China’s trade dispute cost Australia $ 3 billion in lost exports

Photographer: Brendon Thorne / Bloomberg

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Australia’s trade struggle with China cost about $ 3 billion in commodity sales last year, and this relatively small impact suggests there is little economic need for the country to be included under pressure from Beijing.

This is the value of lost Australian exports in 2020 compared to the previous year and covers commodities from copper and coal to wine and lobsters that they are now subject to trade restrictions by Beijing, according to Chinese customs data. The impact on some of these industries has been wild, as exporters are forced to abandon their larger market and look for customers elsewhere.

At the same time, the waste of infrastructure with China’s state aid to rescue its economy from the pandemic has raised the amount of iron ore it needs to fuel record-breaking steel production. And there, Australia is the dominant producer. China’s purchases rose nearly $ 10 billion last year.

The lost value in commodity shipments to China does not capture replacement sales in new markets or changes in international prices and exchange rates. It is also affected by Australia’s total exports of $ 257 billion in the first 11 months of last year. Meanwhile, China’s total imports from the world fell 1.1% in 2020, as the pandemic brought down supply chains and depressed demand.

Beijing’s trade retaliation has ceased to target the most crucial commodities for its own economy: iron ore and liquefied natural gas. They are also Australia’s biggest winners. Australia is the developed economy more dependent on trade with China, and the two completed a free trade agreement in 2015. Relations have deteriorated since 2018, when Canberra banned Huawei Technologies Co. of its 5G network and went into freefall in 2020 after the government called for independence to delve deeper into the origins of the pandemic.

China has been surprised about the lack of dependence on foreign iron ore, but Australian miners are incredibly profitable and the government has few alternatives to avoid the costs of the world’s largest steel industry. Gas is seen as a key fuel for achieving Beijing’s carbon neutrality goal, while wasting coal. China does not produce enough nationally and, again, Australia is among the best suppliers in the world.

– With the assistance of Jasmine Ng, Shuping Niu, Dan Murtaugh and Dennis Ting