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China-Australia relations: Iron ore miners to evade Beijing ‘punitive trade measures’ as small exporters scramble for new markets
Relations between China and Australia have become strained over the past year after Canberra pushed for an international investigation into the origin of the coronavirus without prior diplomatic consultations, and Beijing has finally responded with a number. of trade locks on wine, barley, cotton, copper and coal. , sugar and lobsters. We take a look at the issues in this series. Smaller export products that fall victim to a year-long conflict between China and Australia will struggle to find new markets in the short term, while economically co-dependent trade in raw materials such as iron ore will be spared, analysts said. As the frayed relationship crosses the one-year mark, Australian exporters of commodities such as barley, wine and coal see new business opportunities in countries like Vietnam, Indonesia and Mexico, but these markets will not be able to immediately absorb trade surpluses, said research firm IBISWorld. mentionned. Do you have questions on the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new curated content platform with explanations, FAQs, analysis and infographics brought to you by our award-winning team. Taking barley as an example, Matthew Reeves, senior industry analyst at IBISWorld, said finding alternative export markets is not always a straightforward task. “The progress of the Australian barley industry since China introduced tariffs last year demonstrates the resilience of Australian exporters, who have pursued diversification strategies. However, the transition to new export markets can take months and will do little to alleviate disruptions in the short term, ”he said. What has happened over the past year and what are the prospects? China imposed a total anti-dumping duty of 80.5 percent on Australian barley last May after an 18-month investigation that began before the conflict escalated, making the grain uncompetitive in China. Barley was not the only victim of tensions between the two countries, which escalated when Canberra lobbied last April for an investigation into the origins of the coronavirus pandemic without consulting Beijing. Tensions escalated a notch on Wednesday when the Australian government tore up the Victoria State Belt and Road Initiative’s non-binding agreements with China, as well as two older agreements with the ‘Iran and Syria under the new foreign relations law. Although Canberra says the law was not aimed at China, it was enacted shortly after political furor over Victoria’s actions. Since then, China has also imposed unofficial bans on charcoal, timber, lobsters and wine. Anti-dumping duties were collected on cheap Australian wine late last year and made official last month, putting it priced outside the Chinese market. IBISWorld has identified Vietnam, India, Mexico and Indonesia as potential new export markets, citing shared trade pacts like the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP) – including Mexico, Vietnam and Australia are signatories – as stepping stones for more trade. Tariff cuts resulting from the CPTPP will strengthen Australia’s economic relationship with these countries, Reeves said. Australia also maintains bilateral trade agreements with India and Indonesia which have growing economies and can absorb exports like coal and food products like meat, dairy and grains. Vietnam will also have an appetite for food, minerals and metals, IBISWorld said. Last November, as China’s unofficial ban hit Australian lobsters, Australian Agriculture Minister David Littleproud embraced Vietnam’s virtues as a possible lobster export market. Earlier this year, tariffs on seafood exports to Vietnam fell to around 8% and will be completely eliminated by 2022 thanks to the CPTPP. “And we gave you [exporters] other free trade agreements in which to sell your product. And in fact, lobsters, before the establishment of the free trade agreement, 93% of our lobster market went to Vietnam, and Vietnam still remains a very strong and close friend of Australia ”, Littleproud said, asking exporters to remain calm after the ban. But replacing China with Vietnam as a lobster market will have its challenges. Export figures from the Australian Bureau of Statistics show that in 2019, China imported more than A $ 800 million (US $ 618.5 million) of live and processed crustaceans, including lobsters, while Vietnam hardly mattered. By comparison, before the signing of the China-Australia Free Trade Agreement in 2015, China imported A $ 32 million worth of the product while Vietnam imported around A $ 700 million. While smaller exporters will struggle to find new markets, Australian iron miners need not worry, rating agency Fitch Ratings said. In a new analysis on Thursday, Fitch said economically co-dependent trade like iron ore would likely be untouched by the bilateral conflict. Iron ore is Australia’s largest export to China and is essential to the country’s “industrial policy apparatus”, Fitch said. “We don’t expect China to stop buying iron ore. Iron ore plays a vital role in China’s industrial development, as the main ingredient in steelmaking. Its importance has only grown in the past year, with China’s fiscal policy response to the shock of the coronavirus including a massive infrastructure program, ”said Jeremy Zook, Andrew Fennell and Kathleen Chen of Fitch. Ratings in a note. We would expect China to exclude iron ore from possible punitive trade measures on Australian goods, given Australia’s outsized role in the global iron ore trade. in the global iron ore trade and a limited number of alternative suppliers. But if there were more punitive measures against Australian exports, they would be imposed on small export sectors that would not impact China’s near-term growth prospects, said analysts. Overall, trade actions over the past year have not had a significant impact on the Australian economy, in part due to continued strong iron ore exports to China. As a result, Fitch says Australia’s sovereign credit rating is unlikely to be affected by trade tensions with China, at least for now. “Trade actions have been detrimental to affected industries at the micro level, but these industries do not represent a significant share of overall exports, with the exception of coal,” Fitch analysts said. More information in the South China Morning Post: China-Australia relations: Wine traders seek morale to ‘survive’ crippling disruption China-Australia relations: Lobster exporters seek to ‘restart’ on alternative markets after years of dependence on Chinese demand China-Australia relations: wine accumulates China tells Australia to ‘think about its own actions’ by imposing new import bans China-Australia relations : Canberra ‘should know’ how to improve relations, says Beijing This article China-Australia relations: iron ore Miners to escape Beijing’s ‘punitive trade measures’ as small exporters scramble for new markets first appeared on South China Morning Post For the latest news from the South China Morning Post, download our mobile app. Copyright 2021.