China Trade dispute costs Australia $ 3 billion in lost exports

Photographer: Brendon Thorne / Bloomberg

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Australia’s trade battle with China cost it about $ 3 billion in commodity sales last year, and that relatively small impact suggests there is little economic need for the country to bend over Beijing’s pressure.

That is the value of Australian exports lost in 2020 compared to the previous year, and includes raw materials from copper and coal to wine and lobsters that are now subject to trade restrictions by Beijing, according to Chinese customs data. The impact on some of those industries has been cruel, as exporters were forced to leave their largest market and seek customers elsewhere.

At the same time, China’s state-backed spending on infrastructure to save its economy from the pandemic has increased the amount of iron ore it needs to fuel record-breaking steel production. And Australia is the dominant producer there. Purchases by China increased by nearly $ 10 billion last year.

The value lost when shipping raw materials to China does not include replacement sales to new markets, nor shifts in international prices and exchange rates. It also dwarfs Australia’s total exports of $ 257 billion in the first 11 months last year. Meanwhile, China’s total imports from the world are down 1.1% in 2020, as the pandemic spurned supply chains and reduced demand.

Beijing’s trade achievements are no longer focused on the raw materials most critical to its own economy: iron ore and liquefied natural gas. They are also Australia’s top earners. Australia is the developed economy most dependent on trade with China, and the two signed a free trade agreement in 2015. Relations have deteriorated since 2018, when Canberra Huawei Technologies Co. of its 5G network, and went into free fall in 2020 after the government called for an independent investigation into the origins of the pandemic.

China has been making noises about cutting its dependence on foreign iron ore, but Australian miners are incredibly cost effective and the government has few alternatives to avoid driving up costs for its steel industry, the world’s largest. Gas is seen as a critical bridge fuel to Beijing’s carbon neutrality goal, while weaning itself off coal. China doesn’t produce enough domestically, and again, Australia is one of the best suppliers in the world.

– With assistance from Jasmine Ng, Shuping Niu, Dan Murtaugh and Dennis Ting