Australia is poised to hold its first trade talks with China in more than three years, but experts warn there’s no guarantee of ‘smooth sailing’.
Trade Minister Don Farrell will hold a virtual meeting with his Chinese counterpart Wang Wentao next week.
The talks follow Foreign Minister Penny Wong’s breakthrough visit to China and a meeting between the two countries’ leaders last year that has helped thaw the relationship.
Australian trade with China hit an all-time low in 2020 when Beijing suspended imports of Australian products ranging from lobster to timber, and imposed tariffs on barley and wine.
This was suspected to be in reaction to Australia’s calls to investigate the origins of COVID-19, as well as Australia’s stance on thorny political issues such as Beijing’s claim to the South China Sea.
Although Australia has not changed its stance on any of the major issues concerning China, Beijing has become more open to repairing trade relations, especially since the arrival of the Albanese government.
China began 2023 by partially easing its unofficial ban on Australian coal, and Australian and Chinese trade negotiators have begun discussing the possibility of Australia dropping its World Trade Organisation challenge to China’s barley and wine tariffs in favour of a bilateral agreement.
The results of next week’s trade talks will give more insight into the trajectory of the relationship, and possibly let Australian exporters and Chinese importers know whether to expect the green light for a return to business as usual.
“Minister Farrell will advocate for the removal of trade impediments which continue to affect a wide range of Australian exports to China,” a Department of Foreign Affairs and Trade spokesperson told TND.
“This will take time to resolve, but it is in both countries’ interest for trade impediments to be removed.”
Treasure Jim Chalmers said on Thursday the government’s goal was to stabilise the Australia-China relationship, but with a “dose of realism”.
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Realistic expectations
James Laurenceson, director of the Australia-China Relations Institute at the University of Technology Sydney, said businesses would want to see concrete progress – leading to Australian products again making it through Chinese ports.
Apart from the barley and wine tariffs under dispute at the WTO, the rest of China’s sanctions have been informal, meaning they could easily be pulled back.
But instead of an instant reversal, Australian National University research fellow Benjamin Herscovitch anticipated a quieter and more gradual process to allow China to save face.
“It’ll be embarrassing because … the Chinese government has insisted that even though [trade sanctions are] partly connected to politics and the things that Australia has done wrong in Beijing’s eyes, many of these trade restrictions are driven by independent commercial actors in China,” Dr Herscovitch said.
Instead of a formalised statement, Dr Herscovitch expected “positive messaging” from the Chinese government to local businesses that they could progressively start to normalise trade with Australia.
A range of sensitive issues
Despite China’s apparent eagerness to resume a friendlier relationship with Australia, the nation’s policies and actions could present future blocks.
A DFAT spokesperson said Australia would “co-operate with China where we can, differ where we must and always engage in the national interest”.
Dr Herscovitch said: “Beijing has judged that it is in its best interest to repair that relationship with Australia, but that doesn’t mean that it’s going to be smooth sailing from here on in.
“There will still be a whole host of really prickly sensitive issues that Canberra will be confronted with that could further frustrate, and maybe even enrage, the Chinese government.”
Australia has previously been outspoken on issues such as reported human rights violations against China’s Uyghur population. Before Labor game to government last year, Senator Wong advocated for imposing sanctions on foreign companies.
Since the election, there has been no move, although Australia imposed targeted sanctions as recently as Wednesday in response to human rights violations in Myanmar and Iran, and the supply of drones to Russia for use against Ukraine.
Dr Herscovitch said China could likely use renewed trade restrictions as a threat if Australia make such a move.
“China’s foreign policy will remain very assertive and even aggressive on many fronts, and that will require strong responses from Australia,” he said.
“Those strong responses could very easily aggravate China, so the Albanese government for the rest of this year will be walking a bit of a tightrope on that front.”
New markets found
Following China’s actions towards Australian exports, the nation’s businesses scrambled to find alternative markets, with the coal industry being particularly successful.
Asialink Business chief executive Leigh Howard said while a revived trade relationship would be a win for Australian exporters, many had already found alternative markets, particularly elsewhere in Asia.
“The experience with China has reminded exporters of the benefits that come with diversification,” Mr Howard said.
“In many instances, the exporters impacted by trade sanctions have acquired the skills and capability to be successful in new markets.”
However, even with sanctions, China was still Australia’s biggest two-way trade partner in 2021.
Dr Laurenceson said while some industries were hit hard by sanctions, others exports had soared. In 2021, China accounted for about 90 per cent of Australia’s lithium exports, worth billions of dollars.
“It’s a very complex story… some industries were doing it tough, but new industries were going gangbusters,” he said.
“But a lot of Australian companies will reconnect with the Chinese market because they know that if in the future [China closes] the door again, they’ve still got access to a global market to sell their goods.”
