Name: How Australia and China’s trade relationship broke down | CNBC Explains
Uploaded: 2021-07-10T17:40:26.000Z
Duration: 9 min 24 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

On March 30th 2021, the World Health Organization announced the results of an investigation

into the origins of Covid-19 after a field visit to Wuhan, China.

The 34-strong investigative team declared it was most likely that the virus was transmitted

from animals to humans, while the theory that it leaked from a laboratory was deemed “extremely unlikely.”

The results prompted 14 nations, including Australia, to call for further investigations.

Following this response, China, which has been Australia's largest trading partner

for over a decade, placed an unprecedented number of tariffs and restrictions on several

China then retaliated further, 'indefinitely' suspending economic dialogue, a sign of the

escalating tensions between both countries.

For many people watching, one of the questions they will have is:

"There are so many trade wars, why should we care about this one?"

The thing that you should really be thinking is, what if

my sovereignty decides that I have to make a particular decision and then

China institutes similar trade actions against me?

So, what does this clash mean for Australia, China and the future of global trade?

Before China began to open its economy in 1978, the Asian country was largely rural,

and its goods formed less than 1% of world trade.

Will Koulouris is based in Sydney, where he covers Australia and New Zealand for CNBC.

When did the close relations between Australia and China start?

Gough Whitlam, one of our former Prime Ministers back in the 70s,

started engaging with China before Nixon went there.

The Australian leader's visit to China was a milestone in Australia-China relations,

and is credited with the rapid expansion of trade between the two countries, as well as

prompting other Western countries to follow suit.

China and Australia, from then on, maintained a strong relationship in terms of

the trading relationship; it wasn't anything like it is now.

Australia benefited from China's opening to foreign trade.

The country's share of Australia's exported goods rose steadily in the 1970s and exponentially

By 2009, China's total imports from Australia were worth more than $33 billion, overtaking

Japan to become the largest importer of Australian goods.

China has been Australia's largest trading partner ever since and accounts for more than

China's insatiable demand for Australia's natural resources was one of the main reasons

why it had a 29-year run without a single recession.

In fact, Australia was the only major economy to avoid a recession during the global financial

Australia's higher education system is also heavily reliant on fees from Chinese students.

They account for about 40% of international students in the country, of which 160,000

There's always something that China could do if they really wanted to.

For example, with iron ore, they could, mine the 20 billion tons of iron ore that they've

got in China. That are just reserves in the ground.

It's lower grade, it's going to cause more emissions when you're trying to use it to

make steel. But if they really wanted to, they could.

But it would cost them and the economic costs would outweigh any kind of political advantage

that you're going to get by not having that relationship.

Those ties deepened in 2014 after the signing of a major free trade agreement.

It meant that 95% of major Australian goods including coal, barley, wine and beef could

Everybody was on a high here in Australia.

When it came to the Australia-China partnership, there was all of these promises of the future

riches that Australia was going to garner by this increased cooperation and strategic

economic partnership with China because we had just signed the free trade agreement.

Thanks to that deal, Australia enjoyed a unique position that many countries would crave:

That year, the country exported goods worth more than $80 billion to China while importing

nearly $47 billion, or a trade surplus of nearly $35 billion.

There was always that strong relationship, and it was just all of this political mess

that's happened in the past three years, that's put a dampener on the current relationship.

But then, signs of a fraying relationship and differing values began to emerge.

China claimed Australia had been discriminating against Huawei, by blocking its participation

Australia was the first country to ban Huawei, concerned that the Chinese tech giant would

Huawei has repeatedly denied these claims.

There were a lot of little other things that

were happening on the edges at the same time, in terms of foreign investments being denied.

There were a number of big investment opportunities that Australia had turned down on the basis

of the foreign ownership laws here in Australia.

It's a catalyst, but it's not necessarily the only event that was happening at the same time.

The rift escalated when Australia joined other countries to demand further investigations

What China was contending is that Australia would have given them a little bit of a heads up,

told them this is what we're planning to say.

And then obviously, China is going to be prepared for the media frenzy that's going to result from this.

China responded by placing tariffs and restrictions on Australia's major exports including seafood,

These targeted exports were worth $25 billion in 2019, or 1.3% of Australia's GDP.

Still, the Australian government stood by its decision and even cancelled two deals

China then hit back, accusing the government of having a 'Cold War' mindset, announcing

it would no longer engage in economic dialogue in May 2021.

So, when it comes to the official line, or the view of the Australian Government, what

they're saying is, we just want to get our Chinese counterparts on the phone, we want

to be able to have these frank discussions with them

and talk through the issues we are currently facing.

China isn't doing that. And they haven't done that for over a year now.

They won't discuss anything other than on the diplomatic level, so ambassador to ambassador.

Many of the targeted industries have been affected.

Since late 2020, the total value of Australian exports to China dropped by more than $10 billion.