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International relations

China locks onto Australian farm imports as relations fray

Tensions have escalated since Canberra's push for coronavirus probe

A bottle of Australian wine at a bar in Beijing: China accounts for about 40% of Australia's wine exports.   © Reuters

SYDNEY/BEIJING -- China has further restricted imports of Australian agricultural products as bilateral relations deteriorate in the wake of Australia's call for an independent investigation into the origins of the COVID-19 pandemic.

Beijing recently launched an anti-dumping investigation into Australian wine exports, following trade sanctions already imposed on beef and barley.

"We do find this deeply troubling, concerning and perplexing given Australia's wine industry is not subsidized to export and it's certainly not dumping product on the world market," Australian Trade Minister Simon Birmingham said in response to China's action.

Back in May, China halted imports from four Australian slaughterhouses for "repeated violations of inspection and quarantine requirements." Soon afterward, it decided to impose an additional tariff of more than 80% on Australian barley, claiming that prices are unfairly low. An analyst at an Australian financial institution estimates that Australia's barley shipments to China plunged 98.7% on the month to about 1.09 million Australian dollars ($780,000) in June. Meat exports to China fell 22% in June.

With China accounting for about 40% of Australia's wine exports, many observers believe that Beijing is showing Canberra how much pain it can inflict on the trade front.

Bilateral relations soured in April when Australia requested an international investigation into the origins of the coronavirus. At the time, there were growing calls in the U.S. and Europe for China to pay compensation on the grounds that it was the source of the virus.

Australian Prime Minister Scott Morrison called for an independent investigation into the origins of the coronavirus in April, marking an inflection point in bilateral relations with China.   © Reuters

The Chinese Communist Party's greatest fear was countries demanding that China pay compensation, said a college professor in Beijing. The professor argues that the party sought to deter other nations from joining the call for inquiry by launching an all-out attack on Australia for seeking an investigation that could lead to demands for compensation.

Beijing already had grievances against Australia. In August 2018, Australia decided to shut out products by China's Huawei from its next-generation 5G network due to security concerns. It was after this that China began an anti-dumping investigation into Australian barley and tightened inspections under coal import procedures.

China's Guang Ming Daily criticized Australia on social media in December 2018 when it argued that the Five Eyes intelligence-sharing alliance -- comprising the U.K., the U.S., Canada, Australia and New Zealand -- worked to block Huawei.

Sino-Australian relations cooled further this year due to issues involving Hong Kong and the South China Sea. In July, after China introduced a national security law for Hong Kong that tightened its grip on the territory, Australian Prime Minister Scott Morrison said that Hong Kongers in Australia can apply for permanent residency. Later that month, Australia sent a letter to United Nations Secretary-General Antonio Guterres stating that it does not recognize China's sweeping claims over the South China Sea.

The bilateral dispute is seen impacting business activity. Australia's Financial Review reported on Thursday that Australia will not approve China Mengniu Dairy's proposed buyout of Lion Dairy & Drinks from Japan's Kirin Holdings. The newspaper cited an expert who said that diplomatic issues affected the government's decision.

The U.S. is trying to keep China in check by cooperating with other democracies, mainly Five Eyes members such as the U.K. and Australia. Although Canberra is moving in lockstep with Washington on security issues like Huawei and the South China Sea, its deep dependence on Beijing economically means that a protracted dispute would have a greater impact on the daily lives of Australians.

China accounted for 32.6% of Australia's exports in the 12 months through June 2019, a higher figure than the U.S., Canada or New Zealand. More than 80% of Australia's iron ore, its biggest export item, goes to China. The figure is more than 70% for wool and exceeds 60% for barley.

Although Australia aims to find more customers for its farm products, it has not found a substitute for China. John Hewson, former head of Australia's ruling Liberal Party, argues that both Australia and China need a constructive trade relationship over the long term.

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