China-Australia normal trade resumption may be at hand, but what still stands in the way?

Australian Prime Minister Anthony Albanese’s anticipated visit to Beijing later this year is expected to “demonstrate a full resumption between the two countries” after all trade barriers are settled, according to two sources with direct knowledge of the issue.

To that end, the recently announced visit of Australian trade minister Don Farrell to Beijing “in the near future” aims to remove trade impediments. He accepted an invitation from China’s commerce minister, Wang Wentao, to continue the “productive dialogue” after the virtual meeting held on February 6.

There is not yet a clear timetable for the visits, according to the sources who spoke on condition of anonymity, but the prime minister hopes to show that China and Australia have restarted their normal relationship by travelling to Beijing and meeting with his Chinese counterparts.

And while one of the sources said that the foreign ministries of both countries have started preparing for Albanese’s China visit, the formal invitation has to wait until at least the new leadership in Beijing has officially taken the helm after the annual “two sessions” parliamentary meetings next month.

The Post reported on February 2 that Albanese “looks forward to seeing” a face-to-face meeting between Farrell and Wang ahead of the prime minister’s anticipated visit.

Despite the recent thawing of long-chilled relations between the two countries, a former Australian trade official also said that there are still worries about maintaining the current momentum and getting the China-Australia trade relationship back on sound footing.

Kevin Magee, a former assistant secretary with the Australian Department of Foreign Affairs and Trade (DFAT), told the Post that trade officials with the department were “worried” that the country’s forthcoming Defence Strategic Review, along with the Aukus pact between Britain, the US and Australia, “could possibly slow down or even put a spike in the momentum to improving trade relations” between Beijing and Canberra.

One of the two sources also said that World Trade Organization (WTO) investigations initiated by Australia will be the focus of the discussions between Farrell and his counterparts in Beijing at the upcoming meeting.

“The high tariffs on Australian wine and barley will be the focal points,” the source added. “And it depends on whether China is willing to reduce or abolish tariffs.”

Magee said that “the key tasks” for Farrell include resolving the tariffs issue and getting relations back on track across all sectors.

“[China is] seeking from Australia, in return, commitments to review Australian anti-dumping practices, inward investment rules for Chinese investments, and support for China’s CPTPP membership,” he added, referring to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Relations between China and Australia soured after the previous administration of Scott Morrison called in April 2020 for a probe into the origin of the coronavirus.

China subsequently applied duties of between 116.2 and 218.4 per cent on containers of up to two litres of Australian wine, and then an 80.5 per cent tariff was also imposed on Australia’s barley exports.

“Australia is insisting on the tariffs on wine and barley being removed in full, or returned to the previous pre-sanction levels, before Australia will drop the WTO investigations,” Magee said. “DFAT trade experts are confident that Australia would win the WTO anti-dumping cases on wine and barley.”

Bryan Mercurio, a law professor with the Chinese University of Hong Kong, explained that because the WTO is a “member-driven organisation”, the onus falls on its members to make decisions.

“All it takes to cease the WTO panels from completing their work, or to shut down the case, is for the complainant – in this case, Australia – to inform the WTO that a mutual solution has been reached, and the case will be terminated,” he said.

Henry Gao, a law professor with Singapore Management University, also noted that Australia could drop the case by simply sending a notice to the WTO, but “whether they will do so is another story”.

“Australia has already spent considerable expenses on the cases, so [they] would probably just let them run their course,” he said, adding that the first panel hearing for the wine case and second panel hearing for the barley case have completed.

"We hope that Australia can provide a fair, bias-free and open business environment for Chinese companies" - Shu Jueting, Ministry of Commerce

An Australian wine exporter surnamed Zhang, who asked not to be identified due to the sensitivity of the issue, said that “no concrete changes have been seen on the ground, yet”.

“So far, the customs-clearance situation in China for Australian wine remains the same, which means there are still tariffs,” he added. “It will take some time to see the resumption.”

Wine Australia, the wine industry association of the Australian government, said in a statement on February 7 that exports to North Asia declined by 10 per cent in value to A$314 million (US$217 million) in 2022 due to the continuous declines in the mainland Chinese and Hong Kong markets.

Shu Jueting, a spokeswoman with China’s Ministry of Commerce, said at a regular press conference on Thursday that China was “willing” to communicate on technical issues related to the bilateral trade and find win-win resolutions.

“At the same time, we hope that Australia can provide a fair, bias-free and open business environment for Chinese companies to ensure high-quality development,” she added.

Despite trade barriers that have sabotaged normal operations for certain sectors, China remains the largest two-way trading partner of Australia.

The latest figures from the Australian Bureau of Statistics showed that the two-way trade of goods between the countries reached a record high of A$284.6 billion in 2022, up from A$268.6 billion in 2021.

Data released by S&P Global Commodity Insights on Thursday showed that six vessels filled with Australian coal were headed for China, with four of them from the world’s biggest miner, Glencore.

As part of the easing of tensions following Albanese’s meeting with Xi Jinping in November and the first Australian foreign minister to visit China since 2018 in December, sources had told the Post Australian lobsters would also be allowed to legally return to the Chinese market in March after Chinese buyers received coal in February.

Source: South China Morning Post