Wide restrictions that China imposed on Australian exports are not as damaging as it was feared they would be, because Australia is finding new markets, CNBC reports.
Tensions between the countries have soared in recent months, deteriorating sharply after Australia supported a call for a global inquiry into China’s early handling of the coronavirus disease.
Beijing has since taken several measures restricting Australian imports, ranging from levying tariffs to imposing other bans and restrictions. That has affected Australian goods including barley, wine, beef, cotton and coal.
Collectively, the targeted exports were worth about US$25 billion in 2019, or 1.3 percent of Australia’s gross domestic product, according to Australia-based Lowy Institute.
“Exports to China have predictably collapsed in the areas hit by sanctions, but most of this lost trade seems to have found other markets,” said Roland Rajah, lead economist at the Lowy Institute.
Overall, the affected Australian exports to China — except for coal — held steady through most of 2020 to the tune of just over US$9 billion, Rajah said. They eventually dropped to about half that amount as restrictions escalated in late 2020, he added.
Following the restrictions, those same goods found other export markets, and trade grew by about US$4.2 billion in annualized terms for those goods, offsetting most of the losses from China, according to Rajah.
Coal is one of the commodities thriving despite China’s ban.
“Australian coal exporters seem to have been quite successful in diverting to other markets,” Rajah said in a recent note. “Exports to other markets initially rose as China first reduced its coal imports in general starting around mid-year. The trend then accelerated as China targeted Australian coal specifically starting in October 2020.”
By January 2021, Australian coal exports to the rest of the world were running US$9.5 billion higher in annualized terms than before the ban, he said.
Notably, Australian coal in India has been gaining market share, according to Rajah.
Marcel Thieliant, senior Australia and New Zealand economist, concurred.
While Australia’s non-iron ore exports to China have slumped by 40 percent over the past year, “coal miners have been able to divert their shipments to other countries,” he said. “The upshot is that the conflict isn’t as damaging to Australia’s economy as many think.”
It isn’t just coal. Other Australian exports hit by those restrictions show “even clearer signs of substantial trade diversion,” said Rajah.
He listed barley, cotton, seafood and timber which managed to find new markets.
“Sales of these products to other markets rose sharply, but only after China’s sanctions intensified in late 2020 — with the stark shift signaling this was indeed mostly a result of trade diversion.”
The analysts noted, however, that Australia has had difficulties shipping off beef and wine.
“Australia’s wine industry has struggled to make up for the loss of the premium China market,” Rajah noted. Earlier this year, China imposed anti-dumping duties on some Australian wines, claiming that Australia has been dumping and subsidizing its wine exports — and hurting China’s domestic wine sector as a result. -Photo: ABC News Australia