction on the grounds of national security concerns, and as Australia took the lead in calling for an independent international investigation into the traceability of the New Guinea virus, an infuriated Chinese government retaliated against Australia in bilateral trade by restricting or terminating exports of a range of Australian goods to China, making lobster one of the casualties of China’s geopolitical struggle. Lobster is one of the casualties of China’s geopolitical struggle.
The Chinese government has not explicitly banned the import of Australian lobster, but has delayed or refused imports on the pretext of customs quarantine inspections, for example, claiming that Australian lobster exceeds heavy metal content standards. After November last year, China effectively stopped importing Australian lobsters. This was a sudden and disastrous blow to Australian lobster farmers and led to a sharp drop in lobster prices.
After examining trade data from multiple sources, Bloomberg reported that Hong Kong suddenly became the world’s largest importer and consumer of Australian lobster after China effectively stopped importing it. From October last year to April this year, Hong Kong’s imports of Australian lobster grew 2,000 percent each month. Bloomberg quoted experts as saying that the plummeting price of Australian lobster would of course stimulate the appetite of Hong Kong people, but with so much imported lobster, Hong Kong people are afraid they won’t be able to finish eating it all at once.
Bloomberg quoted Deborah Elms, executive director of the Asia Trade Center in Singapore, as saying, “It’s highly unlikely that Hong Kong residents who were quarantined at home during the outbreak would suddenly buy, cook and eat more than 20 times their usual consumption of lobster in the past six months. She also said, “Lobster is a high-value commodity. Like all high-value commodities, the incentive to evade the ban is very powerful.”
Official data collected by Canberra’s Fisheries Research and Development Corporation shows that China imports 93 percent of Australia’s exported lobster, worth $412 million, during 2019-2020. But from April last year to April this year, China’s imports of Australian lobster fell by 99 percent.
Meanwhile, Australia’s lobster exports to Hong Kong reached $19 million in April this year alone, the highest single month since February 2013. In the first four months of this year, Hong Kong’s imports of Australian lobster were worth $59.36 million.
Bloomberg reviewed Chinese customs data and found that while Hong Kong is importing Australian lobster in a big way, the amount of seafood imported by mainland China from Hong Kong is also climbing in tandem. The total value of mainland China’s seafood imports from Hong Kong has skyrocketed from $500,000 in September last year to $10.6 million in April this year.
Several suppliers sell Australian lobster on Baidu’s online wholesale platform. At the Jingdong online shopping mall, a live Australian lobster sells for 1,500 yuan (about $232) and can be delivered the same day the order is placed if the buyer is in Guangdong.
Deborah Elms, executive director of the Asia Trade Center in Singapore, said backdoor or gray trade is often a way to avoid restrictions.
The Australian Broadcasting Corporation (ABC), which first revealed that Australian lobsters were being smuggled into China via Hong Kong, reported that many goods had been routed through Southeast Asian countries to avoid tariffs before a free trade agreement between China and Australia came into effect in late 2015.
The ABC quoted Jeffrey Wilson, a trade expert at the Pacemakers Center, as saying that exporters often avoid “government-imposed trade barriers” through gray trade. “Gray pipelines are also the only way for exporters to stay in touch with their Chinese partners while sanctions are in place,” Wilson said.
Gray trade to avoid sanctions is not illegal, Wilson said, and it is not the same as “black market trade,” which often involves corruption, bribery and false statements. But the danger of gray trade is that once the government finds out, it will probably find a way to close the loophole.
The Chinese government imposed trade sanctions on Australia, including a halt to lobster imports, to put pressure on Australia and send a political message, but to its surprise, politics was no match for the people’s appetites, and Australian lobster still made its way to the Chinese table through special channels.