China suspends economic dialogue with Australia as relations curdle

by mehekkaoberoi

Background:-

  • China “indefinitely” suspended on Thursday all activity under a China-Australia Strategic Economic Dialogue, its state economic planner said, the latest setback for strained relations between the two countries.
  • The relation between the two-nation is on the decline since 2018. Bilateral ties were strained in 2018 when Australia became the first country to publicly ban Chinese tech giant Huawei from its 5G network. Relations worsened last year when Australia called for an independent investigation into the origins of the novel coronavirus, prompting trade reprisals from China.
  • Australia has cancelled the controversial Belt and Road (BRI) agreement with China saying it goes against its national interest, in a decision that will further increase tensions between Canberra and Beijing.

Linkage:-

  • China’s escalation of tension has propelled Australia to increase links with Asia’s other giant economy, India.
  • New enrollments of international students from India expanded 32% in 2019 from a year earlier and it’s the fastest-growing major market for Australian services. India has overtaken China as the largest source of net migration to Australia.
  • India has benefited the most in imports of coal, as china banned the Australian coal it was offered at a steep discount.

Current Situation:-

  • The relation between China and Australia is at an all-time low. Now, China is suspending all activity under a China-Australia Strategic Economic Dialogue, which was an important forum for Australia and China to work through issues relevant to our economic partnership.
  • This move of China is considered a retaliation to Australia for scrapping the controversial Belt and Road (BRI) agreement with China saying it goes against its national interest.    

Impact:-

  • China is the major trading partner of Australia contributing 32.6% of Australian export. During the bilateral trade between Australia and China   Australia enjoyed a trade surplus. But it started affecting as the relations between the two nations started deteriorating.
  • Barley  In May, Australian grain growers were hit for six when China announced tariffs of 80 per cent on barley. After an 18-month investigation into claims Australian farmers had engaged in anti-competitive behaviour, China announced the anti-dumping tariff would be 73.6 per cent, while the anti-subsidy tariff would be 6.9 per cent. The tariffs apply for five years and have already brought the trade, which in 2017 was worth more than $1 billion, to a halt
  • Last year, Australia sold almost $3 billion of red meat to China, making it the most valuable farm export, but now there are eight Australian abattoirs currently blocked from selling red meat to China. In the same week that China flagged its plans to tariff barley, four major Australian beef exporters were blacklisted by China over claims of mislabelling.
  • Wine
  • Australian wine sales to China have effectively ground to a halt, first with an unofficial ban that held up hundreds of shipping containers at ports, and subsequently with the introduction of tariffs. In August 2020, China launched an investigation into claims Australian winemakers dumped wine and followed up days later with a separate investigation into claims winemakers were subsidized. It has since introduced interim tariffs of up to 200 per cent for dumping and added insult to injury with a six per cent tariff for countervailing duties. The tariffs will apply until China’s investigations conclude — due August 2021 at the earliest — leaving Australian winemakers to scramble to find new markets for $1.26 billion of wine.
  • Lobsters
  • Tonnes of live Australian lobsters were left to die on the tarmac as China’s customs delayed quarantine inspections in November, fuelling uncertainty among Australian fishers. China’s blacklisting of Australian lobsters — an export market worth $771 million in 2017-18 — means crustaceans that would have once sold to China for $250 are now available at home for $100.
  • Coal
  • Australian coal exports to China were worth $13.9 billion last year. For months, dozens of bulk carriers carrying Australian coal were stranded off the coast of two major Chinese ports unable to unload their cargoes. It was estimated up to $700 million of coal had been caught out in the delays, which China attributed to “environmental” problems. Coal had also been identified in the list of commodities that Chinese importers had been warned to avoid from November 6. By early December 2020, fourth-quarter exports had fallen by 82 per cent and Australia’s largest coal port, Newcastle, had completely stopped sending coal to China altogether.

Content contributed by – Jayesh Sonawane

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