For well over two years, the world has been hearing of the US-China trade war that began in July 2018, after several months of warnings from America that tariffs would be imposed as certain trade practices between the two were considered unfair by the Trump administration along with the overwhelming issue of intellectual property rights not being adhered to. Even as the outbreak of the Covid-19 pandemic led to a sharp deterioration in the US-China ties, a tangential impact on China’s relations with long-standing US ally, Australia, has been critical.
Tensions between the two began to surface about eight months ago, in the aftermath of Australia’s public statement requesting an independent inquiry into the origins of the Covid-19 pandemic. US accusations towards China’s role in the spread of the pandemic and Chinese delays on important aspects of information sharing related to the virus were critical, not just for these two countries, but for all the states in garnering a response to the pandemic.
Even as Australia supported the need for an independent inquiry, it was more to do with establishing credible evidence and knowledge on the pandemic, given the serious setbacks the virus has caused across the globe. Beijing’s response to this statement was volatile, leading to a bitter exchange of accusations against Australia, with the Chinese state media calling Australia a “dog of the United States”. As the bilateral ties worsened over trade issues, it took a severe plunge earlier this month when a fake picture of an Australian soldier holding a knife to the neck of an Afghan child was tweeted by none less than the spokesperson of the Chinese foreign ministry, implicating Australian soldiers of criminal excesses and alleged war crimes.
The Australian government responded by calling this fake image as repugnant behaviour by China in the face of the already existing tensions between the two countries. Over the past few weeks, the Australia-China trade war is becoming more intensified even as Beijing has imposed a new set of duties on various products that it imports from Canberra, making this month one of the lowest in terms of the bilateral ties between the two countries this year. In the second week of December, China imposed new tariffs on Australian wine, as well as very high anti-dumping levies.
Following this, China also banned the import of Australian coal on grounds of environmental concerns. Furthermore, there have also been reports in the Chinese media and the Asia Times, that China is also considering imposing additional tariffs on the import of Australian barley, bringing the two countries towards a greater impasse on trade-related matters. Australia, for its part, also banned several investments from China, specifically the ban on 5G Huawei technologies, amidst a deterioration of political relations and attacks against the Chinese in Australia following the pandemic.
Since the China-Australia Free Trade Agreement became operational in 2015, the volume of two-way trade has increased to AUS$ 240 billion. Australia’s largest trading partner is China, with nearly 40% of its exports going to Beijing and about 30% of imports coming from the Asian giant. This month would have marked the five-year period since the FTA was established; however, given the current bilateral lows between the two, the process of the review is not likely to achieve any significant breakthrough in resolving the issue.
Some commentators have speculated that the five-year review of the China-Australia FTA could lead to a complete revoking of the FTA itself, while others have said that would be too drastic a measure, more dictated by political churlishness rather than being based on any meaningful economic measure. It is also significant to remember that both China and Australia are key members of the Regional Comprehensive Economic Partnership (RCEP) and being tied through the FTA under the RCEP would give these two countries the same benefits as having a bilateral FTA with one another.
On 23 November 2020, Australian Prime Minister Scott Morrison received the inaugural Grotius Prize from a UK-based think tank called the Policy Exchange for Australia’s commitment and support towards the establishment of a rules-based order in the Indo-Pacific region. At the same event, the prime minister reiterated the importance of a new report from the Policy Exchange think tank that has endorsed the need for Britain to increase its engagement in the wider Indo-Pacific region within the overall context of the changing geopolitical realities emerging from structural shifts and the need to preserve the normative order in the region.
In this speech, Prime Minister Morrison reiterated the fact that the climate in the region with the ongoing rivalry between China and the US was clearly pitting smaller regional states to take a stand with one of the two and any statement from countries is being viewed within the larger context of this rivalry. He reasserted that this kind of judgement was erroneous as all states are sovereign and have their own capacity to choose what best serves their interest. For Australia, the current crisis with China puts the onus on the choice between a long-standing ally, the US, and an important economic partner, China.
Shankari Sundararaman (shankari@mail.jnu.ac.in)
Professor at School of International Studies, JNU, New Delhi