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US, allies 'biggest beneficiaries' of Australia's $17b China trade row, report finds

ABC Business logoABC Business 29/11/2021
Canberra-Beijing relations have hit rock bottom and there are few signs of improvement. (ABC News: James Carmody) © Provided by ABC Business Canberra-Beijing relations have hit rock bottom and there are few signs of improvement. (ABC News: James Carmody)

Australia's closest security allies, led by the United States, have been the biggest beneficiaries of Beijing's campaign of economic coercion against Canberra, a report has found. 

More than 18 months after China kicked off the trade war against Australia amid a series of spats between the two countries, the University of Technology Sydney found it was Canberra's partners who were picking up much of the slack.

UTS's Australia-China Relations Institute has released figures that show the value of 12 Australian exports to China affected by sanctions fell by $US12.6 billion ($17.3b) in the first nine months of this year compared with 2019.

During the same period, the value of US exports of the same commodities increased by $US4.6 billion ($6.3 billion), while those of Canada and New Zealand jumped by $US1.1b and $US786 million, respectively.

Insitute director James Laurenceson said the data showed Australia's pursuit of closer security ties with the US and other western democracies was not stopping its allies from capitalising on its trade predicament.

"Of course, the US is our great security ally and strategic mate," Dr Laurenceson said.

"Sometimes we get very excited by US-based commentators, and indeed senior Biden officials, saying, 'We will stand shoulder to shoulder with Australia.'

"But actually when you dig into the trade data, the United States is the country that's stealing more Australian sales in China than any other country.

"So strategic friends can be fierce commercial rivals and that's exactly what we're seeing."

Australia bears costs 'alone'

Over several months from May 2020, Australian exporters were hit with a series of crippling trade strikes by Beijing over grievances that included "siding with the US' anti-China campaign".

Among the industries affected by the measures were coal, barley, beef, timber, lobster and wine.

The university found that in some cases, the value of the targeted trades fell to zero, while in many other cases exports were reduced dramatically.

Dr Laurenceson said the actions of the US and other Australian allies were understandable and in the national interests of those countries.

But he said it was imperative Australia faced up to the cost of its own actions, which he argued had been hidden by record prices for iron ore, the country's biggest export to China.

He said the university's analysis had shown that despite the increasingly popular belief that western economies were "decoupling" from a bloc led by China, the numbers suggested otherwise.

"I'm not suggesting we should back down because Beijing threatens us," he said.

"But what I am suggesting is that we should be very clear on what the costs are and who is bearing those costs — and it is Australia and Australian producers alone."

Trade flows 'not coordinated'

Perth USAsia Centre research director Jeffrey Wilson said any increase in sales by the US and other allies to China was coincidental rather than coordinated.

He said companies traded with each other, not governments.

"What we've seen since China's trade sanctions against Australia is a great reordering of who trades with whom," Dr Wilson said.

"It's a little bit like when you dam a river in a complex river system, the water finds other ways to flow complexly around the barrier you put in place.

"And so what we're really seeing is international commercial businesses and markets adjusting around that dam wall between Australia and China, basically on commercial grounds."

Dr Wilson noted countries not regarded as Australia's allies, such as Russia, had also benefited from the trade row by increasing the sales of goods such as coal, which highlighted the unpredictable nature of the fallout.

He argued that a bigger issue at play was China's refusal to play by the rules of global trade.

"It's not the role of government to tell companies who they should sell to," Dr Wilson said.

"But it is the role of government to enforce global rules, and so much of the Australia-US discussion is on that basis.

"At no point does Australia ask the US to stop selling things to other countries — our request is that we work together to ensure China complies with a set of international rules it agreed to … and over the last 18 months has felt simply doesn't apply in its dealing with Australia."

'Don't have to sell your soul'

At Pingrup, a grain growing town 355 kilometres south-east of Perth, Doug Smith's barley harvest is well underway.

WA is expecting a record barley crop of 5.3 million tonnes.

Up until last year, much of the crop would have been bound for the world's most lucrative barley market — China.

But after Beijing blacklisted Australia's barley exports, Mr Smith said the grain was destined for other markets that paid much less.

"Most of our barley now goes into probably the cheapest barley market in the world, which is the Saudi feed market," Mr Smith said.

"And just at the moment we're seeing a major disparity between the prices we're getting paid as growers in WA and what the international price for feed barley actually is.

"We're seeing disparity of around $140 [a tonne]."

Days after Defence Minister Peter Dutton suggested Taiwan could be the first domino to fall in a campaign by Beijing to dominate the Indo-Pacific region, Mr Smith said he hoped Australia could find a better balance in its relations with China.

"Other countries have shown that you don't actually have to sell your soul to do business and I think you need to be able to negotiate something that's fair," he said.

"I think there is still room for that.

"It's probably not quite at that stage, but I'm hoping that we're getting closer to some more common sense."

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