Economic Coercion by China: The impact on Australia's merchandise exports

In 2020, Australia’s trade with China was hit by two important developments other than the COVID-induced global economic downturn. The first was entry into force of Phase One of the US-China Economic and Trade Agreement, under which China undertook to make substantial additional purchases from the United States selected from a wide variety of commodities and services, including many of interest to Australia.

The second was the rapid deterioration in Australia’s broader relationship with China. This had been building slowly for at least two years and started to engulf crucial Australian trade interests from around July that year.

China’s policy of economic coercion against Australia has most clearly targeted eight commodities – coal, copper ores and concentrates, frozen beef, wine, cotton, barley, rough wood and rock lobster. These collectively made up around 13 per cent of China’s merchandise imports from Australia in 2019, the year before relations began to deteriorate markedly. This paper seeks to extrapolate the full cost of China’s trade actions in terms of lost export revenue for Australia, assess Australia’s diversification actions thus far, as well as address the trade consequences of the souring in relations between the two countries.

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Authors: 

Ron Wickes was Director of the Trade Analysis Section of the Department of Foreign Affairs and Trade (DFAT) from 1999 until 2008. Before that, he worked in the Asia-Pacific Economic Cooperation (APEC) Branch and in the East Asia Analytical Unit.

Mike Adams is a former DFAT economist with extensive experience in trade-related aspects of e-commerce, free trade agreements, climate change and agricultural protectionism. 

Nicolas Brown headed DFAT’s branch responsible for analysis and strategic advice about trade and economic issues for five years to 2008.

Disclaimer: The views expressed here are the authors’ alone, and do not represent the views of the Institute for International Trade