Trade tensions, coking coal, and Taiwan

Week of 24 to 30 May 2021

Bilateral relations by the numbers

16

Number of months since foreign ministers Marise Payne and Wang Yi had a phone call in late January 2020 (the last example I can find). Unsurprisingly, they haven’t linked up via Zoom or shaken hands since then (so far as I know).

$8 billion to $10 billion

Some of the best estimates from Jeffrey Wilson and Roland Rajah of the costs of China’s trade restrictions against Australia since May 2020.

$0

Value of Australia’s barley exports to China in March 2021. The value of barley exports in March 2020 was $48 million (before the Australian government’s call for an inquiry into the origins of COVID-19 and China’s tariffs).

Quick take: Don’t expect these and similar numbers to improve dramatically any time soon. A range of political, diplomatic, and strategic flashpoints loom on the horizon for the Australia-China relationship. These include possible moves by the Australian Foreign Minister to veto Confucius Institute agreements, the outcome of the review of the 99-year lease of Darwin Port by the Chinese company Landbridge Group, pressure in Australia to launch targeted sanctions against Chinese officials implicated in grave human rights abuses in Xinjiang, and the prospects of Australian officials boycotting the 2022 Beijing Winter Olympics, among numerous other future sources of heightened tension. These and similar developments increase the likelihood of prolonged and even increased economic coercion from China against Australia.

Verbatim

Ministry of National Defense spokesperson succinctly summarises Beijing’s view of who’s to blame for the current state of Australia-China relations (27 May 2021):

“Currently, China-Australia relations face serious difficulties. The responsibility lies squarely with the Australian side. … We hope the Australian side will not go further down the wrong path and can do more things conducive to the relations between the two countries and the two militaries.”

Quick take: China might be adamant that responsibility for deteriorating bilateral relations lies with Australia. Yet an influential view in Canberra and beyond holds that Australia’s China policy shifts were and still are a necessary response to the way in which President Xi Jinping is reshaping his country’s external policy. One could replace ‘Australia’ with ‘China’ in the above statement and one would roughly capture a growing view in Canberra and the broader Australian community. Although Australian political leaders don't make such bald statements attributing responsibility for the current state of bilateral relations to China, it’s the sotto voce subtext of much of Canberra’s messaging on Beijing.

Let’s graph that

South China Morning Post with a rundown of how US coking coal seems to be plugging some of the shortfall left by China’s trade restrictions against Australian coal.

Quick take: These kinds of market dynamics will make it hard for Washington, Canberra, and other capitals to mount an effective response to China’s economic coercion. The prospects are good for a united multinational front to push back diplomatically against Beijing’s politically motivated use of trade restrictions. But getting private sector actors on board will be much, much harder. One imagines that telling US exporters to forgo new trade opportunities opened by the exclusion of Australian competitors will be politically fraught, to say the least.

Historical bric-à-brac

Then Foreign Minister Alexander Downer speaking in Beijing on 22 August 1996 on the importance of Australia’s relations with Taiwan, including the visit of Minister for Primary Industries and Energy, John Anderson:

“We obviously discussed some of the issues that have been highlighted over the last few weeks in the Australian media. We discussed Tibet and both sides put the familiar positions, we discussed the question of Mr Anderson visiting Taiwan. And I could say also, we both rehearsed our familiar positions. But I, in the context of those issues, made it clear that obviously Australia supports a one-China policy. But we regard our economic relationship with Taiwan as an important relationship – Taiwan is a significant trading partner of Australia’s. We have had ministers visiting Taiwan for quite some years now – since 1992 – and the new Australian Government wasn’t going to change that policy, we were going to continue with that policy. But on those issues of course the familiar arguments were put by Qian Qichen and, if I may say so, the familiar arguments were put by me.”

Quick take: Australia has earned a reputation—both in Beijing and beyond—for being increasingly forward leaning on a wide range of China policy questions. These include, among many others, the security vulnerabilities associated with Chinese telecommunications equipment, Beijing’s expansive maritime claims in the South China Sea, and China’s human rights record. Especially since the high point of Australia-China relations in 2014-15, Canberra has demonstrated a growing willingness to displease Beijing on a growing list of contentious issues. Oddly, Taiwan policy is one area that has so far seemingly not been reshaped by these recent trends in Canberra’s approach to Beijing, which leaves open many additional underutilised lines of effort for Canberra to develop its ties with Taipei.