GP Insights # 357, 16 May 2020
As the trade tensions between Australia and China increase, so has the public support in Australia for their government's stand against China. The pro-government public statements have come as they see their government standing up against an authoritarian regime that has made Australia vulnerable to its blackmail and threats. Expressing their lack of trust in China, people believe that Australia should stand independent of China.
The Prime Minister has refrained from being emotive in Australia's response. Amid the public support, the business community and few state governments have asked the Australian government to solve the problem diplomatically and be "pragmatic" in the trade relationship.
What is the background?
First, a push for an independent inquiry on COVID-19. The escalating trade tensions follow Australia's call for a global inquiry a month ago into the origin of the coronavirus and China's handling of it in order to help the countries better understand the "genesis" of coronavirus. When the Foreign Affairs Minister, Marise Payne proposed the idea, Australia was alone. The proposal for the inquiry is now supported by almost all of the countries in the West. Recently, Australia has secured the support of the European Union, following the United States and the UK. This bolsters the chance of the inquiry passing the WHO's governing forum on 18 May as China canvasses support among the developing countries.
Second, China's economic retaliation. Following Australia's call for the inquiry, China's ambassador to Australia in a veiled threat stated that it would impact Australia's bilateral relations with China. Subsequently, China's Ministry of Commerce imposed 80 per cent import tariff on barley and suspended meat imports from four Australian abattoirs. This has had a heavy impact on the agricultural sector since China is a major trading partner, constituting one-third of Australian exports. China's trade policy will affect barley exports worth $916 million last year, and beef exports to China, valued at $2.6 billion.
Third, growing tensions between Australia and China. Even before the COVID-19, there were tensions between the two countries. Especially within Australia, over the last few years, there was a growing sentiment against Beijing. Relationship with China has become a political issue even during the previous elections. Australia's support for a COVID-19 inquiry has worsened a relationship that was already in deep waters.
What does it mean?
First, China is likely to strangle a chicken to scare the monkey since it comes down to whether the Australians will stand their ground or let go. If Australia steps back fearing economic repercussions, China may apply similar coercion on other countries to make them fall in terms with it. Now that Australia has support from the EU, China should tread diplomatically and with caution.
Second, China is at a disadvantage because many believe that the pandemic originated from Wuhan. It has been persistent on avoiding an inquiry into the situation. The reason behind this can be either the risk of exposing the functioning of the authoritarian government, a thriving illegal wildlife market or to avoid claims for compensation for being the responsible of the pandemic.