27 March 2019
Earlier this year, customs officers at five harbours in northern China suddenly blocked the passage of Australian coal. Yet they waved through shipments from other countries such as Russia and Indonesia. The block later spread to other Chinese ports, apparently to allow Chinese officials to conduct “radioactivity tests”. Australian coal typically takes two to four weeks to clear customs but this process is now taking up to three months.
There is still no obvious explanation for China’s move. It could be payback for Australia’s foreign interference laws or its ban on involving Chinese firm Huawei from rolling out its 5G network. Or it could be an attempt to meddle with international coal supplies, perhaps to support China’s domestic market. It might be the prelude to boosting American coal imports as part of a deal to end the trade war with the United States. Or it could be a genuine response to environmental concerns, albeit poorly explained. Nobody knows.
As with so much of China’s conduct – including the extent of its military and foreign policy ambitions – the reasons for the coal block remain opaque. This highlights a serious challenge for Australia, whose prosperity is now dependent on a country that can be unpredictable, and whose motivations are often difficult to fathom. Australian exports to China were worth $123 billion last year, almost a third of the nation’s exports, and more than the entire amount sold to Japan, South Korea, the United States and India. Coal supply to China was worth $13 billion, more than 3 per cent of total exports. But this booming trade is leaving Australia exposed. The coal block demonstrates that Canberra needs to prepare for future hurdles.
One option is to try to diversify the economy. But this is difficult for Australia, which happens to be rich in assets – from resources to quality education – that are particularly well suited to China’s needs as it transitions from being an economic backwater to a global giant.
Another approach is for Australia to develop closer diplomatic ties with China. No Australian prime minister has visited China for bilateral meetings in almost three years. This is partly due to a freeze by China on high-level visits following Malcolm Turnbull’s curbs on foreign interference in December 2017. It was exacerbated by the toppling of Turnbull, who was reportedly planning to visit China late last year.
In contrast, New Zealand’s prime minister, Jacinda Ardern, is due in China on Sunday to meet with president Xi Jinping and premier Li Keqiang. Like Australia, New Zealand has suffered apparent retaliation from China following its move to bar Huawei from involvement in its 5G network. Beijing reportedly postponed Ardern’s visit but has now agreed to this week’s trip. Ardern will go despite the recent attacks in Christchurch but has cut her visit to just twenty-four hours. Australia should seek similar opportunities, though this year’s election timetable will make it unlikely a prime minister will visit before mid-year.
China’s method of retaliation reveals much about its approach to global trade. Slowing imports by imposing strict testing requirements allows Beijing to block the coal without introducing tariffs. This suggests that China fears, rightly, that it could face action from Australia and others at the World Trade Organization if it adopts overtly protectionist methods. Clearly, China wants to be seen as a compliant global actor that supports trade and the rule of law.
The coal block follows similar moves against Australian wine sales to China. It will probably not be the last time that Australia falls victim to ambiguous Chinese conduct. The lesson is that although the country lacks the clout to retaliate unilaterally against China, it can potentially call on collective international responses. Unfortunately, Donald Trump has been hostile to the WTO – so Australia should make it clear to the United States that it supports the organisation, and should continue to work with countries such as Japan in defending unfettered global trade. Canberra’s best hope for unblocking the harbours is to press Chinese leaders in person, or to work with other countries to strengthen an international umpiring system that treats all players equally.