Op/Ed: China’s Import Bans Are a Diplomacy Fail

As Australian producers scramble to find markets for goods hit by Chinese import restrictions, it might look as though China is winning the diplomatic war.

But the current situation is a diplomacy fail for China as much as for Australia.

What products have been banned?
In recent months, China has imposed restrictions on an array of Australian imports including lobsters, beef and timber as part of a deteriorating relationship summarized in a list of grievances against Australia.

This has hurt some Australian products, such as wine and barley, which have struggled to find equally lucrative markets. However, some others such as wheat have found new buyers relatively easily.

Overall, Australia’s total exports to China actually increased in December, mainly thanks to iron ore, which China needs too much to restrict.

Restrictions cut both ways
But while these import restrictions hurt Australia, they hurt China too.

In the short term, Chinese consumers miss out on products they enjoyed, such as premium Australian wine and lobsters, which are valued for celebrations.

Chinese manufacturers that used Australian goods might have to pay more or accept lower quality, such as for barley used for brewing, which hurts their productivity and economic growth.

In some sectors, there may not be enough immediate replacements for Australian products.

For example, coal shortages have led to China’s worst power blackouts for a decade. While import restrictions are not the only factor – and the Chinese government has denied any link – widespread blackouts at the same time as more than 70 coal ships are stuck offshore show how restrictions cut both ways.

Wider impact
In the medium term, other countries watch the treatment of Australia and consider how to protect themselves, so as not to suffer the same fate.

When China restricted sales of rare earth minerals to Japan in 2010, this led Japan to invest in other countries, resulting in a significant reduction in China’s market share.

While I don’t think countries will band together to resist Chinese coercion – they are more likely to help their companies capture Australia’s market share – they may try to slow the growth of economic ties with China, such as through restricting investment in some sectors.

This means Chinese investors may find overseas markets less friendly, as has happened in Australia with much of the economy now unavailable.

maritime professional