July 2023


Back on track?

Three years on from China and Australia’s diplomatic spat, after Canberra called for an international enquiry into the origins of Covid-19,the relationship seems to be on an even keel again.  Nicholas Nugent  reports

China is very sensitive about what caused the outbreak of Covid-19 in the central Chinese industrial city of Wuhan in December 2019. It is especially irritated at suggestions that the virus may have ‘leaked’ from the Wuhan Institute of Virology where research on newly discovered viruses is carried out – an accusation often made, including by the United States government, but never proven.

When the Australian government of Prime Minister Scott Morrison called on the World Health Organisation (WHO) to investigate the virus’s origins, China reacted with fury and blocked the import of Australian products including timber, coal, copper and cotton, as well as luxury goods such as wine and lobsters.

Australia resisted what it regarded as an attempt to intimidate it into climbing down and, as a result,suffered a sharp fall in trade with its major trading partner.

Relations deteriorated further over what the Australian government regards as Chinese interference in its ‘backyard’, nations of the South Pacific for which Canberra has traditionally acted as protector. China allegedly signed security deals with the Solomon Islands and other island nations, some of which are said to have granted the Chinese navy the right to dock at local ports.

Australian 2022 federal election leader's debate, in Sydney
MUTED REMARKS: Australian PM Anthony Albanese

In return, Australia signed the so-called AUKUS deal with Britain and the United States, under which Australia will obtain nuclear-powered submarines, giving its navy a much greater reach into the Pacific Ocean and South China Sea.

Despite a change in government following the election, in 2022, of the left-leaning Australian Labor Party of Anthony Albanese, Canberra remained steadfast in staring down its large northern neighbour and trading partner.

Prime Minister Anthony Albanese’s June speech in Singapore at the 2023 Shangri-La Dialogue, a forum on regional security issues, was carefully crafted and appeared to give no ground. He emphasised his country’s membership of security alliances, including AUKUS and the Quad, which links it with the US, Japan and India, as well as what he called its ‘strategic partnership’ with Southeast Asian member nations of ASEAN and involvement with economic bodies such as the Asia-Pacific Economic Cooperation (APEC) and the G20.

Australia suffered a sharp fall in trade with its major trading partner

There was no mistaking which side Australia is on regarding regional security issues, even though, like ASEAN members, it maintains a diplomatic silence on the two most divisive issues challenged by China: control over the South China Sea and the sovereignty of Taiwan. 

Meanwhile, China reversed most of its bans on imports from Australia, realising how indispensable Australian raw materials areduring this post-covid era of difficulties for the Chinese economy. Beijing found, for example, that coal bought from alternative suppliers Russia and Indonesia was of lesser quality than that from Australia, while it concluded that Australian timber was not, after all, infested by bugs – its pretext for earlier halting importation.

Supplies of copper and cotton are also flowing again and China is reviewing the heavy import tariff it imposed on Australian barley following a reference to the World Trade Organisation (WTO).

What is more, the two countries’ trade ministers held bilateral talks in Beijing in May.

The decisive factor was China’s desire to join the CPTPP

This restoration of near normal trade with China may explain the Australian prime minister’s somewhat muted remarks at the Singapore forum. He coined the term ‘guardrails’, without explaining what he had in mind, and put dialogue at the heart of efforts to stabilise relations with Beijing, possibly to allay Chinese fears about the long range submarines his country will soon acquire.

‘It’s not a question of placing obstacles in the way of a nation’s progress or potential,’ said Prime Minister Albanese, calling for the removal of ‘impediments to our trade’. There was no reference to the fact that Australia was among the first to follow the US ban on communications technology from China’s Huawei corporation on the grounds of national security.

China will have been left with the feeling that Australia remains something of a proxy for the United States in the Indo-Pacific region, not least in the protective role it exercises towards the South Pacific. Australia’s foreign minister, Senator Penny Wong, who is of Malaysian Chinese heritage, has made strengthening her country’s relations with members of the Pacific Islands Forum a priority.

Beijing surely also realises the importance for its own economy of importing raw materials from Australia, notably coal, as well as iron ore, which is deemed so important to China that it was notaffected by the initial block imposed on other items.

Clearly, China has rationalised its own needs against the earlier ‘insult’, which was, in any case, the action of the previous Australian government. Mr Albanese does not want to provoke China by publicly celebrating a ‘win’ after what has been a difficult time for Australia, though his government will certainly rejoice that trade with China is back to previous levels at more than a third of total exports.

Beijing claimed Australian timber was infested by bugs, a pretext for earlier halting importation

Probably the decisive factor was China’s desire to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a trading arrangement that links East Asian and North and South American economies.  Former US President Donald Trump took the US out of the CPTPP, which remains the most powerful trading agreement in the Indo-Pacific region. Any one of its members, which include Australia, could veto Chinese accession.  

Whatever the case, pragmatic trading considerations seem to have triumphed over strategic concerns and trade between China and Australia will henceforth revolve around price and quality rather than geopolitical rivalry.

Not that the relationship is free of rivalry. Australia is keen to reduce its dependence on China for the processing of strategic minerals like cobalt and lithium, of which China has plentiful supplies, by developing its own processing capacity.

It seems, then, that Sino-Australian relations are back on track for now – but with definite limits.

Nicholas Nugent, a former BBC correspondent, follows Asian strategic and economic relationships

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