Discover more from Beijing to Canberra and Back
Trade ministerial meeting, China's requests, and Australia's mild messaging
Fortnight of 1 to 14 May 2023
Trade likely to follow Farrell’s flight north
Minister for Trade and Tourism Don Farrell’s media release following his meeting with Minister of Commerce Wang Wentao on 12 May:
“Minister Wang confirmed that China’s expedited review of barley duties is on track. I reaffirmed that we expect a similar process to be followed to remove trade barriers for Australian wine.”
“I achieved what I came here for - to find a pathway to resolve the remaining trade impediments.”
“I invited Minister Wang to visit Australia, and I am pleased to confirm he accepted my invitation to visit at the next suitable opportunity.”
Capping off a dramatically stepped up 12-month period of political engagements, this visit was at least the sixteenth meeting between Australia and China at the level of assistant minister or above since the Albanese government came to power in May 2022. It was also the first time that an Australian trade minister visited China in more than three years—the last trip being when Minister for Trade, Tourism and Investment Simon Birmingham went to Shanghai in November 2019. And the pace of high-level engagement looks set to continue. Not only did Minister Wang accept Minister Farrell’s invitation to visit Australia, but a trip by China’s Minister of Foreign Affairs Qin Gang looks likely in July. Although China’s Ministry of Foreign Affairs shied away from corroborating the story, it was subsequently confirmed by Prime Minister Albanese for the “coming months”. On top of this, and as I’ve previously predicted, the Prime Minister is still widely expected to visit China in late 2023, despite no official announcement of the plan.
Yet for all the positive political atmospherics and diplomatic pomp and circumstance surrounding Minister Farrell’s visit, the biggest story was, unsurprisingly, the trade implications. Although the Minister was clear that he wanted real progress on trade blockages and didn’t “want to go to China just for the sake of going to China,” he was also at pains to stress that his expectations were a “pathway to resolving all of those outstanding [trade] issues” rather than a big and immediate breakthrough. The Opposition sought to set a much higher bar for the meeting, with Shadow Minister for Foreign Affairs Birmingham reiterating the message that “[w]e need to see outcomes from this visit to China.” The Opposition’s sceptical assessment was followed by press reporting portraying Minister Farrell as returning from China “empty-handed” and “without securing any major concessions on a raft of trade bans on Australian exports.”
With a similar timeline to those that I’ve previously floated, Minister Farrell said prior to his departure that he hoped “we will have resolved all of the major outstanding impediments to our trading relationship or at least be well on the way to resolving them” before the end of the year. Not only are such trade impediments not immediately tumbling en masse now that Minister Farrell has been to Beijing, but it’s still not certain that all will be removed by the end of 2023. Still, the visit’s buoyant mood and Beijing’s broadly positive response presumably put Minister Farrell’s hopes on more solid ground. So, while Minister Farrell might not have come home with big Chinese government concessions to celebrate, it seems more likely in the wake of the trip that we’ll continue to see the progressive removal of China’s trade restrictions. (Update: Less than a week after his visit, there are already signs of this, with China announcing that it “will resume import of Australian timbers.”)
On top of news of more coal, cotton, and copper ores and concentrates getting back into China, the visit makes the removal of anti-dumping and countervailing duties on barley and wine in the coming months look more likely as well. Speaking immediately after the meeting, Minister Farrell said: “I was very pleased to get reassurance, that our agreement reached recently on barley is on track. I also reiterated that we expect a similar process to be followed with the [World Trade Organization] dispute in respect to Australian wine.” Minister Farrell wouldn’t be drawn on a precise timeline, but the implication of comments upon his return to Australia was that a “decision by the Chinese government” to remove anti-dumping and countervailing duties on barley was expected soon. To be sure, that doesn’t mean that the removal of barley or wine duties are a lock. Yet the Australian government is creating the strong expectation that these duties will go in the coming months and, crucially, the Chinese government isn’t giving indications to the contrary.
