Recently Chinese authorities have been scrambling to figure out a way to reinvigorate China’s failed trade war with Australia. Relations between China and Australia have been on a downward spiral over the last 12 to 18 months, triggered by the Australian government’s call for an international probe into the origins of COVID-19.
On June 24, 2021, Chinese authorities fired another shot by filing an action at the World Trade Organisation (WTO) against Australian tariffs on three Chinese imports, including railway wheels, wind towers, and stainless-steel sinks.
Days earlier, on June 21, Beijing announced a significant investigation into iron ore prices after being left red-faced following the rebound of the cost for the steelmaking ingredient in the last four weeks. This is despite continued attempts to bring it down.
China’s Wolf Warriors have barked and slapped a range of trade sanctions on Australian coal, wine, lobster, barley, cotton, beef, and timber in an attempt to hurt exporters.
They see these sectors as Australia’s soft underbelly and hoped that by turning the screws, they could force the government to back down on its insistence on a proper independent investigation into the virus.
However, instead of causing lasting damage, the CCP’s trade war has had the opposite effect.
Australian thermal coal from the Hunter Valley, exported via the Port of Newcastle, maintains its popularity with Chinese power utility firms due to its quality. It currently costs US $55 per tonne (5500 Kcal/Kg) from Australia.
In placing pressure on Australian coal imports, Chinese utility firms have been forced to buy the same grade quality coal from Russia at the whopping price of US $115 per tonne (US $60 more).
But at the same time, there has been no significant decline in exports of Australian coal as producers diverted the bulk carrier ships that were deliberately held up for months by Chinese authorities and instead sent them to different markets, including India.
Indian power utilities used to buy their thermal coal from Indonesia, but with China now switching to Indonesia as a major supplier, the largest democracy in the world has begun buying from Australia (despite increased shipping costs).
Beijing’s trade war has cost Chinese utilities and power users more money, in fact, because they now must pay exorbitant prices for thermal coal from alternate suppliers.
Australian wine producers have also been negligibly affected by the trade war, with overall shipments down only four percent for the year ending March 2021 despite steep tariffs imposed by China’s Ministry of Commerce—ranging between 107.1 to 212.1 percent for a five-year period.
According to wine industry group Wine Australia, exports to China tumbled 24 percent, but exports to Hong Kong increased 55 percent over the same period.
The same is occurring with the lobster industry.
Australian fishing companies have not sold a single lobster to China—their biggest market— since November 2020 after Chinese authorities introduced prolonged testing procedures, effectively killing off live cray exports waiting on airport tarmacs.
Figures from the Western Rock Lobster Council showed Hong Kong imported about 340 tonnes of lobster in March this year, following import volumes of around 240 to 250 tonnes in January and February.
Before November 2020, volumes to Hong Kong were negligible. However, the big rise indicates importers in Hong Kong are also more than likely using the grey trade market to sell the product into China via unofficial channels.
The Chinese elite’s hunger for West Australian rock lobster and wine is thus insatiable.
Further, despite Beijing’s introduction of 80.5 percent tariffs on Australian barley exports (comprising an anti-dumping duty of 73.6 percent, and a countervailing or anti-subsidy levy of 6.9 percent) following an 18-month “investigation,” Australian barley producers have also found new markets in the Middle East and Asia (mainly Thailand).
There was even an Australian-first trial to sell premium malting barley to brewers in Mexico. All of these markets have helped replace lost trade to China.
Lastly, Australian growers and shippers claimed Chinese spinning mills were told to stop buying Australian cotton in October.
Cotton growers now expect high returns for their produce in 2021 as the industry expands into markets across Indonesia, Thailand, Vietnam, and Bangladesh.
All of which should prove a lesson to the Chinese regime’s Wolf Warriors, who have only operated within the confines of a closed-planned economy for many years, do not understand the adage of international trade, which is: The country that implements ineffective trade sanctions will be the loser in the long run.
Conversely, the target of trade sanctions (in this case, Australia) may be affected in the short term but will bounce back and prosper in the long run.
One also wonders if seeing the failure of their trade war with Australia will force China’s Wolf Warriors to realise the error of their aggressive behaviour that is only damaging China itself.
