Australia is on the edge of a trade war: How can we avoid it?

Wendy Cheong

Australia is in a diplomatic crisis. Last month the Australian government called for an independent investigation into COVID-19, a move that appeared to support US attempts at blaming the mismanagement and therefore spread of COVID-19, on China. Taking it a step further, Scott Morrison personally called leaders across the world to join Australia’s appeal for an international inquiry; an effort that was met with little success. This angered the Chinese government who has in recent months been embroiled in an intensifying blame game with the US over the spread of the virus. In the CCP’s eyes, the call for an inquiry is a political manoeuvre to help the US pin the blame of the pandemic on their country. While the Australian government has insisted that the call for an investigation is apolitical and independent, China remains unconvinced. Their suspicions have been heightened as Australia was cited by the US government for supporting claims that the virus escaped from a Chinese lab. Australia also specifically raised concerns over China’s transparency, an issue that has been repeatedly been sounded by the US government. In response to Australia's actions, China has threatened our country with economic measures if we continue to play "political games".

This week we are beginning to feel the wrath of this rage as economic threats are hurled in our direction.

Barley imports are facing a potential 80 per cent tariff and four Australian abattoirs have already been suspended by the Chinese government. The value of both these markets combined totalled to $3.5bn in 2019; China accounted for $600 million worth of barley exports and $2.9 billion of beef.

Suspicions that the trade threats are linked to the diplomatic spat between Australia and China are high, sparking concerns for our economy as we verge on the edge of a trade war with our largest economic partner.

What does China want?

China has not explicitly linked the trade threats to the political dispute, however the timing speaks loudly.

China is sending a message: it is ready to engage in a trade war if Australia continues to push for an independent investigation into COVID-19

China will remain stubborn on its stance against the independent investigation as long as the relationship between the US and China remains hostile. Until that changes, any move that appears to back the US agenda will be interpreted as an attack.

Whether the call for an investigation is part of a US ploy or not is besides the issue, what matters is that China believes it is. The economic threats will continue until Australia ceases its call for an independent investigation into COVID-19.

Now what?

We are not yet in a trade war and there is still time to avoid it. Only four abattoirs have been suspended at this stage, and the Australian government has up until 19 May 2020 to respond to China’s tariff threats on barley.

This makes the government’s response more crucial than ever, as it will shape the direction of the conflict: Australia and China could either escalate into a trade war or succeed in deescalating tensions.

The issue goes beyond trade, this calls for a diplomatic solution not an economic one.

To avoid an impending disaster, Australia needs to remain composed and reassert an impartial and independent stance.

The reality is, China's dispute is not with our government, but with the US.

As we start formulating a response towards this crisis, Australia must refocus its vision on the country's interests. It is both in our interests to maintain a productive economic partnership with China and to advocate an independent investigation of COVID-19.

The facts surrounding the pandemic do need to be established but Australia's actions are projecting an image that is far from independent.

The key to resolving the issue lies in assuring China that Australia’s interests in the COVID-19 investigation are, truly, impartial.

Our current approach is indeed, appearing to mimic the steps of the US, bringing us dangerously close into the line of fire between the two powers. 

The US is our ally, but a blame-game is not our kind of quarrel. 

If we can reassure China our intentions are impartial, the trade threats will remain just that, threats. 

Wendy Cheong is a Masters of International Relations student at the University of Melbourne.

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