Australian exporters ‘back on the radar’ in China as tensions ease

Australian lobster farmers and winemakers are attracting renewed interest from Chinese importers and distributors, the first sign of a potential withdrawal of $20 billion in trade sanctions that have crippled industries and dominated three years of economic disputes with Beijing.

On the eve of Foreign Minister Penny Wong’s first visit to the Chinese capital, Australia China Business Council president David Olsson said Australia should also consider withdrawing its World Trade Organisation case against China at the same time as Beijing withdraws its anti-dumping case against Australia as a sign of goodwill.

Foreign Minister Penny Wong and her Chinese counterpart Wang Yi.Credit:Eddie Lim

“We all have to make decisions that are not necessarily decisions that we’re entirely comfortable with, but which are important decisions to help us get to a better place,” said Olsson.

“If our government decided that there was merit in agreeing to some sort of tactical compromise on this, to resolve thorny diplomatic problems with China, I think people would generally accept that.”

Wong is the first foreign minister to travel to China since Marise Payne in 2018 after years of diplomatic estrangement over human rights, national security, trade strikes, COVID-19, and the arbitrary detention of Australian citizens Yang Hengjun and Cheng Lei.

“Many of the hard issues in the relationship will take time to resolve in our interests,” she said before leaving Canberra on Tuesday. “Speculation about outcomes obviously has implications for leverage, and I am certainly not interested in giving any country leverage other than Australia.”

David Olsson, president of the Australia-China Business Council.Credit:Eddie Jim

Speaking from Hong Kong, Olsson said until the federal election in May, Chinese businesses did not feel they had permission to engage as deeply with their Australian counterparts as they would have liked.

“The change in government became a trigger for them to try and engage again. So, we’ve had really quite strong engagement, over the last six months in particular,” he said.

“At the business level, members are reporting that the number of calls and email communications they’re getting from Chinese companies has ramped up considerably. It’s as if Australia is back on the radar.”

China is a huge market for Australian exporters and Chinese importers across agriculture, resources, and services sectors and opens up potential windfalls worth billions of dollars when trade resumes. Australia sent $750 million worth of lobster to China every year before they were blocked, making up 90 per cent of its market. Wine sales were worth more than $1 billion before being hit with anti-dumping duties by Beijing. Total exports are worth more than $180 billion. Australia China Business Council members include Australia’s major banks, miners, and agriculture exporters.

The first indication of trade relief will come from business because the Chinese government has never officially acknowledged the existence of the sanctions. Instead, China has argued that importers were making their own investment decisions not to purchase Australian products. In October 2020, coal traders were given verbal instructions to stop importing Australian coal, but little public documentary evidence exists beyond crates of wine piling up at Chinese ports or lobsters spoiling on airport tarmacs, incidents that Chinese authorities blamed on labelling or pest control issues that will form part of its argument in any World Trade Organisation defence.

Olsson said several members in sanctioned sectors including crustaceans and wine have received renewed interest from Chinese importers and distributors for their products.

“That’s a positive development that we’re seeing,” he said.

“It’s not yet translating into real economic activity. One hopes that if something happens tomorrow, that might then provide the impetus for further change and for things to start flowing again.”

Opposition foreign affairs spokesman and former trade minister Simon Birmingham warned against stopping the appeal to the WTO until China’s tariffs are removed.

“Although it would be preferable for China to remove these unfair tariffs without waiting for the conclusion of the WTO processes, we certainly shouldn’t give up the leverage of securing principled rulings from the independent umpire,” he said.

China has also repeatedly raised business investment decisions by Australia, including the rejection of a $600 million purchase of Lion Dairy on national security grounds, as part of its claims of hypocrisy against the Australian government.

The Australian government has maintained that China’s complaint to the WTO over steel anti-dumping measures is without merit and that its trade sanctions on Australia were a form of economic coercion due to its positions on human rights and national security.

Olsson said Australia needed to reconsider some of its foreign investment positions, particularly as China accelerates its plans for renewable energy.

“I think there is a need for Australia to revisit the way in which it looks at foreign investment generally,” he said.

But he said the strongest signal of a new chapter in China-Australia relations would be the release of Yang and Cheng.

“If we don’t see movement on that, or a pathway towards resolution of those issues then I think the future is not as rosy as it seems right now,” he said.

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