China’s trade dispute cost Australia $ 3 billion in lost exports

Photographer: Brendon Thorne / Bloomberg

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Australia’s trade struggle with China cost about $ 3 billion in commodity sales last year, and this relatively small impact suggests that there is little economic need for the country to yield to Beijing’s pressures.

This is the value of Australian exports lost in 2020 compared to the previous year, and it covers copper commodities and coal to wine and lobsters that are now subject to Beijing’s trade restrictions, according to Chinese customs data. The impact on some of these industries has been wild, as exporters are forced to abandon their largest market and seek customers elsewhere.

At the same time, Chinese state investment in infrastructure to rescue its economy from the pandemic has increased the amount of iron ore needed to fuel record steel production. And then, Australia is the dominant producer. Purchases by China increased by nearly $ 10 billion last year.

The value lost on commodity shipments to China does not capture replacement sales to new markets or changes in international prices and exchange rates. It is also overshadowed by Australia’s total exports of $ 257 billion in the first 11 months of last year. Meanwhile, China’s total imports from the world fell 1.1% in 2020, as the pandemic shook supply chains and reduced demand.

Beijing’s trade reprisals have stopped hitting the most crucial commodities for its economy – iron ore and liquefied natural gas. They are also Australia’s biggest winners. Australia is the developed economy more dependent on trade with China, and the two concluded a free trade agreement in 2015. Relations have deteriorated since 2018, when Canberra barred Huawei Technologies Co. from its 5G network and went into free fall in 2020 after the government called for an independent agreement to investigate the origins of the pandemic.

China has been making noise about breaking its dependence on foreign iron ore, but Australian mining companies are incredibly economical and the government has few alternatives to avoid rising costs for its steel industry, the largest in the world. Gas is seen as a crucial bridge fuel for Beijing’s goal of carbon neutrality, while getting rid of coal. China does not produce enough on the domestic market and, again, Australia is among the world’s top suppliers.

– With the help of Jasmine Ng, Shuping Niu, Dan Murtaugh and Dennis Ting