Although it’s far from definitive evidence, the symbolism also augurs well for wine. In addition to a recent senior Chinese representative’s upbeat visit to a Canberra region winery, Minister Wang was apparently “beaming” when Minister Farrell presented him with a bottle of the Godfather Too shiraz from Farrell Wines. The images in the press reporting certainly conveyed a big dose of bonhomie. Add to that Minister Wang’s possible trip to South Australia to visit the winery sharing Minister Farrell’s name, and it starts to look more and more likely that the anti-dumping and countervailing duties on wine will be removed in the second half of this year.
Addendum: Beyond the apparent path forward for removing anti-dumping and countervailing duties on barley and wine and the positive political signals, it’s also possible that the visit will yield a concrete deliverable on copper ores and concentrates. Prior to the visit, a Chinese official went on the record suggesting that China would likely resume its imports of copper ores and concentrates if the “talks go well”. Given the seemingly positive tone of the tête-à-tête, the warmth with which the Chinese government feted Minister Farrell’s trip, and Minister Wang’s acceptance of an invitation for a reciprocal visit, the signs suggest that the rendezvous was a roaring success. So, on the back of reports of small amounts of Australian copper ores and concentrates getting into China earlier this year, it’s entirely possible that the gates will now open and much more will follow.
Of course, we shouldn’t over interpret the significance of this possible development regarding copper ores and concentrate. (Indeed, I’m not even sure that the market has moved in the wake of the visit and would welcome any industry pointers on that.) Copper ores and concentrates were just one of the nine exports targeted by China’s trade restrictions. And as a fungible commodity, they found alternative buyers much more easily than, for example, wine or lobsters. So, restarting imports of copper ores and concentrates is less economically significant for Australia than a shift on wine or lobsters would be. Still, after coal, copper ores and concentrates were the most lucrative Australian export hit by Beijing’s trade restrictions, so the resumption of large-scale purchases from China (if they occur) would be a significant trade signal of ongoing relationship repair.
Stubborn sticking points
Minister for Trade and Tourism Farrell responding to a journalist after his meeting with Minister of Commerce Wang on 12 May:
“Like all countries, we reserve the right to make strategic decisions about foreign investment, particularly where it involves state owned companies. So, yes, the Minister raised those issues, and I countered with an explanation of Australia’s policy in these areas.”
There might be, as Minister Farrell has described it, a “pathway to resolve the remaining trade impediments.” But to extend the metaphor a bit, it remains unclear what that pathway’s terrain might be and whether Canberra and Beijing can walk it. Minister Wang raised China’s goal of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and expressed “hopes that the Australian side can provide a good business environment and treat Chinese companies and products fairly and justly”. But on both these issues, there’s considerable space between Canberra’s and Beijing’s positions. Beijing is seemingly committed to joining the CPTPP and gain other capitals’ support, while Canberra refuses to be drawn on China’s bid and reiterates its priority of maintaining the “high standards of the CPTPP”. Meanwhile, Australia insists that it won’t shift its approach to assessing foreign investments, despite China’s longstanding concerns on this front.
Is it possible that Beijing will make the dismantling of its trade restrictions contingent on some level of support from Canberra for China’s CPTPP bid and/or a more laissez-faire treatment of Chinese companies? Certainly. But on balance, I don’t think Beijing is likely to insist on either. First, China’s low-key public expression after the meeting of its hopes on both CPTPP membership and the environment in Australia for its business points to cautious expectations. Beijing’s position might have been more pointedly conveyed in private, but China’s public messaging suggests modest determination to move the Australian government’s dial on these issues. Second, China has form for repairing relations with Australia without extracting significant policy changes. There’s no guarantee that we’ll see a repeat of this, but China’s willingness to rev up diplomatic and political engagement without a major policy shift from Australia makes the removal of trade restrictions without Canberra coming to the table on CPTPP or Chinese investments look more likely.
