Brewing tensions between China and Australia: What could be at risk?

In the US, the policymakers are noting that there is enough evidence suggesting that coronavirus originated from a lab in Wuhan. PM Morrison intends to unearth the truth in a transparent manner, which will have implications for the whole world.

An enquiry into the Great Virus Crisis’ origination will provide the global society with answers and lessons, and the Prime Minister has written to G20 leaders for the virus enquiry. He also noted that he spoke to counterparts in the European Commission and others, and they have supported this motion.

Recently, Mr Morrison said that Australia has a mutually beneficial relationship with China, underpinned by a strategic partnership. As countries trade with each other, issues are likely to occur, beef and barley have been one those issues, especially on barley over the recent past.

Issues related to trade with China are regularly discussed with Chinese counterparts. He also denied that restrictions on Australian barley exports to China were deterred by China buying barley from the US.

Media reports from China suggest that the country has allowed imports of barley and blueberries from the US. This move came after China had blocked beef exports from Australia while also announcing plans to impose tariffs on Australian grains.

Since the Great Virus Crisis has damaged supply chains, China is lagging on commitments made in phase one trade deal with the US. This week, Chinese trade authorities lifted tariffs on a range of US goods, making them cheaper for its consumers.

The tariff easing on the US goods by China dropped after the country scrapped imports from four Australian beef facilities, citing health and labelling issues. China also noted a wild plan of imposing high tariffs on Australian barley (up to 80%). As a part of phase one trade deal with the US, China has to undertake purchases of the US goods, adversely affecting purchases from other countries, including Australia.

Chinese Foreign Ministry said they are willing to investigate at an appropriate time. However, the word on the street is that the virus may have emerged from the wet market in Wuhan, China.

Many nations have come in support of an independent enquiry on originations of the Great Virus Crisis. Despite the first case arising out of China, some Chinese officials are also claiming that the novel virus might not have originated from China.

Chinese Authorities are very-much inclined when denying claims of an artificially developed virus and firmly believe that the virus has originated from some other source. In fact, Chinese ministries are suggesting that first cases might have been noted in the US and France, while some also say that the US Military has transmitted the virus to Wuhan.

Chinese media reports also propose that unauthorised laboratories were directed to destroy the early samples of coronavirus by the Government. Meanwhile, the US Officials continue to highlight that the Chinese officials had resisted providing the samples of the virus.

However, the health care authority also noted that the destruction of early samples was a preventive step towards lowering the risk of a second disaster and biological complications in laboratories. When pneumonia-like symptoms appeared in Wuhan, they conducted tests to identify pathogens.

In February, the Chinese Authorities had told the labs not to transmit samples to other institutions without any approval. Reports also advocate that the virus was detected by labs as early as December, which could also imply that the virus was making its way into the society possibly earlier than December.

If relations were to deteriorate between China and Australia, what could be at risk?

Tussling relations between the two countries could not only induce trade restrictions like tariffs and barriers but a wide range of psychological changes as well. Consider Chinese politicians portraying Australia as a bully to them. The large-scale Chinese consumer could refrain from buying many products originated from Australia or even holidaying in the sixth-largest nation in the world.

As far as trade is concerned, it took ten years to pen a Free Trade Agreement by the two nations. In December 2015, China and India were able to enforce the China Australia Free Trade Agreement.

In 2018-19, the total merchandise value of trade was around $213 billion, constituting approximately $135 billion worth of exports and ~$78.2 billion in imports. China is Australia’s biggest trading partner.

During the year, among the most significant exports and imports, Australia sold $63.12 billion of iron ore to China, natural gas accounted for $16.64 billion, $14.12 billion worth of coal, and gold worth $5.07 billion. Australia bought telecom equipment and parts of $8.87 billion, computers worth $6.63 billion, furniture and homewares worth $3.42 billion, and refined petroleum of around $2.77 billion.

At the same time, there is an excellent relationship between China and Australian businesses in other areas as well, which could be small. For instance, Phoslock Environmental Technologies Limited (ASX:PET) has substantial business in China.

Media reports have exaggerated the little stir between two countries, primarily inflicted by the implications of the Great Virus Crisis – which seems manageable as Beijing is willing to co-operate at an appropriate time.

There is no denying that issues exist such as banning of Huawei 5G equipment and will continue to exist, but how the two countries reach a mutually beneficial relationship matters the most. China has also learnt that engaging in a trade dispute is not constructive and finding a solution at some point in time is a must.

One should instead think why a free trade agreement between the two countries was negotiated in ten long years. Extreme brainstorming and implications might have been considered, which is why it took a decade. And, if some areas need attention, both leaders will get it done at the right moment as for now, developing a vaccine appears far more appealing than engaging in trade wars.

NOTE: All figures are reported in Australian Dollars unless stated otherwise.