Third, and perhaps most importantly, China can make a tactical decision to further unwind trade restrictions in 2023 without in any way forgoing its freedom to either withhold the removal of some trade restrictions or once again throw down the hammer on other Australian exports. In other words, predicting a progressive removal of China’s trade restrictions without Canberra falling in behind Beijing on the CPTPP or Chinese investments doesn’t mean all these trade restrictions will be removed or that the spectre of economic coercion will dissipate entirely. China can also remove its trade restrictions while simultaneously stepping up its efforts to persuade Australia to back its CPTPP bid and liberalise its approach to Chinese investments via economic and diplomatic inducements. (Indeed, I’d expect China to both wind back its trade restrictions in 2023 just as it amps up pressure via other means in relation to both its CPTPP bid and Chinese investments.) So, although I’m (tentatively) assessing that China is unlikely to hold the progressive removal of trade restrictions hostage to Australia shifting position on Beijing’s CPTPP bid or Chinese investments, we shouldn’t necessarily expect trade restrictions to be removed entirely and we shouldn’t be surprised if more threats of economic coercion or actual economic coercion come Canberra’s way.
Economic coercion by any other name
Shadow Minister for Foreign Affairs Birmingham speaking to Sky News on 11 May:
“China … should be backing down on the type of economic coercion they tried to apply.”
Amidst the broad and bipartisan Australian policy consensus on China, rhetorical tweaks are one of the most conspicuous contrasts between the current Labor government and its Coalition predecessor. As I’ve written previously, the Albanese government hasn’t been as rhetorically cautious or disciplined on China as one might imagine, including in recent months. But use of the term “economic coercion” is one point on which Prime Minister Albanese and his ministers have followed a decidedly more mild path than the previous government. Whereas Prime Minister Scott Morrison and his ministers regularly raised concerns about economic coercion in speeches and when talking to the media, their successors seem to prefer using labels like trade “sanctions” or “impediments”. (One for the real wonks: I was surprised to learn when looking at past government messaging that the term “economic coercion” featured in significant Turnbull government speeches [e.g., here, here, and here] well before Australia was subjected to large-scale trade restrictions by China. So, perhaps the rhetorical distinction between Labor and the Coalition also speaks to deeper political/ideological divisions instead of being a function largely/purely of changes in Australia’s experiences with economic coercion? But I digress.)
This partisan contrast is far from clear cut though. Albanese government ministers periodically raise “[c]oercive trade measures” in speeches and at least 10 different joint statements have used “economic coercion” or similar terms since the change of government in May 2022. But even by the metric of joint statements, a rhetorical shift appears to be taking place. No joint statement to which Australia has been a party (at least that I’ve seen) has featured the term “economic coercion” or similar since the end of January this year. More tellingly still, this includes a series of joint statements that used “economic coercion” and related terms in previous iterations. In particular, the leader-level meeting with India, ministerial meetings with Vietnam (NB not a like-for-like comparison) and Malaysia, and the Quad foreign ministerial meeting didn’t feature “economic coercion”/related terms despite similar formats doing so in 2021-22 before the Albanese government was elected.
Of course, this doesn’t mean that the term “economic coercion” won’t once again rise to prominence in Australia’s diplomacy. Moreover, these linguistic tweaks might not be exclusively the doing of the Australian government. All the above bilateral/minilateral post-meeting messages were worked out with the other countries involved, meaning that other capitals might have instigated cutting references to “economic coercion”. Finally, the above is not necessarily to argue that the shift in language isn’t warranted given what appears to be a progressive unwinding of China’s trade restrictions. (For what it’s worth though, I’m still inclined to stand by my previous but tentative defence of the use of the term “economic coercion”.) Those caveats notwithstanding, it’s still striking to see just how much the Australian government’s language has (seemingly) shifted, especially considering the Coalition’s willingness to continue calling out economic coercion by name.
As always, thank you for reading, and please excuse any errors (typographical or otherwise). Any and all objections, criticisms, and corrections are very much appreciated.